COPY NO.
138
FOR THE ASSISTANT DIRECTOR
CURRENT SITUATION IN MALAYA
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CURRENT SITUATION IN MALAYA
SUMMARY
Malaya is of Importance to the US because II is thc world's greatest producer of rubber and tin.8 Malaya produced almost half of the total world production of natural rubber and morehird of the world production of tin. World War II brought forcibly to US attention theof these vital commoditiesar-making machine; they retain theirif less urgently. In time of peace, and are on the lists of strategic materialsfor US stockpiling. Through theand tin industries, Malaya is tbe sterling bloc's biggest dollar-earner. As such,economic position materially affects that of thc UK in the Western Alliance and thus affects ERP and other US financialin Europe.
Of secondary but considerable importance are Singapore's extensive naval facilities and strategic location on world shipping lanes. Control of tlic Malayan peninsula, andthe Island of Singapore, entails control of the Straits of Malacca through which passes most of thc sea-borne commercethe West and the populous nations of the Far East. Singapore's harbor, with its repair facilities,atural base for naval forces, while the airfields on Singapore Island offer the best potential facilities In Southeast Asia for long-range aircraft.
Withdrawal of British forces from India and Burma gives Singapore eventaging point for Britishmilitary forces. The navalin Singapore have been restored, and Singapore is the focal point of all British armed forces from Ceylon, on the west, to Hong Kong, on the east. Unrest in the Far East not only has further aggravated the
Note: The intelligent* orfsniiatioru ol tbe Air Force have concurred in thU reportolctober.
problem of area defense there, but also has thrown greater responsibility uponln the British Empire Defense Plan.
The UK has thus far been successful In maintaining control of Malaya, and Malay nationalism has not yet developed to the point where it could threaten this control in the near future. Certain pressing problems, however, are facing thc British The most urgent is terrorism, carried on by aCommunist guerrillarmed members, led andby Chinese whose purpose is theof political control from the British
To counteract this threat, the British have Instituted strong political and military action Although terrorist activity has been fairly well contained, the threat Is still present and necessitates large expenditures of money and manpower. An additional problem, and one which Is likely to grow steadily InIs that of communal friction between thc Malays, who are favored politically by the British, and the Clunese, who, second only to the British, dominate the economic life of the peninsula. So far. efforts to increase racial harmony between these two have had at bestuperficial effect.
Although neither tin nor rubber production has been seriously affected by terroristthe producers fear the possible effectecline in world markets. The rubber industry (which wholly or partiallyhird of Malaya's population) faces not only thc likelihood of increased competition from neighboring countries' natural rubber but the competition of synthetic rubber Theis less with respect to tin.essening of world demand,onsequent drop In price,trong possibility.ecline ln
Department* of State. Amy. Navy, and the It Is based on information available to CIA
either or both Industries, accompanied by-serious unemployment, would mean an end of Malaya's economic stability and might bring political chaos.
Continued British control of Malaya and. consequently, continued US access tostrategic commodities, will largely be determinedow Malaya's 2Vi million Chinese align themselves politically when the full effect of China's Communist victory ishe extent of moral and material aid given Malaya's terrorists by the Communist regime Inhe degree of friction or
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cooperation between the almost numerically equal Malay and Chinesehe degree of Malay political solidarity and willingness to accept continued UK control;he status of Malaya's rubber and tin Industries.
Over the next five years, the net effect of these pressures on the UK probably will be to threaten British control of the area, and, toward the end of this assumed period, will mean the granting of greater participation in the government to the Chinese in Malaya, thus legally recognizing their increasing
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CURRENT SITUATION IN MALAYA
THE POLITICAL SITUATION
ground.
After Worldbe government Lnunderwent several changes, finallyInto two distmctColony of Singapore and the Federation of Malaya. The British Military Administration6alayan Union which brought together the nine prewarStales (four Federated and five Unfedcr-ated) and the Straits Settlements, excluding Singapore wlucheparatelyCrown Colony. Malay opposition to thc Union led to its replacement by thcFederation of Malaya
The Federation differs from thc earlier Union mainly In that it nominally restores sovereignty ln the States to the Sultans, and makes several other relatively minor concessions to Malay sensibilities. As now constituted, thc Federation of Malayarotectorate, over which thc British exercise exclusive control of all Internal and external affairs, through thc mandatory advice ofadvisors In each of the States, except in matters pertaining to the Mohammedanand Malay customs, which remainthe jurisdiction of the Sultans. The framework of the Federal Governmentappointed Executive and Legislative Councils, with numerical representation in these bodies heavily weighted in favor of the Malays as against other racial communities. Similar Councils appointed by the Sultans exist in the various States.
At the lop of the Federation Administrationritish High Commissioner in whom are vested such extensive powers as unlimited veto, unilateral promulgation of Legislation, and appointment of members to thcand Legislative Councils.
The Crown Colony of Singapore, quitein governmental structure to the Federa-
tion, is administeredovernor. Six of Us twenty-two Legislative Council members are elected.'
The major obstacle to efficient operation of these two Governments is the peculiarof Malaya's population, whichonstant and Increasing threat to7 census of both areasotal population, approximately half Chinese and half Malay. In thcitself therehinese1 Malays. In Singapore Colony therehinese andalays. There are. Inndians in the Federation0 in Singapore. The Chinese, and.esser degree, the Indians, object to thc favoritism shown the Malays by the British administrations In the Federation and Singapore. Even the Malays arc notover the British rule, but most of them accept itemporary expedient against domination by thc politically and economically aggressive Chinese.
2. Current Problems. a. Terrorism.
errorist Organiration,urn
The most pressing current problem in the Federation Is terrorism which began Innstigated and led by the MalayanParlyheercent of whom are Chinese, now numberto the best available estimates. Their fighting organization, the Malayan Peoples'
' Singapore alio serves aa the headquarter! ol the
Commissioner General for the UK in southeast Asia, whose fobo coordinate policy inSoutheast Asian posse ssiuru. which Include, In addition U> Malaya and Singapore. porUom ottheColony o( HonR Koiit. and minor islands In the eastern Indian Ocean
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Army, evolved from the Malayan Peoples' Anti-Japaneseungle-wise guerrilla force which during World War II was largely under the direction of thc Malayan Communist Party, although partiallyand trained clandestinely by the British.
The terrorists' organization, which neverigh degree of efficiency, hasin the past few months, owing to vigorous British countcrmeasures and lack of genera] support from the populace.of the terrorists is In the bands of several hundred "hard core" Communists, but there seems to be almost no cooidinatlon between guerrilla bands In various parts of theSince8 the guerrillas haveIn excessonfirmed casualties. The terrorists have been forced to withdraw to rather Inaccessible and sparsely populated Jungle areas in central and northern Malaya, leaving behind only small groups known as "killer squads" to continue sporadic andineffective attacks against estates and mines and civilian personnel.*
errorist Aims, Program, Propaganda. British intelligence sources report from captured terrorist documents that theprogramignificant change toward thc endhere Is reason to believe that, in the early stages of violence, when the terrorists were enjoying theof surprise and considerable freedom of movement, they hoped lo wreck Malaya's economy and wrest political control from the Britishatter of months. There are also indications that they anticipated moral and material aid from other Communist-led movements in Asia.eappraisal of thc situation several months laterled thc terrorists to changehort-
' The terrorists appear to be increasingly short ot arms and ammunition. British security forces (totaling! have recovered considerable quantities o( guerrilla suppliesrogram of material aid from ouutde the country hasnot materialised.ay IMS tooreifles,ounds ofhells,CO hand gienadrs. moreortars, and nearly 5O0 pistols and revolvers were recovered by lhe British.
term campaign of sabotage, violence, and murderong-range strategy of attrition both of the country's economy and theauthority,ampaign of continued, but less Intense military action, and greater political work towards gaining public support and recruiting new members.
Terrorist activities seriously affectedmorale,arked lack of popular cooperation with British forces was evidence of decreasing faith In British ability tolaw and order. The Chinese, whothe heaviest casualties, were the most noticeably affected. Europeans engaged In rubber and tin production. Inadequately armed and lacking proper protection bytroops and police, found themselves easy targets. However, the full deployment of the security forces and the resultant drop InIncidents hasalutary effect on morale.
Clandestine MCP newspapersteady stream of propaganda, the keynote of which Is hatred for the British soldier and thc British Government. Highly colored accounts of terrorist exploits andforce "atrocities" appear regularly, along with bitter denunciation of British
xploitation of Populace. Although much of the terrorist propaganda is directed toward the Malays, they have so far been unaffected by it. Neither has the vast majority of Malaya's Chinese population shown signs of being swayed to overt action,
ooklet, captured in Perak and enutied "The Ainu of Presentypical illustration of tho currentxpose the violence of Britain's postwar colonial policy and the extreme hardship and sufieftaf It lnfUcU on the Malayan people; (ll represent Britain as being forcedolicy of fleecing tho Malayan peopleesult of tu weakened domestic andpostwar position. (St accuse Britishof robbing tbe people of their victory In World War II and of adopting the Fascist method of police and military rule lo suppress the peoplesonvince the masses of theof Uie forces ranged against Britishand ill recount the rartyahistory of struggle for the independence ol the Malayan people duilnc the past twenty years.
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many of them arc susceptible to such propagandaesult of dissatisfaction with their present status or because of sheer opportunism.
In the past, terrorists have been successful in extracting "protection money" fromrubber estate and tin mine owners, but recent police measures have probably reduced this practice.
One serious problem which some British officials regard as the key to the terroristis the more successful exploitation of Malaya's "squatters" by the guerrillas. Thc squatters, who number, arc displaced or immigrant Chinese who haveillegally on Government holdings, or land reserved for the Malays, in scattered groups throughout the Federation. It is believed that relatively few squatters have voluntarily aided the terrorists, but many more have been intimidated and blackmailed intofood, money. Information, and shelter to marauding bands. Furthermore, the illegal squatter communities provide Ideal cover for the terrorist guerrillas, and threats ofand death prevent many squatters from reporting the presence of guerrilla bands to the security forces.
The great majority of Malayan Chinese, however, stilloncommittal policy toward Malaya's civil strife, Although some of Malaya's most influential Chinese have shown signs of accommodation with theCommunists in China proper, there is yet no indication among Malayan Chinese in generalignificant swing to themovement. The fact that they have traditionally been aligned politically and economically with China nonetheless presages increasing difficulties for the British when the full effect of the Communist victory in China is felt. Already the Kuomlntang has become decreasinglynd several Chinese newspapers havetrong sympathetic attitude toward the Chinese Communists.
'Rather than face recent restrictions, the KMT in both the Colony and the Federation has decided to close its branches and to cease (overt) activIUes.
Direction and Support
There is no evidence of overt Sovietof current developments in Malaya or of Soviet agents operating in the area. There are, however, strong Indications that thefor the terrorists' uprising emanated either from thc World Federation ofYouth Conference or from the Second Congress of the Communist Party of India, both of which were held in Calcutta earlyhe militant policy which emerged from these conferences ls believed to have been the basis for the near-simultaneousuprisings in Burma, Indonesia, and Malaya. Furthermore, Malaya hasthe attention of the Soviet radio and press, which terms Malaya'snational liberation struggle of the Malay people" and derides British promises for the country's eventual independence In the face of what Is called the "greedy colonial war."
Communist Direction and
Evidence exists of Chinese Communistin the Malayan situation On9 the Peiping radio,tatementby two banished Malayan Chineselabor leaders, protested the British hanging of an Indian Communist labor leader in Malaya, and characterized the guerrilla warfarerevolutionary upsurge" andign of the solidarity of the revolutionary forces of the workers of Chinese nationality with the Malayanropaganda interest in Malaya, together with promises of "moral and material aid wherever possible" to colonial areas in Southeast Asia, indicate that the Chinese Communists will try to counteract the British antl-Communlst
There has been no evidence of materialfrom the Chinese Communist Party (CCP) since the latter partt that time, British intelbgence sources reported that twenty members of the CCP arrived in Singapore to assist the MCP in the work of reorganization. Another report, possiblyto the same development, stated that the South China Bureau of the CCP planned to send sixty reinforcements to the MCP and
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some If not all of them left Hong Kong for Malaya In'
(G) British Political Counte/measures.
Apart from the military effort against the terrorists, the British have rigidly enforced numerous and drastic political measuresto counteract lawlessness In Malaya and to halt the spread of Communism. Thc Communist-infiltrated Pan-Malayanof Trade Unions (PMFTU) wasonnd on8 the Malayan Communist Party and itsthe MPAJA, the New Democratic Youth League, and the PETAalaya youth group) were banned throughout Malaya. The China Democratic League, presumed toommunist front, has been declaredin the Federation, and is operatingsuch severe restrictions in the Colony as to make its future doubtful Policepowers, invoked first on8 in certain parts of thc Federation,ew weeks later asRegulations Ordinances affecting both the Federation and thc Colony.
These Emergency Regulations grant wide powers to the two governments: banishment ofandatory death sentence for Illegal possession of arms, powers of search of persons and premisesarrant, long-term detention of suspects without trial, close control over movements of persons and vehicles, and power to impose curfews and occupy properties. Legislation, making compulsory the registration ofover twelve years of age anil theof identity cards, was later enacted.
From the beginning of the Emergency throughliens andritish subjects (most, If not all. Chinese andhave been deported under theRegulations, andersons
1 Captured documents and interrogation olprisoners, indicate that Chinese Communists irom Indochina. Thailand, and Indonesia hoveIntoaptured terrorist leader reported that thirty leaders, sent to Indochina lor training in 1MT. returned lo Malaya some time8 and aere responsible for increased terrorist activiUcs In certain areas of the Federation inot llial year.
have been detained, among them manysquatters, suspected or convicted ofthe terrorists. In particularly bad areas of the Federation, whole groups of squatters have been deported, and for security reasons some squatter areas have been completely evacuated and resettled.'
The Emergency Regulations also provide that anyone contributing funds to theis liable to arrest and prosecution.some property owners have beenlt is believed that the terrorists still are able to collect funds through extortion sufficient toarge part of theirexpenses-
abor Movement.
Immediately before the formal outlawing of the MCP Inalaya's leading labor personalities, who were alsoParty members, reportedly wenttaking the Union's funds with them This action, combined with the earlierof the PMFTU. which pretended tomost registered labor unions in Malaya, left Malayan laboreriously demoralized state. Immature, lacking In spontaneity of unionization and collective action, frustrated by racial antagonism and handicapped by the peculiarities of Chinese workers' membership in guilds and secret societies, organized labor in Malaya has been seriously disorganized since that time While the Government hasolicy of encouraging workers' groups and lias registered individual unions, which are attempting to maintain some corporate status at the present time, emergency conditions are severe obstacles to the restoration of trade unionism. The lack of money, union distrust of Government assistance, as well as unfriendliness in some business quartersevival of trade
'The squatter problem continues toostly one. and thc Government hopes lo Implement as soon as possible Ihc recommendationsquatter Committee's report,hich sutseiti that the squatters be settled legally on the land they now occupy, and. where that Is notmeiued permanenUy on other lands The report stresses lhe necessity for re-establishIng the administrative control over squatter areas which has been completely lacking In the postwar period
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ail further hamper Governmentto re-establish Malaya's unions, b. Nationalism.
Nationalism as It Is known in neighboring Southeast Asian countries is still incipient In Malaya and does not nowerious threat to British control. The presentdisorders. Involving, as they do,mall segment of the Chinese population, largely under Immigrant Chinese leadership, cannot properly be considered aof nationalism. The Malays haveonly recently displayed an appreciable degree of political awarenessesire fordesire rather effectively held In check by fenr of Malayan ChineseIn thc event of Independence.
olitical Organization and Activity.
Of the two major Malay politicalthe United Malay Nationalist(UMNO) Is by far the larger. Its leader, Dato Onn bin Jafaar. Is Primeof Johore. the largest Malay State, and the most influential and respected Malay In the country. Relatively conservative In its political orientation, the UMNO stands for what Dato Onn calls "Malayism,'* which "aims at achieving and maintaining Malayhe organization, until recently supported by the Sultans, accepts the premise that Malaya will not be ready forfor several years. Its most recent move, devised to broaden its popular support, was to allow associate non-voting membership to non-Malays. Dato Onn's Increasing political strength and the alms of the UMNO, which include the establishmentingle Malayan State with one ruler, have arousedopposition from the Sultans, who areof these threats to their sovereignty.esult, some of the Sultans arcto undermine thc Influence of both Dato Onn and the UMNO, which may lead to the polarization of most Malays Into either pro-Sultan or pro-UMNO factions.plit in Malay ranks could be extremelyto the British administration which would. In supporting one faction,izable group of Malays In the other
The Malay Nationalist Partysmall left-wing organization, has been
more vociferous and reportedly was used,the Emergency, by the MCP in anto draw Malays into the Communist bloc. Whereas thc UMNO has adopted aattitude toward the British, the MNP Is considerably more militant andand British Intelligence Indicates thatecision to conserve strengthMNP collaboration with the terrorists.
While recent intimations from leaders of both the UMNO and the MNP Indicateapprochement achieving greater unity among thc Malays may be reached some time in the future, an effective union of the two groups docs not appear immediately feasible.
The only articulate non-Malay political organization ln Malaya Ls the left-wingIndianather Ineffectual group that maintains close tics with India.
ationalism and Self-government.
Thc Federation and Colony Governments have encouraged political activity as valuable training for the eventual orderly assumption of self-government. Commissioner General MacDonald stated on9 that the purpose of thc British administrators in Malaya Is to "unite and gradually transferrime Minister AtUee's9 statement that Britain has no Intention of withdrawing prematurely from Malaya hasboth European businessmen In the Federation and those Malays fearful of the Malayan Chinese threat.
(a) Communal Friction.
Malay nationalism is closely bound up with the increasingly vexing problem of communal friction between Chinese and Malays, awhich looms large in any consideration of self-government for the country. The British policy, which favors Indigenous Malays, has prevented the Malayan Chinese from dominating the country politically as they now do economically. The Malays areto any concessions given the Chinese which might threaten present Malay political supremacy. Malaya's Chinese, on the other hand, are generally dissatisfied with theframework of the Federation, and with their lower political status In particular. The Malayan Chinese resent the difficulties ofcitizenship, the treatment of squatters
other hardships resulting from the present Emergency Regulations, and their unequal representation In the Government.
The British are making some efforts to allay this communalovernment-en-couraged Malayan Chinese Association (MCA) was established on9 to foster inter-communal harmony and cooperation. So far, Its results hate been disappointing. The Commissioner General alsoen-man SLno-Malay Goodwill Committee,
composed of leading Malays and Chinese, to explore the objective of political homogeneity and toommon MalayanThe group, now known as theLiaison Committee, Includesof other racial groups andis reviewing the whole field of relations between the communities Insocial, and political. Suchhowever, will not be able toinal solution to racial differences In thefuture.
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THE ECONOMIC SITUATION
Importance of Mataya'i Product* to US and UK.
Although Malays.ignificant exporter ol coconut products, palm oil and pineapples, these arc secondary In Importance to the two major exports, rubber and tin.ubber constituted overercent ot the value of total exports from the Federation alone and provided tbe sole or main source of livelihood for one-third of the population. Rubberin the Federation reached an all-time recordong tons inhe US was the leading purchaserons, over half of total US rubber imports. Slightly lower production and export levels have been maintained so far
Tin-ore production8 rose3 tons, approximatelyercent over theyear although someercent below the highest prewar levels. Tin-metal exports4 long tons, of which the US7 tons,hird of total US On-metal imports. Malaya's tin production9 Is expected to be somewhat higher than that
Rubber and tin. currently being stockpiled as strategic commodities in thc US. represent thc principal source of Malaya's income and made that country the sterling area'sdollar earnerS interest in the Malayan economic situation, then, is(I) Malaya is the principal source of two Important strategic materials;earnings strengthen the UK financially.
2. Curronl Production end Outlook, a. Rubber.
During the first six months9ong tons of rubber have been prc-
' Total experts of rubber from Malaya (whichimports lor re-export, mainly fromwereons.
duced In Malaya. The future of tbe Malayan rubber industry, however, ls clouded by several economic factors. The most publicized of these Is the competition offered by synthetic rubber, although thc ultimate results of this competition cannot now be conclusivelyAn equal threat lies In tbe fact that the greater part of Malaya's production ls from large Western-owned estatesigh cost as compared with Asiatic small-holdings. Over half the production In Indonesia, Malaya's principal competitor. Is from small-holdings. The industry'sposition Is also adversely affected by the comparatively advanced age of Malayanand by the small percentage ofrubber trees. These factors cannot be overcome excepteriod of years andost which the present price of rubber makes difficult. The Malayan industry hassince the war from the abnormally low production In Indonesia and Indochina, aof unstable political conditions. Ato normal production In those countries willecline ln Malaya's relativein the industry. For these reasons, the weakness of the rubber market since the fall8 hasatter of extreme concern both to the planters and to Malayan end UK authorities as well.
During the first six months0 long tons ol tin ore have been produced in Malaya. Factors adversely affecting the outlook for Malayan tin production, however,he slow progress made Inthcncertainty over themarket tor tin;he temporary cessation of prospecting and development of new tin-producing areas.
A factor of primary importance ln alllabor costs and therefore in Malaya's competitive position In world markets, ls the
olalaya, able lo produce only approximately one-third of Its riceIs dependent upon Imports. Malayan authorities hare taken several steps todomestic rice production but it isthat maximum production cannotmore thanercent of requirements.
3. Effect of Terrorism.
According to figures issued by the British, terrorism has so far had no appreciable effect on current Malayan production. Terrorist activities, however, probably have affectedproduction, and should terrorismthe long-term outlook is not The tin industry has probablymost. Prospecting for new tin deposits has been virtually halted because of danger to personnel from guerrilla bands and further rehabilitation of theof dredges, and development of presentsuffered for the same reason. The uncertainty of the European position inparticularly when terrorism was at Its height, made owners of rubber estates and tin mines reluctant to Invest new capital. The danger of terrorists in the relativelylarge rubber estates has resultedow rate of replanting, which seriously affects future production. Government aid Inand developing the Industries,Is necessarily limited by the largeexpenditures required for thesuppression campaign.
4. Antagonism toward US Tin and Rubber Poticiei.
Malaya's rubber planters are deeplyby thc US synthetic rubber program.
' At the present time, tbe Oorernroent-eontrolled price lor raUonedpproximately three times the prewar price and lhe price for open-market rice, with which all AitUUes must augment their ration. Is considerably hlRher. Rice Imports, principally from Burma and Thailand,aior source of those Govern menu* Income and the Malayanwhoiving wage must, in efTect, raise wages lo include the mark-up that Ihcseplace on their exported rice. The rubber Industry, whose product is selling belowrices. Is particularly burdened by current He* prices and, within the industry, the estatewho employ large labor tunes are aJTecled most severely.
Planters complain that although the program may be partially justified for US security rea-sons, it is holding down the price of natural rubberevel where some estates canonlyeficit. Relaxation of certain of the mandatory regulations concerning US use of synthetic rubber following the US-UK-Canadian financial discussions In9 was well received. There remainsfear, however, that an increase in the use of synthetic rubber in the US. with areduced demand for natural rubber, may force many planters out of business and create mass unemployment, wldch in turn would threaten British control in Malaya.
Tin producers likewise have grievances against US policies. While the price of tin has been satisfactory, Malayan producers fear that US stockpiles may be unloaded on the world market at some future date withoutfor the interests of the Industry. They dislike the pressure from the US to acquire ore for the Texas City smelter, since theof the Singapore and Penangare far above present Malayan oreong-established complementaryexists between Malayan mine owner and smelter.
5. Devoluolion.
Malayan currency was devalued by the same amount as sterling on' The effect on the price of rubber, whichree market, was ofise in terms of sterling and Straits dollars,all in terms of US dollarsdevaluation will, at least temporarily, benefit Malayan producers. Thc lower USprices will improve the competitive position of natural rubber relative to synthetic, and the higher return in local currency to Malayan producerstemporarily at least-ease their cost problems. The position of thc Malayan Industry relative to other majorwill be little affected in view of the similar devaluation of other soft currencies.
All Malayan tin has been purchased and soldixed price by the British Ministry
'Prior to devaluation onqualedr0 equals.
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Supply. Following devaluation, the US dollar price was lowered fromb.lb. and the sterling price raised. UKnow plan to reopen the London and Singapore metal exchanges and permit tin loree marketurther reduction in the dollar price ia probable which, however, should serve to stimulate dwindling demand.
6. finance!.
The finances of thc Federation are severely strained. During the past few months,representations for financial aid have been made to the UK, It is estimated that the emergency is costing thcay. Total expenditures of the Federation8 were an estimatednd the resultant deficit estimated at over0 was met throughand drawing on Reserve Funds.eficit (now believed too low be-
cause of increased Emergency costs).
The Colony of Singapore, In somewhatfinancial condition, recently presented thc Federationiftor the suppression of lawlessness.eficit occurred8 (practically all accounted forhortfall0 in estimated revenue from Incomehe anticipated surplus9. According to the Colony's Financialthe present financial position apparently gives no cause for concern.
An3 percent loan was floated in London In9 for Federation financing of rehabilitation and development projects. The total amount of assistance to Malaya from the UK is expected to reachwhich will be variously used to financecosts, pay for war damageclaims, and contribute toward colonial development schemes.
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THE MILITARY SITUATION
British Strength and Capabilities; Morale.
The strength of British Far East Land Forces (FARELF) in Malayaactical units consist of seven battalions of British Infantry, seven battalions of Gurkha Infantry, three battalions of Malay Infantry, one British artilleryne Malayregiment, and one British armored car battalion. The various support andunits are composed mainly of Malays with smaller elements of Ceylonese, Chinese, and Indians. All arms, equipment, am muni-Hon, and part of the rations for this Force are supplied from the United Kingdom.
The Royal Air Force strength ln Malaya isircraft, of whichre directly Involved In the suppression of the terrorists. The RAF assists in locating terrorist units and bases, attacks isolatedIndependently, strafes terrorist hideouts in support of ground forces, and transports men and supplies to forward areas. Carrier-based aircraft of thc Royal Navy nave participated recently ln ground support
In addition to the British military forces there00 police andmostly Malays of varying levels ofand usefulness, engaged In terroristunder British command. Thecapabilities of thc police forces haveimproved.
At present, the security forces have theof protecting mines and plantations from serious losses Recent operations,with the positive measures wluch the British are continuing to take, offer reasons to believe that the situation will continue to improve Despite these optimistic signs,strength in the near future willbe maintained at the maximumby commitments elsewhere.
The morale ol British forces in Malaya has improved considerably during recent months,
ritish Army artillery regiment correspondsS Army artillery battalion.
irect result of thc improved security RAF morale is particularly high.
Strength ond Capabilities;scattered nature of the Malayanmakes It difficult to develop anof theirigure ofbased on an analysis of terrorista period of time, ls considered thcavailable estimate. Reportedly,are well supplied with small armschronically short of ammunition.of popular support, the Chineseis being weakened by British
While the terrorists are able to disturbeconomic life by means of murder and sabotage, they do not now possess theeither of completely disrupting theor of driving the British out of theRecent vigorous measures taken by the security forces apparently have weakened the terrorists but. while their morale has suffered accordingly, there is no evidence to suggest that it has collapsed. Indeed, the success of the Chinese Communists undoubtedly hasthe Malayan Communists, even though it has not added to their presentcapabilities.
Tactics.
Terrorist tactics arc to avoid contact with the security forces as much as possible, while inflicting maximum damage upon publicand the economy. Thc terrorists operate in small groups of twenty men or less, and typical activities during the past six monthslashing of rubberabotage of electric powerabotage of hydraulic Intakes to tinurning of cover crops on rubber estates, withdamage tombushingaiding in order to obtain arms and ammunition;ssassinations.
The reduction of terrorist activities inmonths is primarily the result ofand full deployment of the secu-
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forces,onsequent interdiction of terrorist communications and destruction of some terrorist bases of operations. Compelled to modify their tactics, the terrorists haveto concentrate their attacks on thc easier targets offered by unguarded estates and mines, vehicles on Isolated roads, andrailroads and telecommunications. Theft of dvihan identity cards has facilitatedinfiltration and sabotage.
4. British Tactics.
British tactics are centered on Intensiveactivities, pursuit of terrorist bands, and thc destruction of known terroristareas and bases of supply. The RAF assists the security forces In locatingunits and bases and, on occasion, by bombing suspected terrorist strong points. Units of the Royal Navy patrol both coasts of Malaya to prevent arms smuggling.of the security forces and special police, deployed defensively for thc protection ofestates and installations, arcto safeguard every target, however, and scores of places remain vulnerable to terrorist attack.
5. Foreign Implications.
a. Thai-British Cooperation.
The British security forces and the Thai Army have been conducting Joint operations, under British direction, against the Malayan terrorists along thc border of Thailand, where the Thai Army has stationed five infantrytotalingen. Thchave sold the Thaiorth of
small arms and ammunition exclusively for the use of these battalions and. in addition, have beenmall group of Thaiin the Jungle Warfare School in Johorc.
Owing largely to Thai inefficiency, however, these joint operations have not been effective in stopping the escape of terrorists across the border, and the British have recentlyan agreement with ThailandBritish security forces to pursue escapingistance of forty miles Inside the territory of Thailand, provided that the security detachments are accompanied by Thai police. It is believed that this measure will Improve the capabilities of thc security forces in dealing with the terrorists.
b. Possible Terrorist Infiltration and Smtig-gltng.
The British have no evidence that theChinese terrorists in Malaya have been receiving supplies of arms and ammunition from outside the country sincehile some Chinese have arrived Illegally by sea since then. It ls uncertain whether those arriving can be classed accurately as terrorist reinforcements.
An Important consideration In assessingterrorist capabilities Is the relativeof Malaya from the present centers of Communist armed strength in China and northern Indochina. As long as the British Navy dominates thc Malayan coasts and the Thai border is adequately policed, thewill have to depend largely on localand can expect little external support cither in terms of manpower or material.
SEOJRET
Original document.
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