MALAYA was undoubtedly a wealthy nation in the late 19th century and early part of the 20th century, thanks to its rich resources including tin and rubber.
With British colonial rule firmly in place, Malaya was a magnet for European investors, putting their money in the mining and the plantation sectors.
Yet, when it gained independence in 1957, Malaya was still an underdeveloped country, according to various social and economic indicators.
As Sultan of Perak Sultan Nazrin Muizzuddin Shah explained in his latest book, Charting the Economy: Early 20th century Malaya and Contemporary Malaysian Contrasts, earnings outflows did not help the domestic economy and wage level.
“While GDP (gross domestic product) was relatively high, GNI (gross national income) was probably much lower in view of the large leakages that flowed back overseas as profits and rents,” he wrote.
The bulk of Malaya’s commodity export earnings was repatriated to the home base in Europe with comparatively little being ploughed back as re-investment in the Malayan economy.
True, as Sultan Nazrin argued, the British had put in place institutions and systems that helped support Malaysia’s development post-Merdeka.
But, he concurred that the British lacked a development vision for the Malayan people and, accordingly, failed to make “strategic investments in the interest of the national population or balanced regional development”.
As the title suggests, the 234-page hardcover attempts to answer two pertinent questions: what is the economic legacy of British colonialism in the Malay peninsula, and how differently has the economy performed under the Malaysian government?
This would be possible by number-crunching Malaya’s GDP from 1900 to 1939 to analyse economic trends and performance.
The ruler, however, faced a major snag in his scholarly study into the area: The concept of GDP was not even invented (by Simon Kuznets) until 1937.
It was not even applied to high-income countries until after the Second World War. But, for former colonies like Malaysia, the GDP calculations began only after independence and not for the years before independence.
However, since the 1980s, scholars have begun to construct the GDP accounts of a number of former colonies.
“This study by HRH Sultan Nazrin Shah, therefore, fills an important gap for understanding what happened to the Malayan (later Malaysian) economy prior to the country’s independence,” Professor Dwight H. Perkins and Professor C. Peter Timmer co-wrote in the foreword of the book.
Both were Sultan Nazrin’s PhD advisers at Harvard University, where he obtained his PhD in Political Economy and Government.
Sultan Nazrin wrote in the book that he was fascinated with Malaysia’s economic history when he was doing his doctoral degree at Harvard almost a generation ago.
After graduating from Harvard, he started a research project to continue with his investigations. The book, published by Oxford University Press, is a narrative of his findings.
During the British rule, the colonial authorities adopted a laissez-faire economic system, giving the British-dominated firms carte blanche to reap maximum profits. These profits were repatriated to the home country.
According to the writer, real per capita incomes in Malaya were three times larger in 1939 than in 1900, equivalent to an annual growth rate of 2.9 per cent.
Consumption per capita in real terms was just 51 per cent higher in 1939 than in 1900. This is equivalent to growth of just one per cent, lagging so far behind GDP per capita growth of 2.9 per cent per year.
In the years after Merdeka, the income disparity, unbalanced development, poverty and economic inequalities were major headaches for the Malaysian government.
Economist Professor Jomo K.S. said the common sayings of the 1960s that “politics were for the Malays” and the “economy for the Chinese” were essentially false because they obscured the domination of the national economy by British and other foreigners.
The British remained a dominant economic force even 10 years after Merdeka.
In the mid-1970s, 67 per cent of directors in Malaysia’s top 100 companies were still non-Malaysian, and 30 per cent remained British.
This led to the argument that Malaysia had obtained political independence without substantial economic independence.
The New Economic Policy (NEP), launched by the government in 1971 following the May 13, 1969 incident, led to the government taking a more proactive role in addressing the economic imbalances and restructuring society.
By the 1990s, the economy of Malaysia had broken out of the dependency on commodities to join the ranks of fast industrialising Asian tigers.
In contrast to post-colonial Africa, Malaysia proved to be a successful model in terms of economic management. There is an impressive track record in terms of poverty reduction, income redistribution and employment and wealth creation.
Looking ahead, Malaysia should be on the next lap towards a developed nation.
Email: jalil@nstp.com.my
A veteran newsman, A Jalil hamid believes that a good journalist should be curious and sceptical at the same time.