The PAP felt that Singapore would find it difficult to survive as an independent state. This was due to her lack of natural resources and problems like declining entrepot trade and growing unemployment .
To worsen matters, the Malayan government had introduced trade tariffs on goods between the two countries.
The PAP believed that the best solution was to stimulate the economy by starting new industries and generating more trade. With the merger, Singapore hoped for a Common Market to be set up to support Singapore’s new industries.
Goods could be bought and sold freely within the Common Market. This could then promote rapid economic growth through the increase in trade. and expansion of industries. This would then solve the problem of unemployment through the creation of jobs.
A traditional British policy towards its colonies and protectorates is known as the policy of closer association . This involves amalgamating scattered units within a geographical range into a unitary bloc so as to improve the administrative efficiency , economic development and security .
The case of Malaya before it was given self-governance in 1948, and eventually independence in 1957, it was originally made up of 4 Federated Malaya States (Negri Sembilan, Pahang, Perak and Selangor) and 3 Straits Settlements (Malacca, Penang, Singapore). However, to be given self-government and independence by the British, the 9 Malay States, with Malacca and Penang, had to become one single unit known as the Federation of Malaya.
Singapore was left out of the earlier Federation and remained a British colony for a variety of reasons – but the main reason normally cited was because of the Chinese majority in the island .
However, the British had long discussed the concept of a “greater Malaysia” as one solution to their long-term aim of bringing their colonies in the region together in a federation before they were given independence.
Britain: Lack of confidence in an independent Singapore
The British were initially reluctant to give Singapore independence because they feared that Singapore would fall to the communists.
Hence, the PAP government had hoped that merger with a strong anti-communist Malaya would persuade the British into giving Singapore its independence.
The split in the PAP between the moderates and the radicals caused Tunku to be fearful of a communist takeover. He was afraid that the communists would establish a government in Singapore and use Singapore as a base to spread Communism to Malaya, eventually causing his Malayan government to fall.
On 27 May 1961, the Tunku proposed merger between Malaya and Singapore, as well as the creation of a new federation including other British colonies like Brunei , Sabah and Sarawak . He felt that the inclusion of these colonies would overcome the fear of possible Chinese dominance in the new federation.
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Reactions of SEA countries towards proposal of merger
Disagreements over the terms Malaysia wanted: Singapore wanted: Details of the Common Market to be worked out after the signing of the Malaysia Agreement Inclusion of Common Market terms in the Malaysia Agreement A $50 million grant from Singapore for the development of Sabah and Sarawak To provide a loan of $150 million for the development of the two territories instead of giving a grant To collect revenue in Singapore and then give Singapore what is needed to run the state To collect its own revenue and then send an agreed sum of money each year to Kuala Lumpur as taxes
Since both sides were unable to work out the terms, a round of talks was arranged in London for the two sides to reach an agreement.
The Singapore delegation to the London talks was led by Lee Kuan Yew. The Malayan delegation was led by Deputy Prime Minster Tun Razak. The Tunku had instructed his DPM to break off talks if a solution was not found – there was a strong possibility that Singapore would be left out of Malaysia if the talks failed.
The final agreement Agreed terms The Common Market would be established in stages Singapore would provide $150 million loan for the development of Sarawak and Sabah Singapore would collect its own revenue and pay Kuala Lumpur an agreed sum of money as taxes .
According to the Agreement, Malaysia would be formed on 31 August 1963.
However, because Indonesia and the Philippines strongly opposed the formation of Malaysia, a United Nations mission was sent to Sabah and Sarawak to find out whether the people were in favour of joining Malaysia.
On 14 Sep, the UN mission reported that the majority of the two territories were in favour of joining Malaysia.
Hence, on 16 September 1963 , the new nation of Malaysia came into existence.
Political: Differences in political views Malaysia Singapore Political parties were formed along racial lines. (E.g, The Alliance Party) The main aim of each party was to look after the interests of its own community Political parties were multi-racial in nature. They did not aim to promote the interests of one community over another. Special rights were given to the Malays to help them improve their standard of living. No special rights were given to Malays. The Singapore government believed that every citizen, regardless of race, should have the same opportunity to succeed. Central government in KL expected Singapore to follow its lead. Singapore hoped that Malaysian Government would move towards a mult-racial approach.
After the Alliance’s victory in the Federal election, UMNO felt that it was time to win back the Malay vote in Singapore. It criticized the PAP for not looking after the interests of the Malays in Singapore.
Malay newspaper Utusan Melayu also joined in and made an issue of the PAP resettlement project in which the Malays were involved.
PAP stressed that it would try its best to help the Malays in education, employment and housing.
The racial tension led to 2 racial riots in Singapore .
The Alliance Party in Singapore challenged the PAP by declaring that it was preparing for the 1967 Singapore State election with the aim of forming a new government in Singapore.
PAP then brought together four other opposition parties to form the Malaysian Solidarity Convention (MSC). The MSC aimed to create a Malaysia were everyone was treated equally regardless of race, language or religion.
The UMNO leaders were furious at the campaign and called for the arrest of Lee Kuan Yew.
The Central Government treated Singapore like an economic rival and was not keen to set up the Common Market.
It also raised Singapore’s revenue contribution from 40% to 60%. Singapore was unhappy with such an unfair proposal since it came at a time when Singapore was collecting less revenue as a result of the Indonesian trade embargo.
The Tunku was afraid of racial clashes occurring should the differences between the Alliance and the PAP remain unresolved. He realized that the disagreements between the two parties could never be settled. This was why he felt it was best for Singapore to leave Malaysia.
On 7 August 1965, the leaders of Malaysia and Singapore signed the separation agreement.
On 9 August 1965, Singapore broke away from Malaysia and became a fully independent country.