Striving for Inclusive Development: From Pangkor to a Modern Malaysian State

ISBN : 9789834729769

Sultan Nazrin Shah
560 Pages
Pub date
Mar 2020
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By the author of the highly acclaimed Charting the Economy, this book is the most comprehensive study yet of Malaysia's impressive economic and social transformation over the past 150 years.

Drawing on primary data sources, archival documents and cutting-edge national and international research, Sultan Nazrin Shah traces in detail Malaysia's fascinating journey, starting from the signing of the seminal Pangkor Treaty in 1874, through British occupation to the present.

The author unearths the true roots of Malaysia's economic and social development-its people, their human capital and well-being, as well as economic structures-including how the British established institutions for the expansion of the lucrative tin and rubber trade, and how they encouraged labour immigration to support their economic ambitions.

The outbreak of World War II and the Japanese occupation forced the British to rethink their strategy for Malaya, which experienced a sequence of turbulent events through to the formation of Malaysia in 1963.
The 1960s saw solid economic growth, but it failed to benefit the bulk of the population, helping to trigger ethnic clashes. One response by the government was the start of redistributive policies and aggressive affirmative action, with the launch of the New Economic Policy in 1971.

Almost 50 years later, sustained rapid economic growth and a modernizing economy have led to fast-rising incomes, the ending of extreme poverty and the emergence of a sizeable middle class, despite setbacks during financial and economic crises.

Striving for Inclusive Development makes it clear that the country still faces huge and complex challenges. Building on its analysis of the past, this landmark book concludes with a forward-looking assessment of these challenges, and sets out Sultan Nazrin Shah's vision for an inclusive and sustainable future.


Boxes xii

Figures xiii

Tables xvii

Maps xix

Abbreviations xx

Preface xxii

Introduction xxiv


Chapter 1 From British Intervention to Independence

The Straits Settlements of Penang, Melaka, and Singapore




Governance of the Straits Settlements

The Pangkor Engagement, 1874

The Federated Malay States and Their Governance

The Unfederated Malay States and Their Governance

Kelantan and Terengganu

Kedah and Perlis


Administration of the Unfederated Malay States

Administration of British Malaya, 1900-1945

Malayan Civil Service

District Offices

Administration during the Japanese Occupation, 1941-1945

Administration of North Borneo and Sarawak

From Fragmentation to the Federation of Malaysia, 1945-1963

Decolonization to Merdeka, 1945-1957

Malaya to Malaysia, 1957-1963

Maintaining Law and Order

The Military

The Police

The Justice System

The Tax System

The Financial System

New Straits Settlements Dollar


Chapter 2 Population and Migration

Counting and Classifying the People

How Population Classification Has Evolved

Major Categories of Ethnic Classification

Changing Classifications of Ethnic Subcategories

A Century of Migration to 1957

Chinese Migration

Indian Migration

Javanese Migration

Population Growth, 1871-1957

Impact of Migration on the Population of the Straits Settlements and Federated Malay States, 1871-1911

Impact of Migration on the Peninsula's Growth and Ethnic Composition, 1901-1957

Impact of Migration on the Sex Ratio of the Peninsula's Population

Population Policy After 1957

Ethnic Balance and the 1969 Riots

A 70 Million Policy

Lower-skilled and Higher-skilled Emigration, 1957-2017

Population Growth and Changing Ethnic Composition, 1957-2017

Sabah and Sarawak, 1963-2017

A Century of Spatial Redistribution, 1901-2017


Distribution by States


Annex Table 2.1 History of ethnic sub-classifications used in Malayan/Malaysian population censuses


Chapter 3 Building Human Capital

Ethnically Segmented Education in Colonial Malaya

Malay Vernacular Schools

Chinese Vernacular Schools

Indian Vernacular Schools

English-medium Schools

Islamic Schools

North Borneo and Sarawak

Higher Education in Colonial Malaya

Modernization of Education Policy

Education Policy After the Japanese Occupation

Education Policy towards Merdeka

Post-independence Education Policy Reforms

Planning and Human Capital Development

Emergence of the Private Sector and Liberalization of Higher Education

Educational Inputs, Impacts, and Outcomes

Education Expenditure

Universal Literacy

Increasing Enrolment at All Education Levels

Improving Pupil-Teacher Ratios

Rising Educational Attainment

Supply of and Demand for Human Capital

Challenges in Human Capital Development

Performance in International Assessments

Why did Malaysia's Performance Decline in International Assessments?

Improving the Quality of Education

The Challenge of Innovation

The Brain Drain


Chapter 4 Increasing Well - Being

Health and Development in Colonial Malaya

Sanitary Boards

The Medical Department and the Expansion of Public Health

Hospitals, Research, and Training

Health Care from World War II to Independence

Impact of Colonial Health Measures

Post-independence Health Policies and Their Impact on Well-Being

Health Policy

Health Outcomes

The Demographic Transition

The Fertility Transition and Its Impact on Well-Being

The Fertility Transition

Changing Family Size and Female Labour Force Participation

Changing Family Size and Women's Well-Being

Changing Family Size and Impact on the Population's Age Structure

The Demographic Dividend



Chapter 5 Economic Growth and Change , 1874 - 1969

GDP Growth and GDP Gaps, 1900-1969

Data and Data Sources

Growth of Per Capita GDP

Convergence and Gaps in Per Capita GDP

Post-Pangkor Engagement, 1874-1899

Growth, Volatility, and Reversals, 1900-1941

The Rubber Boom, 1900-1929

Volatility in Tin Output and Prices

The Great Depression and Its Aftermath, 1930-1941

A Segmented Economy and People

Japanese Occupation, 1941-1945

Recovery, 1946-1949

Commodity Dependence and Institutional Transformation, 1950-1959

Post-independence Economic Priorities, 1960-1969


Chapter 6 Growth , Productivity , and Wealth Since Independence

The Record on GDP Growth

Income Convergence and Catch-up

Total Factor Productivity Growth and Input Growth

Factor Productivity Benchmarks

Components of Labour Productivity Growth

Structural Change, the Structural Bonus, and Sector Productivity

Structural Change

Structural Bonus

Sector Productivity

Demographic Dividend

Genuine Wealth


Chapter 7 Advances , Reversals , and Changes , 1970 - 2017

Outline Perspective Plan 1, 1971-1990

New Economic Policy: Rationale and Scope

Targets and Policies in OPP1

Outcomes, 1971-1980

Outcomes, 1981-1990

OPP1 Summary

Outline Perspective Plan 2, 1991-2000

The National Development Policy: Rationale and Scope

Targets and Policies in OPP2

Outcomes for OPP2

Outline Perspective Plan 3, 2001-2010

The National Vision Policy: Rationale and Scope

Targets and Policies in OPP3

The Global Financial Crisis and Great Recession, 2008-2009

Impact and Responses

Outcomes for OPP3

The Tenth Malaysia Plan, 2011-2015

Targets and Policies in MP10

Outcomes for MP10


Export Diversification

Innovation-led Growth

MP11 and the New Directions Set in Its Mid-Term Review



Chapter 8 Agricultural Development and Poverty Reduction

Historical Context: The Horns of a Dilemma

Structural Transformation

State-level Agricultural Development and Poverty Reduction, 1970-2015

Poverty and Economic Data

Measures of Structural Transformation at State Level

Agricultural Commodities

Structural Transformation at State Level

Linkages between Agricultural Growth and Poverty Reduction

Commodity Production and Poverty Reduction



Annex Table 8.1 Steady progress in poverty reduction halted during the Asian financial crisis but resumed in year 2000

Annex Table 8.2 Controlling for time-related structural changes in the economy, 95 per cent of variation in poverty is explained

Annex Table 8.3 An increase in real GDP per capita lowers poverty rates

Annex Table 8.4 Rice production has different impacts on poverty at state level

Annex Table 8.5 Palm oil production has different impacts on poverty at state level

Chapter 9 Inequality : A Century of Change

Inequality and Consumption in Malaya, 1900-1939

Piece-wise Linear Lorenz Curves

Lower-bound Gini

Intra-standard Consumption Variance

Intra-standard Dispersion

Simulated Indicators of Inequality

Summary of Inequality in the Colonial Era

Measuring Income Inequality in Malaysia, 1970-2016

Limitations of Income Survey Data

Income Surveys and the National Accounts

Malaysian Household Income Surveys

Type of Income

National Trends in Inequality

Mean and Median Incomes

Lorenz Curves


Percentile Ratios and Shares

Impact of Financial Crises on Income Inequality

International Experience

The Macroeconomic Impact on Malaysia

Malaysian Inequality in Crisis Years

Differentials in Income Inequality

Ethnicity, Strata, and Household Size



Determinants of Income Inequality

Modelling Determinants

Model Results


Annex Table 9.1 Residents of Kuala Lumpur are more likely to be in the top quintile-logistic regressions: Top-quintile

Annex Table 9.2 Tertiary education raises the likelihood of high income- logistic regressions: Top 5%


Chapter 10 Working Towards an Inclusive and Sustainable Future

One: Affirmative Action

Two: Diversified Development

Three: Immigration and Labour Market Regulations

Four: Environmental Management for Sustainability

Five: Implementation

Administrative Alignment and Configuration

Human Resources

Data for Evidence-based Policy



About the author: 

Sultan Nazrin Shah is the Ruler of Perak, and the Deputy Yang di-Pertuan Agong of Malaysia. He is Chancellor of the University of Malaya. He is an Honorary Fellow of Worcester College, Oxford, and of Magdalene College and St Edmund's College, both Cambridge. Sultan Nazrin Shah has a PhD in Political Economy and Government from Harvard University.

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