1900-1929

In this time of period, Malaya was ruled under the governance of British. This is the
reason why in this period, our countrys economic development had developed rapidly as the
results of industrial boom in Europe. Our economy was transitioned from traditional plantation to
modern trade due to the overwhelming demand of raw materials such as rubber and tin. Before
1900, terms of trade were deteriorating due to rising import prices accompanied by stagnating
export prices. However, this situation improved thereafter resulting from the tin and rubber
boom. Growth in rubber production was fuelled by growth in demand from Western automobile
industry after 1900, particularly from the US. Since most Malayan states were well endowed
with natural resources and the appropriate conditions for rubber plantation, it was well positioned
to seize the benefits from this surge in demand. Hence, planters were quick to abandon existing
crops in favour of rubber. In 1910, 225,000 hectares were planted. By 1921, this had grown to
891,000 hectares, or 53% of total area in South and Southeast Asia. The booms in tin and rubber
along with policies implemented by the British have significant implications on Malaysia's social
structure (and divide) of a pluralistic society that exists today. Chinese and Indian immigrants
provided crucial sources of labour for tin and rubber industries respectively. Though rubber
growing was profitable, indigenous and Malays did not experience absolute gain since traditional
activities such as traditional handicrafts were given up. In fact, it was non-indigenous groups,
particularly the Europeans, who had the most control over productive assets and they were the
principle gainers. In 1921, approximately 75 - 80% of the total Malayan estate area was owned
by Europeans while the remaining was owned by the Chinese.
However, in 1920, international market conditions adversely affected the economy badly.
In April 1920, the Allied governments (Britain, France and USA) implemented deflationary
policies to control inflation. This in fact caused the increment in the interest rates and the credit
was restricted. With this, the boom dissipated as manufacturers reduced output and employment,
and purchase orders dwindled. Consequently, prices of raw material nose-dived. Between 1919
and 1922, prices of rubber and tin fell by 60% and 46.4% respectively. Inevitably, commodity
terms of trade fell by 75% and income terms of trade fell by 51% between 1919 and 1921.

The slump in rubber industries had caused the colonial government intervened to restrict
rubber exports from Nov 1922 to Oct 1928 by implemented Stevenson restriction scheme
whereby export restriction was determined by a country's aggregate output with the main aim of
stabilizing prices to allow a reasonable margin of profit. This scheme achieved a desired level of
prices between 1922 and 1923. However, between 1924 and 1925, supply was insufficient to
meet the surge in American demand due to administrative inflexibility and hence, this shortage
induced a price rise again. In 1928, its effectiveness progressively deteriorated with prices falling
to near pre-restriction levels. Because of this, this scheme was subsequently abolished. After that
another regulations which is International Rubber Regulation Agreement (IRRA) was then
established to regulate prices and rubber production from 1934 until 1943.
In 1925-1929, there was crisis in rice imports. The government intervened to ensure
supplies at highly subsidized prices. Hence, there was desire to reduce heavy dependency on
imports. From 1925-29, imports were equivalent to 70% of consumption and the shortage
problem re-emerged during the Great Depression. Hence, the Rice Cultivation Committee was
set up in 1930 to make recommendations on methods to improve yield and the Drainage and
Irrigation Department was established. Other projects included technical work on water control
and quality of seeds. These efforts led to an increase of approximately