The British occupied Dutch colonies during the Napoleonic Wars, including the Dutch East Indies (now Indonesia), following France’s invasion of the Netherlands in 1794. Dutch King William of Orange, who fled to London, instructed Dutch governors overseas to end their rivalry with the British and to permit the entry of British troops to their colonies in a bid to keep the French out. Historian William R Roff writes: “From being an Indian power interested primarily ... in the free passage of trade through the Malacca Straits and beyond to China, the East India Company suddenly found itself possessor not merely of a proposed naval station on Penang island but of numerous other territorial dominions and responsibilities.”
The British had their own colonial designs, having already established a foothold on Penang where Captain Francis Light had set up a trading post in 1786. The Anglo-Dutch Treaty of London signed in 1824 effectively divided maritime Southeast Asia into British and Dutch spheres of influence. Britain retained Penang, Melaka (which it swapped for the Sumatran port of Bengkulu) and Singapore – which had been founded by Stamford Raffles in 1819 – and these formed the Straits Settlements. The Dutch regained control of their colonial territories in the Indonesian archipelago. Britain promised to stay out of Sumatra and the Dutch promised not to meddle in the affairs of the peninsula, thus separating two parts of the Malay world whose histories had been intertwined for centuries.
The British did very little to interfere with the Malay sultanates and chiefdoms on the peninsula, but the Straits Settlements grew in importance – particularly Singapore, which soon superceded Penang, which in turn had eclipsed Melaka. Chinese immigrants arrived in all three ports and from there expanded into tin mining, which rapidly emerged as the main source of wealth on the peninsula. The extent of the tin rush in the mid-19th century is exemplified in the town of Larut in northwestern Perak. Around 25,000 Chinese speculators arrived in Larut between 1848 and 1872. The Chinese fought over the rights to mine the most lucrative deposits and organized into secret societies and kongsis, which by the 1860s were engaged in open warfare. At the same time, the Malay rulers in the states on the Peninsula were busily taxing the tin traders while in the Straits Settlements, British investors in the mining industry put increasing pressure on the Colonial Office to intervene in order to stabilize the situation. In late 1873 Britain decided it could not rule the increasingly lawless and anarchic states by remote control any longer and the western-central states were declared a British protectorate. In his account of British intervention, William R Roff quotes a Malay proverb: “Once the needle is in, the thread is sure to follow”.
In 1874, the Treaty of Pangkor established the residential system whereby British officers were posted to key districts; it became their job to determine all administrative and policy matters other than those governing Islam and Malay custom. This immediately provoked resentment and sparked uprisings in Perak, Selangor and Negeri Sembilan, as well as a Malay revolt in 1875. The revolts were put down and the system was institutionalized: in 1876 these three states plus Pahang became the Federated Malay States. By 1909 the north states of Kedah, Perlis, Kelantan and Terengganu – which previously came under Siamese suzerainty – finally agreed to accept British advisers and became known as the Unfederated Malay States. Johor remained independent until 1914. The British system of government relied on the political power of the sultans and the Malay aristocracy: residents conferred with the rulers of each state and employed the aristocrats as civil servants. Local headmen (known as penghulu) were used as administrators in rural areas.
Meanwhile, the British continued to encourage the immigration of Chinese, who formed a majority of the population in Perak and Selangor by the early 1920s. Apart from the wealthy traders based in the Straits Settlements, the Chinese immigrants were organized (and exploited) by their secret societies, which provided welfare services, organized work gangs and ran local government. In 1889 the societies were officially banned and while this broke their hold on political power, they simply re-emerged as a criminal underworld. In the Federated Malay States, there was an eight-fold population increase to 1.7 million between 1891 and 1931. Even by 1891 the proportion of Malays had declined to a fraction over a third of the population, with the Chinese making up 41.5% and Indians – imported as indentured labourers by the British – comprising 22%. To the south, Johor, which in the late 1800s was not even a member of the federation, had a similar ethnic balance.
For the most part, the Malay population remained in the countryside and were only gradually drawn into the modern economy. But by the 1920s Malay nationalism was on the rise, partly prompted by the Islamic reform movement and partly by intellectuals in secular circles who looked to the creation of a Greater Malaysia (or Greater Indonesia), under the influence of left-wing Indonesian nationalists. These Malay nationalists were as critical of the Malay élite as they were of the British colonialists. The élite itself was becoming increasingly outspoken for different reasons – it felt threatened by the growing demands of Straits-born Chinese and second-generation Indians for equal rights.
The first semi-political nationalist movement was the Kesatuan Melayu Singapura (Singapore Malay Union), formed in 1926. The Union found early support in the Straits Settlements where Malays were outnumbered and there was no sultan. They gradually spread across the peninsula and held a pan-Malayan conference in 1939. These associations were the forerunners of the post-war Malay nationalist movement. In the run-up to the Second World War the left wing split off to form the Kesatuan Melayu Muda – the Union of Young Malays, which was strongly anti-British and whose leaders were arrested by the colonial authorities in 1940. The Chinese were more interested in business than politics and any political interests were focused on China. The middle class supported the Chinese nationalist Kuomintang (KMT), although it was eventually banned by the British, as it was becoming an obvious focus of anti-colonial sentiment. The KMT allowed communists to join the movement until 1927, but in 1930 they split off to form the Malayan Communist Party (MCP) which drew its support from the working class.