Foreign Relations of the United States, 1961–1963, Volume XXIII, Southeast Asia

330. Special National Intelligence Estimate⁰

SNIE 54/59–63

Washington, February 20, 1963.

PROSPECTS FOR MALAYSIA¹

The Problem

To estimate the prospects for achievement of the proposed Federation of Malaysia² and to assess its viability.

The Estimate

I. Prospects for Achievement of Federation

1. The proposed Federation of Malaysia was promoted by the UK and the Government of Malaya primarily as a means of: (a) checking the Communist threat in Singapore, whose population is overwhelmingly Chinese, and maintaining the Singapore base; and, (b) providing the UK with an acceptable alternative to its present colonial position in northern Borneo. Both within the areas which are to form Malaysia and in the neighboring countries, there are elements strongly opposed to the scheme which threaten to prevent its accomplishment and which make uncertain the viability of the new state, if it does in fact emerge.

2. In Malaya, the leftist parties, both Chinese and pro-Indonesian, and the extreme rightists oppose the creation of Malaysia. Although the Alliance Party has been somewhat shaken by the Brunei revolt, Prime Minister Tunku Abdul Rahman’s firm grip on governmental machinery and majority public support will probably not be upset before the target date for federation, 31 August 1963. In Singapore, there is powerful opposition from the predominantly Chinese, pro-Communist Barisan Sosialis Party (BSP). However, a number of its leaders have recently been arrested and pro-federation Prime Minister Lee Kuan Yew can probably maintain his position by a combination of political acumen and an effective internal security apparatus.

3. In the Borneo territories, indigenous tribes, although trusting the British, have expressed their age-old fears of Malay domination and many would probably prefer independence to membership in Malaysia. Domination by Indonesia, however, would be a less attractive alternative than Malaysia. There are strong anti-federation forces, including elements in the Chinese-dominated Sarawak United People’s Party (SUPP) and the Party Rakyat of Brunei (PRB), which dominates political activity of the oil-rich protectorate. The PRB, stymied by the pro-merger position of the Sultan of Brunei, resorted to open revolt on 8 December 1962 under the leadership of Party Chairman A. M. Azahari. Although the revolt was quickly put down by British forces, it called attention to the widespread internal opposition to federation and provided an occasion for Indonesia and the Philippines to manifest their open opposition.

4. Indonesia is the biggest threat to the establishment of the Malaysian Federation. Sukarno is publicly committed to disruption of the scheme. His opposition is couched in terms of objection to neo-colonialism, claiming that the Federation will be merely a mask for continued Western domination. The Indonesians have also expressed fear of extension of Chinese Communist power into the area. Sukarno’s real motives, however, probably arise out of a desire to extend hegemony over Malay peoples and advance his ambitions for great power status. Whatever his motives, Indonesia has posed the challenge and has taken many steps to oppose federation, steps in which Sukarno has had the enthusiastic support of the armed forces and the Indonesian Communist Party (PKI).

5. Indonesia has provided political, financial, and limited military support to the Brunei rebels. Its intelligence forces have long been engaged in clandestine activities designed to establish Indonesian influence in Malaya, Singapore, and the Borneo territories. Its army is probably training guerrillas, and has called for Indonesian “volunteers.” The PKI is also active in the area. The long Borneo border provides many opportunities for infiltration and there are active Indonesian sympathizers in each of the three territories, principally among militant SUPP elements in western Sarawak (the so-called Clandestine Communist Organization), PRB activists in Brunei, and the 30,000 Indonesian migrants in North Borneo. Support of insurrection in Borneo is being coupled with a policy of direct “confrontation” of the Tunku, seeking to frighten him and the UK into reconsidering federation. “Confrontation” does not yet seem to imply an overt use of military force, although Indonesia has considerable capability for armed action, including the use of specialized regular units which could infiltrate by sea, land, or air.

6. The Philippines is an added though lesser threat to the establishment of the Federation. The Philippine Government allowed Azahari to operate from a base in Manila and gave him at least nominal aid in connection with his revolt in Brunei. Manila’s motives are not completely clear, but it is obvious that a genuine desire has arisen to secure North Borneo. The territory is seen as a buffer against both Chinese and Indonesian expansion into the southern Philippines. There is little confidence in the Tunku’s ability to restrain Chinese Communist subversives from moving into the territory and little confidence in the UK ability to defend it against Indonesian aggression. With concern over Indonesian expansionism, there is also a desire to act in concert with Indonesia, which many Filipinos see as the future dominant power in Southeast Asia. Indeed, it may be that there has already been an understanding between the two countries whereby, for tactical purposes, Indonesia has implied its respect for the Philippine claim to North Borneo to encourage Philippine opposition to Malaysia. The Philippine leadership is also motivated by a desire to appear anti-colonialist and fully independent of the West.

7. The USSR has actively opposed the establishment of Malaysia, but Communist China has indicated opposition only indirectly. Soviet officials in Djakarta are encouraging Indonesia in its course of action, probably as a method of further alienating Indonesia from the West and increasing its dependence upon the USSR. Peiping’s current caution probably reflects concern about the overseas Chinese and about possible conflicts between Indonesia’s ambitions and Communist China’s own designs in the area. Communist China almost certainly has ambitions to dominate the Malaysian area; its influence is probably largely exerted through the Chinese-dominated leftists in Malaya, Singapore, and Sarawak.

8. Despite these various opposition forces, we believe that the British and the Tunku will press on with the federation scheme since available alternatives appear to them even less promising. Opposition forces in Singapore and the Borneo areas are not likely to acquire sufficient power to frustrate the plan. Indonesia will actively oppose the establishment of the Federation, and will have Soviet support. It will probably continue to stir up trouble in Borneo, particularly in Brunei and Sarawak, and will continue the training and supplying of disruptive forces. It may hope to create enough trouble and disorder to bring the matter to the attention of the UN with the objective of postponing federation. We do not believe, however, that Indonesia will take sufficiently strong steps to prevent the establishment of Malaysia on schedule. At this time, Indonesia would be reluctant to face the UK directly and would hesitate to risk the damage to political and economic relations with the US which overt intervention might cause. In these circumstances, we believe it probable that Malaysia will come into being by the scheduled date of 31 August 1963.

II. Viability of the Federation

9. Even if the Federation is formed on schedule without further serious difficulty, it will at once be embarked on stormy seas. The internal elements which have opposed federation will continue to exist and, within an independent and untried country, may well gain in strength. The problems of operating these territories, with their great ethnic and cultural diversities, as a single administrative entity would be trying enough for a seasoned and mature government; for the new Malaysian government, they may be insoluble. Presumably the Federation will be a Commonwealth member with special relations with the UK, Australia, and New Zealand; its defense against external adversaries will largely rest on the UK.

10. In Singapore, BSP efforts to displace the Lee Kuan Yew government through strikes, riots, and parliamentary means will continue and have at least an even chance of success. The Tunku’s overwhelming domination of the present Malayan government can hardly be extended to the whole Federation and will lessen as new political elements are introduced into the Malaysian parliament. The most serious setback to Malaysia would be the death of the Tunku, who personally has provided the unifying force among the diverse groups comprising the ruling Alliance in Malaya. In Borneo, leftist Chinese and Brunei Malays will continue efforts to subvert the unity of the state, both seeking independence, but the former looking forward to eventual ties with Communist China rather than with Indonesia. Tribal disaffection may also become a factor of some importance. Without Indonesian support, it is unlikely that these disruptive elements could soon succeed in undoing Malaysia. The prospects in long-range viability would be enhanced if the Tunku is able to overcome initial suspicions and gain the general support of the major ethnic groups, particularly the Chinese and the indigenous non-Malays.

11. We believe that Sukarno will not relinquish his ambitions with respect to the Borneo territories and will persist in his efforts to dominate them through subversion and the promotion of internal disorders. The chances for survival of the Federation during its first few years are probably no better than even. The outcome will depend primarily upon the effectiveness and tenacity of the British and Malayan response to the internal security threat. Sukarno will probably persist in his campaign, hoping that British interest in the situation will lag, and then seek an advantageous accommodation. The sort of struggle that appears to be in prospect for this region resembles insurgency situations elsewhere. The key element will probably be the attitude of the region’s peoples toward the insurgents and their sense of identification with one or the other side. At present, the advantage is with the Malaysia forces because of the general loyalty of the indigenous non-Malays of northern Borneo to the British. On the other hand, the historic antipathy between these peoples and the Malays will be difficult to overcome. Furthermore, Indonesia will be able to count upon the Brunei Malays, many of the migrant Indonesians, and a fair sprinkling of tribesmen with ties in Indonesian Borneo, as well as upon deriving some advantage from disaffection among the Sarawak Chinese.

12. It is possible that intentionally or otherwise, Indonesia will press its Borneo activities and “confrontation” tactics to the point of open hostilities or that the insurgency it promotes could escalate info open fighting. In this event, the massive military buildup with Soviet arms, which has occurred in the past year, would make Indonesia a formidable opponent for the limited military resources which Malaysia is apt to have or for the limited forces which the Commonwealth will probably be willing to commit to the area. Once Malaysia is established, however, Indonesia will be contending with an independent Asian state which will have substantial international support, including some elements in the Afro-Asian bloc. In the event of identifiable Indonesian aggression, Malaysia could be expected to appeal to the UN and anticipate assistance.

13. There is some possibility that Malaya and the Philippines can arrive at an accommodation sufficiently reassuring to the Philippines on security grounds and gratifying on prestige grounds to permit Philippine cooperation with Malaysia. If such an accommodation is not reached, the Philippines will probably continue to harass the new state. It will pursue all available avenues to substantiate its territorial claim, probably focussing its activities in the UN.

14. Both the Soviets and the Chinese Communists will continue their interest in frustrating development of a viable Malaysian state. The former, as in the past, will press its interest largely through support of Indonesian expansionism. The Chinese, on the other hand, are likely to support the subversive efforts of internal, Chinese-oriented, leftist parties seeking control of the new state, and may become increasingly concerned over Indonesian expansionism.

III. The US Role

15. The new Federation will have a basis for a sound economy and, in the first instance, will look toward the UK for technical and administrative help. It will probably also seek some US contribution along these lines. In the military sphere, it is probable that indigenous forces with Commonwealth assistance will be capable of dealing with the limited operations Sukarno probably has in mind for the next few years, but their capabilities would be seriously strained by large-scale infiltrations. Some US counter-insurgency assistance may be requested should the situation deteriorate.

16. US political support for the Federation would tend to strengthen it by diminishing its sense of threat from hostile neighbors. In addition, such support might have some restraining influence on Sukarno who wants US economic aid and fears any US military intervention. While the US position might restrain Sukarno from a maximum effort against Malaysia, it would be unlikely to dissuade him from continuing subversion and infiltration. It is unlikely that the US could bring the Philippines to abandon its claims to North Borneo, but US encouragement might have some weight in persuading the Philippines toward an accommodation with an independent Malaysia.

IV. Consequences of Delay or Cancellation

17. A serious delay in meeting the August target for Malaysia would play into the hands of antimerger elements. The BSP would have an excellent chance of winning the Singapore elections scheduled for 1964. If the UK initiated the delay over the Tunku’s opposition, he could become disgusted with UK vacillation and might abandon the Malaysia project. A delay would injure the Tunku’s prestige, and his government’s prospects in the 1964 Malayan general elections would suffer. In Borneo, the embryo opposition parties would gain time for strengthening themselves and establishing contact with foreign elements. Following upon his success in West New Guinea, Sukarno’s prestige would be further increased through his apparent success in frustrating federation. Indonesian-Malayan antagonisms would not diminish and the Philippine-Malayan rift would widen.

18. Cancellation of the whole scheme would be a serious setback for the Tunku. His political position at home would be seriously weakened. Another step to the left would be likely in Singapore where the Lee government would probably fall. The UK would once again be caught in its colonial dilemma in Singapore as well as in Borneo. As Communist influence rose in Singapore, the UK military base would be placed in jeopardy. The failure to establish the Federation would rate as a major Sukarno victory, enhance his international stature, and encourage him in pursuing further territorial ambitions. The Borneo territories, whether retained by the UK or set adrift as an independent state, would remain a target for Indonesian ambitions. They might also become a prime target of Chinese Communist penetration or the cause of clashes between Indonesian and Philippine claimants.

0. Source: Department of State, INR/EAP Files: Lot 90 D 165, SNIE 54/59–63. Secret; Controlled Dissem. A note on a cover sheet indicates that the Central Intelligence Agency; the intelligence organizations of the Departments of State, Defense, the Army, and the Air Force; and the National Security Agency participated in the preparation of this estimate. All members of the U.S. Intelligence Board concurred with it with the exception of the Representatives of the Atomic Energy Commission and Federal Bureau of Investigation who abstained because the subject was outside their jurisdiction. An accompanying 2-page map is not printed.
1. NIE 54/59–62, “Prospects for the Proposed Federation of Malaysia,” dated 11 July 1962, outlines the background and early history of the Federation movement. [Footnote in the source text. NIE 54/59–62 is printed as Document 327.]
2. The proposed Federation of Malaysia is to be made up of: (a) the Federation of Malaya, which became independent in 1957; (b) Singapore, which was granted partial self-government in 1959; and (c) the three British dependencies on the Island of Borneo—the Protectorate of Brunei and the Crown Colonies of Sarawak and North Borneo. [Footnote in the source text.]