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Land use for rubber and rice in Malaya, 1947-1960 Degani, Amina Hatim 1962

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LAND USE FOR RUBBER AND RICE IN MALAYA 1947-1960 by  AMINA HATIM DEGANI B.A.(HONOURS), UNIVERSITY OF MALAYA, SINGAPORE, I960  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS  IN THE DEPARTMENT OF ECONOMICS  WE ACCEPT THIS THESIS AS CONFORMING TO THE REQUIRED STANDARD  THE UNIVERSITY OF BRITISH COLUMBIA AUGUST, 1962  In presenting  t h i s thesis i n p a r t i a l f u l f i l m e n t of  the r e q u i r e m e n t s f o r an advanced degree a t t h e U n i v e r s i t y  of  B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and f o r extensive  study.  I f u r t h e r agree t h a t p e r m i s s i o n  c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y purposes may  g r a n t e d by the Head o f my Department o r by h i s  be  representatives.  I t i s understood t h a t copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o i v e d w i t h o u t my w r i t t e n  permission.  i  Department o f The U n i v e r s i t y o f B r i t i s h Vancouver 8, Canada. Date  Columbia,  ABSTRACT T h i s i s an e x p l o r a t o r y study.  I t s purpose i s t o  d e l i n e a t e and i d e n t i f y the important f a c t o r s  influencing  l a n d use i n Malaya d u r i n g the p e r i o d 1947 t o I960. Since the s u b j e c t o f land use i s very wide our aim i s t o d e a l o n l y w i t h a g r i c u l t u r a l l a n d use.  Other uses  are d i s c u s s e d only i n c i d e n t a l l y o r as they are i n v o l v e d i n the s h i f t i n g uses of l a n d . The scope and nature o f land use p a t t e r n s i n Malaya as i n other c o u n t r i e s , i s a r e f l e c t i o n o f economic, i c a l and p o l i t i c a l f a c t o r s .  geograph-  Land use u s u a l l y r e f l e c t s the  o p e r a t i o n o f the p r i n c i p l e o f comparative advantage.  Theor-  e t i c a l l y d i f f e r e n t t y p e s o f l a n d would n o r m a l l y be put t o t h e i r best uses and any i n s t a b i l i t y which e x i s t s would be c l e a r e d up by the market mechanism.  Institutional  barriers  o f t e n impede t h i s development as we show i n the Malayan case. Two c o n f l i c t s are apparent i n the l a n d use p o l i c i e s i n Malaya.  The f i r s t  i s between rubber and r i c e ; that i s ,  whether t o s p e c i a l i s e i n the p r o d u c t i o n o f rubber, over which Malaya has a comparative advantage, o r t o produce r i c e f o r s u b s i s t e n c e over which Malaya does not have a comparative advantage.  Of course t h e r a t i o n a l course from an economic  p o i n t of view i s t o produce more rubber.  But more than econ-  omics are i n v o l v e d i n such i s s u e s . The other c o n f l i c t i s whether t o produce rubber on  e s t a t e s , which are the l a r g e s c a l e e n t e r p r i s e s , or on  small-  h o l d i n g s , which are the peasant, small s c a l e e n t e r p r i s e s . Again more than economics, are  involved.  In t h i s study a t t e n t i o n i s focussed r u b b e r - r i c e land use p a t t e r n . the a t t e n t i o n .  p r i m a r i l y on  Even then rubber gets most of  T e c h n i c a l questions  i n g t o rubber are of c o n s i d e r a b l e  e s p e c i a l l y those r e l a t -  i n t e r e s t but these are  cussed only i n s o f a r as t h e y have g e n e r a l economic The  chapter  I I comprise the f i r s t  c o n t a i n s the economic and  the land use r i c e land use  section.  dis-  relevance.  study as a whole can be d i v i d e d i n t o three  Chapters I and  the  The  parts.  opening  h i s t o r i c a l background t o  p a t t e r n s i n Malaya and  p o i n t s out the rubber-  pattern.  In Chapter I I we  d i s c u s s the t h e o r e t i c a l ,  suggested  e f f e c t s of the d u a l p a t t e r n of land u t i l i s a t i o n .  An  attempt  i s a l s o made t o apply the d u a l i s t i c t h e o r i e s of economic growth t o Malaya i n order t o a s c e r t a i n whether the  conclu-  s i o n s of these t h e o r i s t s are v e r i f i e d i n Malaya. The  second s e c t i o n comprises of Chapter I I I .  d i s c u s s the o b s t a c l e s to good l a n d u t i l i s a t i o n i n the war  Here  we  post  period. The  t h i r d major s e c t i o n takes up the remaining chap-  t e r s , a l l of which d e a l l a r g e l y w i t h rubber, which i s one of the mainstays of the Malayan economy. In Chapter IV we  d i s c u s s the r e l a t i v e e f f i c i e n c y  of  iv  e s t a t e s and t e r may  be  s m a l l h o l d i n g s as' producers of rubber.  T h i s chap-  s a i d to c o n t a i n the heart of the matter s i n c e i t  h e l p s us t o e v a l u a t e two  r e c e n t developments, which are  cussed  VI.  i n Chapters V and  dis-  Chapter V, the "break-up" of rubber e s t a t e s , d i s c u s s e s the v a r i o u s a s p e c t s of e s t a t e s which have been d i m i n i s h i n g i n size.  The most important  e f f e c t of t h i s i s the c r e a t i o n of  s m a l l h o l d i n g s and a l o s s i n government revenue. The  second recent development, the l a n d development  schemes i n i t i a t e d by the government, i s d i s c u s s e d i n Chapter VI.  Here again the c h i e f e f f e c t i s the c r e a t i o n of rubber  smallholdings. The  concluding  chapter has the twofold aim  s i n g the main f i n d i n g s t o t h i s study and  of summari-  of s e t t i n g out  l y the p o s s i b l e f u t u r e t r e n d s o f land use i n Malaya.  brief-  ACKNOWLEDGEMENTS I am g r e a t l y indebted t o my s u p e r v i s o r , Professor Anthony-D. Scott f o r the l i b e r a l  all-  otment of h i s time, a very scarce f a c t o r of production indeed, and f o r h i s s t i m u l a t i n g suggestions and comments and constant e f f o r t s t o set me on the r i g h t t r a c k .  I would a l s o l i k e t o thank  the S o c i a l Science D i v i s i o n of the U n i v e r s i t y L i b r a r y f o r t h e i r co-operation i n obtaining l i t erature p e r t a i n i n g t o Malaya.  F i n a l l y I would  l i k e t o acknowledge my o b l i g a t i o n t o the Canadian Commonwealth Scholarship Committee f o r making my Master's programme p o s s i b l e .  CONTENTS PAGE TITLE PAGE  i  ABSTRACT TABLE OF CONTENTS  i i •  v  LIST OF TABLES  viii  LIST OF MAPS  x  ACKNOWLEDGEMENTS  xi  TABLE OF CONTENTS CHAPTER I.  PAGE  THE LAND USE PATTERN BY 1947  1  Land U t i l i s a t i o n i n 1947  2  The Emergence of the Rubber Industry i n Malaya  6  The E f f e c t s of Rubber R e s t r i c t i o n 9  Schemes on Land Use  15  Rice Land P o l i c i e s The E f f e c t s of the Second World War on  II.  Land Use  20  Summary and Conclusion  20  SUGGESTED EFFECTS OF THE LAND USE PATTERN ON ECONOMIC DEVELOPMENT  \  22  S o c i o l o g i c a l Dualism  22  Technological Dualism  27  C o l o n i a l i s m and the "Backwash" E f f e c t s  III.  of I n t e r n a t i o n a l Trade  34  Conclusion  42  The D u a l i s t i c Theories and Malaya  43  Conclusion OBSTACLES TO LAND UTILISATION IN THE POST  53  WAR PERIOD  55  I n s t i t u t i o n a l Obstacles  56  Investment i n Rubber  60  Land Use P o l i c y f o r Rice Summary  79 38  vi  CHAPTER IV.  PAGE  A COMPARISON OF ESTATES AND SMALLHOLDINGS AS PRODUCERS OF RUBBER Organisation  91  Production  99  The Supply of Rubber  103  Planting Density  109  Bark Consumption  109  Weeding  Ill  Planting Material  112  Processing of Rubber  117  Marketing of Rubber  119  The Availability of Credit  120  Research  122  Replanting Summary ..... V.  91  THE "BREAK-UP" OF RUBBER ESTATES Definition of Terms Used The Sale of Rubber Estates  123 12$ 130 130 132  Subdivision of Estates  140  Costs of Subdivision  141  Subdivision for Replanting  145  Demand, for Land  14$  Size of the Subdivisions  153  Effects of Subdivision on the Malayan Economy  157  Summary  163  vii  CHAPTER VI.  PAGE  THE LAND DEVELOPMENT AUTHORITY--AN ECONOMIC NECESSITY? The Land Development Authority Reasons for the Establishment Land Development Authority  165 of the  Is the Authority Necessary for Land Development?  167 170  Risk  171  Ignorance  172  Institutional Rigidities  175  Some Objections to Government Participation in Land Development Summary VII.  ,. 165  SUMMARY AND CONCLUSIONS  177 178 181  APPENDICES I.  REPLANTING SCHEMES IN THE RUBBER INDUSTRY  193  II.  SCOPE AND METHOD OF DATA COLLECTED ON THE "BREAK-UP" OF RUBBER ESTATES  19$  BIBLIOGRAPHY  200  LIST OF TABLES TABLE .  PAGE  I.  Area under A g r i c u l t u r a l Crops, 1 9 4 7  II.  New Rubber P l a n t i n g s and New York Crude Rubber P r i c e s , Averages, 1 9 0 0 - 1 9 3 3 A Comparison of the Earning C a p a c i t i e s of Rubber and Rice 1 Ownership of Estate Acreage under Rubber, 1 9 5 3 , Analysed by Race Ownership of Rubber Smallholdings, 1 9 5 3 , Analysed by Race 4  III. IV. V. V I .  A Comparison of Land Use,  V I I . Rubber P r i c e s , VIII. IX. X. XL. XII. XIII.  3  1 9 4 7 and 1 9 5 &  1 9 4 7 - 1 9 6 0  4  E x i s t i n g and Planned Synthetic Rubber Capacity i n the Free World, I 9 6 0 Earnings of Some " S t e r l i n g " E s t a t e s November 1 9 5 9 •• Rice Y i e l d s of the Major Rice Producing . Countries, 1 9 5 9 - 1 9 6 0  4 5  4  6  5  Estimate of World Rubber Production and Consumption, I 9 6 0 6 Free World Rubber Consumption 1 9 5 0 and Projected 1 9 7 5 Consumption  Estate Acreage under Rubber,  9  6  " 6  7  9  2 7  $  $  4  I 9 6 0 .  Analysed by Size Group and Race  9  4  XIV.  Operation of the Producing Farms  9  6  XV.  Cost of Production of One Pound of Estate Rubber, 1 9 4 0 and 1 9 5 $ Annual Percentage Changes on Previous Years' Figures i n the P r i c e and i n Malayan Output of Rubber, 1 9 4 ^ -  XVI.  1  1 9 5 $  0  2  ix  TABLE XVII.  PAGE Percentage of Higher Yielding Rubber to Total Planted Acreage, I960, By Size Group and Race  115  Yields per Acre from Selected and tinselected Material, I960, By Size Group and Race  116  XIX.  Malaya, Exports of Ribbed Smoked Sheet and Latex, 1950-1960  113  XX.  Area Replanted and New Planted by Estates  XVIII.  and Smallholdings, 1951-1960  124  XXI.  Number of Estates Sold, 1956-1953  132  XXII.  Analysis of the Acreage of Some Estates Sold Number of Sales Classified By sizes of Pieces Sold Numbers of Sales Classified By Reasons for Sale,--  XXIII. XXIV.  134 139 140  XXV.  Price per Acre of Some Estates Sold  143  XXVI.  Extent of Subdivision  149  XXVII.  Total Area Subdivided and Density Per Square Mile  150  XXVIII. Buyers and Subdividers, By Race  152  XXIX.  Area Subdivided and Sizes of Subdivisions ....  155  XXX.  Estate Acreage under Rubber and Area Subdivided  156  LIST OF MAPS  MAP  PAGE  I.  Malaya  Frontispiece  II.  Malaya--Land U t i l i s a t i o n , 1947  Between pages 1 & "2  III.  Malaya—Malav Reservations,  1954  .......  Between 50 &  vaees 51  MALAYA  CHAPTER I THE LAND USE PATTERN BY 1947 The purpose of this chapter i s to serve as a background to the post war pattern of land use.  In this intro-  ductory chapter we w i l l briefly sketch the land use pattern and then go on to give an account of the rubber-rice land use pattern of development. In this and subsequent chapters we are concerned only with the u t i l i s a t i o n of land for agricultural purposes; other uses are discussed only incidentally or as they are involved in the shifting uses of land. The scope and nature of the land use patterns in Malayaf as in other countries, is a reflection of economic, geographical and p o l i t i c a l factors.  From the economic standpoint, land  utilisation i s concerned primarily with the characteristics and conditions, conflicts, shift and adjustments i n land use that arise from the use of land as a resource.  Also involved  is the physical response of land to varying applications of capital and labour, the individual and social costs and benefits of land use,, and the operational effect of land policies on the use of land. Land use usually reflects the operation of the prin-  Unless otherwise stated, Malaya means only the Federation of Malaya and does not include Singapore. Also unless otherwise stated, a l l values are in Malayan dollars. $M1 - US&.-33 cents.  MAP I I  2  c i p l e of comparative advantage,factors  of p h y s i c a l p r o d u c t i v -  i t y , economic l o c a t i o n , e f f i c i e n c y and  the c o s t s of the  f a c t o r s used i n the p r o c e s s . T h e o r e t i c a l l y , d i f f e r e n t of l a n d would normally  be put t o t h e i r best uses and  various  types any  i n s t a b i l i t y which e x i s t s would be c l e a r e d up through the market mechanism.  I n s t i t u t i o n a l b a r r i e r s o f t e n impede t h i s  velopment, as we  s h a l l see i n the Malayan  Land U t i l i s a t i o n i n We w i l l now  case.  1947 g i v e a b r i e f d e s c r i p t i o n of the land  p a t t e r n , which i s g r a p h i c a l l y d e p i c t e d i n Map mately e i g h t y per cent of the country mountain or swamp.  de-  The  II.  use  Approxi-  l i e s under j u n g l e ,  only f u l l y c l e a r e d p a r t s of the  country are along the west c o a s t , an area i n the n o r t h and number of s t r e t c h e s up the p r i n c i p a l r i v e r s .  In the  c l e a r e d of jungle are the rubber p l a n t a t i o n s and i n g s , t i n mines, r i c e f i e l d s , coconut and  economic l i f e  o i l palm e s t a t e s ,  of Malaya are l a r g e l y  t r a t e d on the c o a s t a l areas and  Hence the concen-  h i n t e r l a n d s o f the west  It i s evident from Table H a n d Map occupies w e l l over h a l f  area  smallhold-  from a l l of which the country's wealth i s d e r i v e d . p o p u l a t i o n and  a  coast.  I I t h a t rubber  of the t o t a l c u l t i v a t e d a r e a .  It i s  a p r i n c i p a l crop not only on e s t a t e s ^ but a l s o on peasant holdings;  2 G e n e r a l l y e s t a t e s are d e f i n e d as u n i t s o f o p e r a t i o n over 100 a c r e s . S m a l l h o l d i n g s are d e f i n e d as u n i t s of operat i o n under 100 a c r e s . F o r a more d e t a i l e d d e f i n i t i o n see Chapter IV, ,. 9 3 . p  3  Next i n importance a f t e r rubber i s r i c e , which i s c u l t i v a t e d on about sixteen per cent of the land. l y a smallholders crop.  I t i s entire-  Rice y i e l d s are the highest f o r  South-east A s i a but Malaya depends on imports f o r about h a l f her requirements. TABLE  I  AREA UNDER AGRICULTURAL CHOPS, 1947  Crop  Acres  per cent  Rubber Rice Coconuts O i l Palms Pineapples Tea Market gardens Other food crops  3,481,000 831,538 512,000 78,405 11,920  68.7 16.2 10.1 1.6 .2 .2 .3 2.9  Total c u l t i v a t e d area Source:  9,016  15,019 146,329 5,067,226  100  Great B r i t a i n , C o l o n i a l O f f i c e , C o l o n i a l Annual Reports. The Malayan Union, 1 9 4 7 , London, Her Majesty's S t a t i o n e r y O f f i c e , 1 9 4 9 , pp. 3 5 - 3 9 . Other crops of commercial importance are coconuts,  grown on about 512,000 acres by both estates and smallholders, and o i l palms which occupy about 78,400 acres and which are e x c l u s i v e l y an estate crop.  1  M i s c e l l a n e o u s f r u i t s , v e g e t a b l e s , other food and  crops  s p i c e s are c u l t i v a t e d on about 1#2,300 a c r e s f o r sub-  s i s t e n c e purposes,  o f t e n as a supplement t o the major crops,  f o r example, rubber, r i c e , o r coconuts.  However s p e c i a l i s e d  commercial c u l t i v a t i o n i s a l s o important, e s p e c i a l l y o f f r e s h v e g e t a b l e s and f r u i t s , i n c l u d i n g p i n e a p p l e s f o r the canning i n d u s t r y and t e a , mainly f o r domestic In s p i t e of the importance  consumption.  of a g r i c u l t u r e i n the  Malayan economy, the r e g i o n i s not s e l f - s u f f i c i e n t  i n food-  s t u f f s due t o the r e l a t i v e advantages o f , and degree of s p e c i a l i s a t i o n i n rubber and t o t h e c l i m a t i c l i m i t a t i o n s f o r many food c r o p s .  However the i d e a o f s e l f - s u f f i c i e n c y i s  p e r v a s i v e i n o f f i c i a l p o l i c i e s r e g a r d i n g l a n d use. p a r t i c u l a r l y important  i n the r u b b e r - r i c e a l i e n a t i o n  It i s policies  which we t u r n t o n e x t . The  i n v e s t i g a t i o n i n t o the r u b b e r - r i c e l a n d use pat-  t e r n s and p o l i c i e s can be d i v i d e d i n t o two, t h a t r e l a t i n g t o rubber and t h a t r e l a t i n g t o r i c e , each o f which i s d i s c u s s e d in turn. The  j u s t i f i c a t i o n f o r c o n c e n t r a t i n g on rubber and r i c e  i s t h a t rubber i s the c h i e f export crop and r i c e the s t a p l e food c r o p .  The a l t e r n a t i v e s so f a r as•  l a n d use i s concerned,  are between p r o d u c t i o n f o r export and p r o d u c t i o n f o r s u b s i s tence.  The interdependence  between the two can be seen by the  f o l l o w i n g i l l u s t r a t i o n : t h e value o f land s u i t a b l e f o r rubber  5  c u l t i v a t i o n depends not only on the p r i c e of rubber but also on the wages being paid i n a l t e r n a t i v e occupations ( p a r t i c u l a r l y r i c e fanning i n the case of smallholders) open to l a b our, which i s required to develop and maintain the h o l d i n g s , as w e l l as on the cost of moving from one d i s t r i c t to another. The value of land i s t h e r e f o r e contingent on the p r i c e of rubber as w e l l as on the cost of i n t e r n a l m i g r a t i o n . I t cannot be overemphasised that the Malayan economy revolves around rubber and to l e s s e r extent around t i n .  The  emphasis on rubber i s substantiated by the f o l l o w i n g figures-^ from which we n o t i c e that rubber i s o f overwhelming importance by any c r i t e r i o n .  About s i x t y per cent of the f o r e i g n  exchange earnings and t h i r t y - t h r e e per cent of government revenue have rubber as t h e i r source;  about 2 5 . 9 per cent  of a l l g a i n f u l l y occupied persons were employed i n the rubber industry i n 1 9 4 7 ;  and i n 1 9 5 3 rubber contributed  t h i r t e e n per cent to the n a t i o n a l income.  •* 'Foreign exchange earnings — Federation of Malaya, Second Five Year Plan 1 9 6 1 - 1 9 6 5 , Kuala Lumpuro, Governme P r i n t e r , 1 9 6 1 , p. 1 5 . ( i i ) Employment i n the rubber i n d u s t r y — I n t e r n a t i o n a l Bank f o r Reconstruction and Development, The Economic Development of Malaya. Singapore, Government P r i n t e r , 1 9 5 5 , Table I I , p. 8. Hereafter r e f e r r e d to as The Bank M i s s i o n Report. ( i i i ) National Income—Ibid., Table IV  p. 9 .  6  The Emergence of the Rubber Industry The, economic foundations  i n Malaya  of modern Malaya may  be 4  dated t o the e x t e n s i o n  of B r i t i s h r u l e over the  B r i t i s h r u l e not only brought peace and with  i t came B r i t i s h and,  capital.  The  i n the i n i t i a l  Peninsula.  s e c u r i t y but  also  t o a l e s s e r extent, other European  opening up and development of Malaya at l e a s t stages was  achieved by non-indigenous p e r s o n s .  With the B r i t i s h came rubber so t h a t the l a n d use p a t t e r n it  as  e x i s t s today can be d i r e c t l y r e l a t e d t o the i n t r o d u c t i o n  of rubber i n t o the  economy.  Rubber d i d not come e f f e c t i v e l y i n t o the Malayan p i c t u r e or f o r t h a t matter, the world g i n n i n g of the present  century.  Up t o t h a t time the  l y s m a l l amount of rubber t h a t was needs came from the Amazon. today was  p i c t u r e u n t i l the  had  relative-  required f o r existing  The rubber i n d u s t r y as i t i s  c a l l e d i n t o being by the appearance of the auto-  mobile and the i n v e n t i o n of the pneumatic t y r e . it  be-  Before  long  r e p l a c e d a l l other a g r i c u l t u r e i n Malaya. S e v e r a l f a c t o r s were r e s p o n s i b l e f o r the  i n rubber, the c u l t i v a t i o n of which was t o the west c o a s t .  investment  especially attracted  A s k e l e t o n network of roads and  railways  were a l r e a d y l a i d out t o serve the mining i n d u s t r y of the ^Between 1874 and 1909, the nine Malay S t a t e s which had f a l l e n i n t o a c o n d i t i o n of semi-anarchy and c h r o n i c m i s r u l e were brought under B r i t i s h r u l e . See L.A. M i l l s , B r i t i s h Rule i n East A s i a . London, Oxford U n i v e r s i t y P r e s s , 1942, p. 3.  •7  western f o o t h i l l s .  Well d r a i n e d  were c o n t r i b u t o r y f a c t o r s . rubber was  s i t e s and  Besides much of the  p l a n t e d on l a n d which had  coffee plantations.  As we  earlier  been under sugar  and  have noted above, c a p i t a l f o r i n -  vestment i n rubber came w i t h the extension The  proximity to ports  of B r i t i s h  rule.  a v a i l a b i l i t y of cheap s u p p l i e s of labour from I n d i a  and  China a l s o gave impetus t o investment i n e s t a t e rubber. Moreover as the demand f o r rubber Increased,  difficulties  i n the c o l l e c t i o n of w i l d rubber from South America a l s o i n creased the  as producers were d r i v e n t o the extensive margin of  jungle. In 1900  only 5,000 acres of rubber had  During the next decade however, she was world rubber p r o d u c t i o n .  fertile  s o i l , r a t h e r i t was  a t i o n s , h e a l t h s e r v i c e s and  producing  Malaya's success  r e l a t i o n t o other t r o p i c a l areas, was due  been p l a n t e d . one-half  of  i n rubber, i n  not due  to  particularly  t o l a b o u r s u p p l i e s , communic-  the r e l a t i v e l y l a r g e amounts of  unused land i n a s u i t a b l e c l i m a t e . A l a r g e number of companies of v a r y i n g s i z e s were floated.  The European owned e s t a t e s g e n e r a l l y tend t o  larger—ninety-two 1,000  acres.^  per cent  be  of t h e i r e s t a t e s are more than  A s i a n owned e s t a t e s are g e n e r a l l y s m a l l e r ;  of  T.H. S i l c o c k , The Economy, of Malaya. Singapore, Donald Moore, I960, p. 17. ?  Puthucheary, Ownership and C o n t r o l i n the Malayan Economy. Singapore, E a s t e r n U n i v e r s i t i e s P r e s s , I960, p. 26.  8;  these only s i x t e e n per cent of the Chinese and t h i r t e e n  per  7  cent of the I n d i a n e s t a t e s are more than 1,000 At f i r s t rubber was of peasant p a r t i c i p a t i o n t h a t of e s t a t e s .  acres.  an e s t a t e crop o n l y .  The  history  In rubber c u l t i v a t i o n c l o s e l y  The e f f e c t s  of contact w i t h  follows  agricultural  p r a c t i c e s of the more "advanced" c o u n t r i e s have been very different  from those assumed by the " I n t e r n a t i o n a l Demon-  stration Effect".  In t h i s case i t has promoted economic  growth by encouraging p r o d u c t i o n f o r the market. I t appears t h a t Chinese merchants probably used some pressure through goods s u p p l i e d on c r e d i t , encouraging Malay and other peasants t o p l a n t rubber.  The Malay peasants,  a t t r a c t e d by the l a r g e p r o f i t s being made, cut down t h e i r f r u i t t r e e s and r i c e p l a n t s t o p l a n t rubber.9  The  reason  f o r t h i s might have been t h a t they c o u l d not o b t a i n l a n d t o c u l t i v a t e rubber or t h a t they d i d not have the c a p i t a l t o purchase l a n d . Rubber i n t r o d u c e d the o n l y s i g n i f i c a n t change i n the Malay r u r a l landscape.  The reasons why  rubber are q u i t e d i f f e r e n t  the peasants took t o  from those of e s t a t e investment i n  7 Loc c i t . J  $  Cf. R. Nurske, Problems of C a p i t a l Formation i n Underdeveloped C o u n t r i e s . Oxford, B a s i l B l a c k w e l l , 1955, pp. 61-66,  70.  %.0. Winstedt, The Malays, a C u l t u r a l Rutledge and Kegan, 1950, p. 127.  H i s t o r y . London,  9  rubber.  The c u l t i v a t i o n of rubber made few demands on the  s m a l l h o l d e r ' s time and i t f i t t e d e a s i l y i n t o the Malay lage s e t t i n g w i t h i t s emphasis on t r e e c r o p s .  The  vil-  small-  h o l d e r a l s o d i s c o v e r e d t h a t an acre;: of rubber could g i v e him an income over and above t h a t which he c o u l d d e r i v e from an acre of r i c e .  However, t h i s abandoning  of r i c e f i e l d s d i d  not occur i n E a s t e r n Malaya where the customary o c c u p a t i o n , r i c e , i s i n e x t r i c a b l y bound up w i t h the peasant's whole way  of  life. The response of the peasants can a l s o be s a i d t o have come from the need t o pay t a x e s , r e n t s and t o s a t i s f y s o c i a l wants.  new  S u b s i s t e n c e p r o d u c t i o n which depends on a  c l o s e d system of exchange w i t h i n the community, g r a d u a l l y gave way  t o p r o d u c t i o n f o r the market.  i n g the f i r s t  Thus we  see t h a t even dur-  decades of t h i s c e n t u r y the i n d i g e n o u s peasants  were f a i r l y quick i n t h e i r response t o changing  opportunities.  The E f f e c t s of Rubber R e s t r i c t i o n Schemes on Land  Use  Up t o now we have d i s c u s s e d the growth o f t h e rubber industry.  In the next s e c t i o n we t u r n t o the rubber r e s t r i c -  t i o n schemes which were an important f a c t o r i n f l u e n c i n g the acreage under rubber. By 1 9 2 0 , Malaya was the world's r u b b e r . 1 0  producing f i f t y - t h r e e per cent of  Up t o 1 9 2 0 ,  t o o , the h i s t o r y of rubber  • L . A . M i l l s , . Malaya. A P o l i t i c a l and Economic A p p r a i s a l . M i n n e a p o l i s , U n i v e r s i t y of Minnesota P r e s s , 1958, p. 2 2 . X U  10  had been one of expanding markets.  There was a d i r e c t r e -  l a t i o n s h i p between rubber p l a n t i n g s and the long run trend of rubber p r i c e s as Table I I shows. TABLE I I NEW RUBBER PLANTINGS AND NEW YORK CRUDE RUBBER PRICES, AVERAGES,  Period  1900-1909 1910-1914 1915-1919 1920-1924 1925-1928 1929-1933  Additional Area  1900-1933  Planted ( 0 0 0 acres)  Estates  Smallholdings  439 219  78  174 88 215 130  Av. Annual P r i c e (cents per pound) 109.8  117 169 95 375  123.4 63.8 25.4 63.0 9.2  78  Source: K.E. Knorr World Rubber and i t s Regulation, Stanford, Stanford U n i v e r s i t y Press, 1 9 4 5 , p. 0 7 . The i n d u s t r y grew r a p i d l y up to 1 9 1 4 and was s c a r c e l y able to keep up with the i n c r e a s i n g demand. A f t e r 1 9 1 4 however, the new p l a n t i n g s reached maturity and supply demand.  exceeded  Because of the i n e l a s t i c nature of rubber production,  supplies could not be s u b s t a n t i a l l y r e d u c e d .  11  Surplus  were s t i l l f u r t h e r increased by the depression of  stocks  1920-1922.  The i n e l a s t i c nature of rubber production i s discussed i n Chapter IV, pp.103-108.  11;  Consequently the p l a n t e r s appealed t o t h e government f o r a 12 scheme t o r e s t r i c t p r o d u c t i o n .  According  t o Rowe,  The s t r o n g e s t argument i n favour o f t h e a d v i s a b i l i t y of r e s t r i c t i o n , i f not i t s n e c e s s i t y , was t h a t t h e c r e d i t s t r u c t u r e of the Chinese community c o u l d not have stood the s t r a i n much l o n g e r . The Chinese had a good d e a l o f immature rubber on t h e i r hands, p l a n t e d between 1916 and 1922. The same could be s a i d o f t h e numerous B r i t i s h e s t a t e s , e s p e c i a l l y t h e " d o l l a r " 13 companies. From 1922-1939, the rubber i n d u s t r y was i n t e r m i t t e n t l y under r e s t r i c t i o n schemes.  We a r e not concerned  essentially  w i t h t h e nature and workings o f these schemes, but with  their  e f f e c t s on l a n d use. ^" 1  The  first  r e s t r i c t i o n scheme, the Stevenson Scheme,  1922-1928, "... brought a short period, o f h e c t i c p r o s p e r i t y t o Malaya, but i t s long run consequences have been u t t e r l y d i s 15 , astrous". No r e s t r i c t i o n was placed on new p l a n t i n g ( t h a t  '  J.F.W. R o w e / S t u d i e s i n t h e A r t i f i c i a l C o n t r o l o f Raw M a t e r i a l S u p p l i e s . No. 2. Rubber," Royal Economic S o c i e t y , London, S p e c i a l memo, No. 29, A p V i l 1931, p. 18. 12  • ^ " D o l l a r " companies are those rubber companies i n c o r porated i n Malaya o r Singapore. I n c o n t r a s t the " s t e r l i n g " companies are i n c o r p o r a t e d i n t h e United Kingdom. -^For t h e economics o f r e s t r i c t i o n schemes see, J.F.W. Rowej S p e c i a l Memo No. 29. c i t e d above, and Rowe Markets and Men. Cambridge, At the U n i v e r s i t y Press 1936, Chp. 6; E . S t a l e y , Raw M a t e r i a l s i n Peace & War, New York, C o u n c i l on F o r e i g n R e l a t i o n s , 1937; 0. Lawrence, "The I n t e r n a t i o n a l C o n t r o l of Rubber," Commodity C o n t r o l i n the P a c i f i c Area, ed. W.L.Holl a n d , I n s t i t u t e of P a c i f i c R e l a t i o n s , Stanford, S t a n f o r d U n i v e r s i t y P r e s s , 1935, Chp. 12. A. Macfadyean, ed. The H i s t o r y o f t h e Rubber R e g u l a t i o n 1934-1943. London, Seorge A l l e n & Unwin,1944. " ^ S i l c o c k , op. c i t . , p. 19.  \  12  i s on investment) or r e p l a n t i n g but the  o f f i c i a l ban  on the a l i e n a t i o n of land f o r rubber had  which  was  placed  ful  i n f l u e n c e on the development of the i n d u s t r y and,  for  the m o d i f i c a t i o n i n 1939-1940, i t remained i n f o r c e u n t i l ,  a f t e r the second world war."^ o n l y on land a l r e a d y Smallholders, reserve  L a w f u l new  planting  a powerexcept  occurred  a l i e n a t e d but not yet p l a n t e d with rubber.  u n l i k e the e s t a t e s , r a r e l y possess unplanted  land and much of the p l a n t i n g they had  been on land p r e v i o u s l y p l a n t e d ,  undertaken  had  e s p e c i a l l y w i t h coconuts or  fruit. Malaya l o s t the g o o d w i l l of her c h i e f customers, the Americans, who of s u p p l i e s . 1 ? Liberia.  were encouraged t o seek a l t e r n a t i v e sources Thus e s t a t e s were e s t a b l i s h e d i n B r a z i l  E f f o r t s to economise i n the use  of rubber l e d to  the r a p i d growth of the rubber r e c l a i m i n g i n d u s t r y . run i t gave impetus to the production T h i s l a s t p o i n t has discouraged subsequent chapter,  and  In the  long  of s y n t h e t i c r u b b e r .  investment, as we  i n n a t u r a l rubber during  show i n a  the post war  per-  iod. D u r i n g the tenancy of the I n t e r n a t i o n a l Rubber Regulation  Scheme, 1934-1938, new  p l a n t i n g was  again  possible  G . C . A l l e n and A.G. Donnithorne, Western E n t e r p r i s e i n Indonesia and Malaya. New York, Macmillan, 1957, p. 123. XD  'For an i n t e r e s t i n g account of the American r e a c t i o n see, Rowe, S p e c i a l Memo. No. 2 9 . pp. 5 2 - 5 6 .  only on l a n d a l r e a d y a l i e n a t e d but not yet p l a n t e d w i t h ber.  Thus once again the  ous p o s i t i o n .  s m a l l h o l d e r s were i n a  rub-  disadvantage-  T h i s c l a u s e remained i n f o r c e u n t i l 1940  when  producers were allowed t o p l a n t up t o f i v e per cent of t h e i r 1938  acreage.  T h i s , i n c i d e n t a l l y , was  smallholders.  The  of l i t t l e  f i v e per cent of 1938  benefit to  acreage was  the  declared 19  t o be the e q u i v a l e n t of e i g h t t r e e s f o r s m a l l h o l d e r s . was  h a r d l y worthwhile r e p l a n t i n g eight, t r e e s s i n c e as we  It point  out i n Chapter IV, r e p l a n t i n g l e s s than t w e n t y - f i v e a c r e s i s 20 u n f e a s i b l e , both economically vanced age  Hence the  of s m a l l h o l d e r s ' rubber t r e e s and t h e i r l a c k of  p l a n t i n g may restriction  and t e c h n i c a l l y .  schemes.  the competitive  the age  r  p o s i t i o n of the Malayan rubber i n d u s t r y .  the area under rubber prevented composition  Between 1925 age  new  be a t t r i b u t e d t o the p l a n t i n g p r o v i s i o n s of the  As a r e s u l t of these p o l i c i e s , a change o c c u r r e d  only was  ad-  1940,  i n c r e a s e d from about 2.45  Not  from expanding, b u t  of the rubber t r e e s became and  in  unfavourable.  w h i l e the Malayan rubber acrem i l l i o n a c r e s to 3.48  million  The r a t e of f i v e per cent was chosen because t h i s was thought to be the approximate e q u i v a l e n t of the r a t e of d e p r e c i a t i o n of the p l a n t e d acreage. See P.T. Bauer, The Rubber I n d u s t r y , a Study i n Competition and Monopoly. London, Longmans Green, 1948, p. 97. •^Bauer, Report on a V i s i t to Rubber Growing S m a l l h o l d i n g s i n Malaya. July-September 194o"T London. Her Majesty's S t a t i o n e r y O f f i c e , 1948, p. 36. 20  1  T h i s i s d i s c u s s e d i n Chapter IV, pp. 125-126-.  14  a c r e s t h a t i n other c o u n t r i e s i n c r e a s e d from 2 . 4 3 m i l l i o n 21  acres t o 6 . 7 8 " m i l l i o n acres. The  f i n a n c i a l l o s s estimated by Bauer due t o the two  r e s t r i c t i o n schemes was about $ 3 4 0 t o $ 3 # 3 m i l l i o n .  He r e -  c  minds us t h a t i n order t o get these f i g u r e s i n t o p e r s p e c t i v e we should note t h a t the t o t a l a l l o c a t i o n t o Malaya under t h e C o l o n i a l Development and Welfare A c t was only about $ 4 3 m i l li x• o n . 2 3 Thus between 1 9 2 5 and 1 9 4 0 ,  t h e area under rubber was  a f f e c t e d by the p l a n t i n g p r o v i s i o n s o f t h e r e s t r i c t i o n  schemes.  A l s o d u r i n g the d e p r e s s i o n when t h e schemes were no l o n g e r i n f o r c e , t h e e s t a t e s had l i t t l e c a p i t a l f o r r e p l a n t i n g . The Japanese occupation e n t a i l e d a heavy r e h a b i l i t a t i o n cost and made i t impossible t o p l a n t or r e p l a n t b e f o r e 1 9 4 7 *  All in  a l l , r e p l a n t i n g was delayed by about f i f t e e n t o twenty y e a r s . ^ 2  Hence t h e u t i l i s a t i o n o f l a n d f o r rubber  i n Malaya  has passed through two stages before the second world war. The  first  stage was one o f i n i t i a l development,with booming  rubber markets.  T h i s stage may be s a i d t o have l a s t e d  until  21  Bauer, Report 2 2  on a v i s i t  f  p. 15"'.  I b i d . p. 4 2 .  ^Loc. c i t . ^ I n a d d i t i o n r e p l a n t i n g was delayed by t h e "Emergency" d u r i n g t h e post war p e r i o d . 2  2  .15  1914. The  second  stage encompasses the post World War  I  d e p r e s s i o n s and i s c h a r a c t e r i s e d by r e s t r i c t i o n schemes. Several effects  of the r e s t r i c t i o n schemes have been noted.  The r e s t r i c t i o n of r e p l a n t i n g r e s u l t e d i n an unfavourable age composition of the rubber t r e e s .  The r e s t r i c t i o n of  p l a n t i n g prevented the acreage under rubber from Malaya l o s t the g o o d w i l l o f her American  new  expanding.  consumers.  This i n  t u r n gave impetus t o the rubber r e c l a i m i n g i n d u s t r y and i n the long run t o s y n t h e t i c rubber.  Hence the e f f e c t  has been one o f  i n c r e a s i n g s u b s t i t u t i o n of s y n t h e t i c f o r n a t u r a l rubber. A l l of the above mentioned quences i n the post war  effects  have had important  conse-  p e r i o d and are c o n s i d e r e d i n Chapter  III. R i c e Land We  Polities s h a l l next c o n s i d e r the r i c e l a n d p o l i c i e s .  In the  u t i l i s a t i o n of land f o r rubber, economic f o r c e s have been i m i portant.  However, w i t h r e s p e c t t o r i c e the p o l i c i e s  have been more of a p o l i t i c a l nature as we The cry f o r s e l f - s u f f i c i e n c y war development.  In f a c t  shall  pursued  indicate.  i n r i c e i s not a post  i t owes i t s o r i g i n t o the i n t r o d u c t i o n  of rubber i n t o the economy.  In t h i s connection we  how  i n f l u e n c e d by o f f i c i a l  the r i c e l a n d p o l i c y was  and a t t i t u d e s , although the a u t h o r i t i e s i n Malaya,  s h a l l see policies unlike  those i n the Netherlands E a s t I n d i e s , were never d i r e c t l y i n -  It  volved i n p r o d u c t i o n . In the e a r l y years of the twentieth century two t o r s were r e s p o n s i b l e f o r a r i c e shortage.  fac-  To a c e r t a i n  ex-  t e n t the Malays s u b s t i t u t e d rubber f o r r i c e , s i n c e the former was  the more p r o f i t a b l e c r o p .  At the same time demand f o r  r i c e i n c r e a s e d when immigrant l a b o u r was  brought i n t o  the  country to work on the mines and p l a n t a t i o n s . The Malay r i c e farmer d i d not, a t l e a s t u n t i l P a c i f i c war,  grow r i c e f o r purposes of exchange.  produced r i c e f o r h i s own him.  needs.  R i c e was  a way  the  He merely of l i f e f o r  Government attempts t o make the country more s e l f - s u f -  ficient  i n r i c e were l a r g e l y attempts to perpetuate "poverty  25 by r e s i s t i n g the c u r r e n t f l o w towards h i g h e r paying  occupations.  Such attempts i n c l u d e d i r r i g a t i o n works, r e s t r i c t i o n s on the a l i e n a t i o n of l a n d s u i t a b l e f o r r i c e f o r other purposes, low l a n d taxes: f o r r i c e farmers. was ber.  and  At the State l e v e l , t h e r e  marked r e l u c t a n c e i n a l l o w i n g l a n d t o be c l e a r e d f o r rubAttempts were made t o discourage the d r i f t to rubber  to the t o w n s ^ by means of s p e c i a l r u r a l education. '''' 2  2  and  I t should  be noted t h a t , i n s p i t e of the measures taken, t h e r e was  a  25 S i l c o c k , oo. c i t . . p.  3.  26)  I t i s i n t e r e s t i n g t o note t h a t today the attempts to discourage movement to the towns a r e t a k i n g the form of r e settlement schemes, See Chapter VI pp. £6'5>4]L66. ' 27  S i l c o c k , op. c i t . . p.  5.  17  steady d r i f t towards rubber p r o d u c t i o n . An acute r i c e  shortage developed a f t e r 1 9 1 8 when  r i c e crops f a i l e d i n I n d i a and the I n d i a n government p r o h i b i ted  the export of Burmese r i c e .  p l i e r of r i c e t o Malaya.)  . (Burma was  ;  l a b o u r were compelled t o grow f o o d s t u f f s . shortage, r i c e was  sup-  Consequently p r i c e s doubled and  government c o n t r o l of r i c e became n e c e s s a r y .  rice  the c h i e f  A l l employers  To a l l e v i a t e  imported from Indo-China and  of  the  resold  29  at a l o s s of $ 4 2 m i l l i o n . posed  on a l l imported r i c e from October 1933  a result  t o May  of the tax and the measures mentioned  age under r i c e was  A t a x of $ 2 . 5 0 per t o n was  i n c r e a s e d somewhat.  im-  1935.  As  above, the a c r e -  For example, i n 1 9 3 0  rice  c u l t i v a t e d on about 7 0 7 , 7 4 0 a c r e s ; by 1 9 3 7 the acreage  had increasedtto 7 4 0 , 0 4 0 a c r e s . 3 0  It i s quite significant  these measures were designed as much t o i n c r e a s e r i c e  that  pro-  d u c t i o n as t o d i s c o u r a g e s m a l l h o l d e r s ' rubber p r o d u c t i o n . I n c r e a s i n g the output o f r i c e has always been handicapped by the h i g h e r income p o t e n t i a l o f rubber.  Greater  p r o d u c t i o n of r i c e could have been achieved i f the p r i c e of rubber had f a l l e n  s u b s t a n t i a l l y or i f the income from r i c e  increased s u b s t a n t i a l l y . ^°Mills, 2  The  smallholder hesitated to s h i f t to  B r i t i s h r u l e i n East A s i a , p. 2 5 3 .  ^Loc. c i t .  3°Ibid.. p.  260.  had  18  the production of rice not only because there was l i t t l e land suitable for the purpose, but also because the price of rice like that of rubber f e l l during a general business depression.  With the exception of 1932, the smallholder could  throughout the entire period of the Depression, secure more rice by producing rubber than by producing rice.  The f o l -  31  lowing figures computed by Bauer tion (See following page).  clearly show this rela-  The behaviour of smallholders,  reflected by the above figures appears to be rational. In fact o f f i c i a l policies designed to keep smallholders in their traditional occupation appear to be irrational i n that they were inhibiting instead of promoting economic growth. The failure of agricultural experts to increase native production i s often explained on the grounds that i t i s difficult to persuade the conservative and easy-going native peasantry to improve their methods.^2  The above i s not a con-  clusive argument, for while the Malay was reluctant to grow 33  more rice he was readily taking to the production of rubber. From the foregoing we may conclude that o f f i c i a l policies were designed chiefly to encourage the production of •^Bauer, "Some Aspects of Malayan Rubber Slump, 19291933," Economica.volume 11, No. 44 (November 1944), p. 196. 3 2  M i l l s , British Rule in East Asia, p. 251.  -^In Java similar developments occurred with sugar.  J  CO O  £ »-$  O CD •• 2 o •  *v  * •  -p-P" t d 2 (D O  < C D  3 Cf CO  * to • p (fa CO cf P • O 3 CO £ ct.. c t p 1-" 3 • vnffq • II VJ1II td o C 3  _ cf Scf  H H H H M \OvO^OvO vO Vo ?v>  h-  a n d  eg  3  P 3  o  er  OvO  .p-vo.p-.p-.pO O0--P O OQ.  -—. rv>  I— 1—' 1— v_o O-O OvD-P"  — VO w  -  vnuimovn < 1  1  « ••. * ?V> O O vo \j-t  P CD  Cfl P  1  4 CD CD CD • ct  VOVOVO  M O VO Hj o • ct  P  ffq 3 P cf 3 CD ct 4 P 3 O aq 3 CD II «  P  H 1  tO  cf cf  CD CO  3  --^  s  -  H • O O VJJ I-J-P>  -  —» I I o " L  acre  K>  ?\J-p- vn  H H M  3 H* O  -  O M CC-P- - 0 >  —  H H H O M o - o CO-  .—. I—  rubber  proceeds  1  gantangs p e r acre  o  1  2 , • CO • o t—' 3 CD H H  61  o  VO V O V J J VO VO O O O O O  Deduct r i c e  H H .—. l-» M v  -j ro-o-p-vn O O 1— Vo vo  _  1  <— M O •—'  £  CD ffq 3 CO  equivalent  1  •—  a »-a  >  o  s • o  to  >  2 H o  >  a o tq • H *n SJ • M K t=d CO CO M O 2!  CO  o to cd CO Cfl to  a  *  M £IV)  M Jv) • ^_^^—» OQ-H-'-p- H rO 1—' VO -p- H < I H - P H  w  2  ^ O CD  o  >  Cd Cfl M M  > • M  *'—.  H- Cfl ct 1— ffq ffq p P i—• 1— CD O 3 1 1  Av. r e t a i l p r i c e o f  oa  M  oq « P 3 ct P 3 ffq  o  sa M  r  3  c cf —cf  CO  S3  H' CD  cfl o o 3 O  pro-  ..—* -0 N  CD H-  •  >  Assumed expenditure p e r acre $  o «—,  M 3  p  estimated p o s s i b l e ceeds. $  O  RI  P 3  Assumed av. p r i c e r e ceived, cents/lb.  -O O O Cq-vri  •p- fv) v o - o vn o - o o  S  'Singapore p r i c e R.S.S.I cents/lb.  H vo  3 CD CD CL  CD  Av. y i e l d o f Rubber Mature acre  o o a o o .o a « «. .  CD o •1 3 (0 H vO > -P- CO -p->d —- CD o ct m Cfl  p Cfl Cfl £ tr  .—*  Net y i e l d  of r i c e  to H O Cfl  20  rice.-  In some r e s p e c t s the implementation  i c i e s helped to perpetuate economy.  of such  pol-  the d u a l i s t i c f e a t u r e s of the  T h i s p a r t i c u l a r aspect i s d i s c u s s e d i n the next  chapter. The E f f e c t s of the Second World War on Land Use Before c o n c l u d i n g t h i s chapter we may mention the e f f e c t s o f the second world war on land u t i l i s a t i o n . e i g h t per cent of the e s t a t e acreage of  the s m a l l h o l d i n g acreage  occupation.  About  and about f i v e per cent  was d e s t r o y e d by the war and the  G r e a t e r problems however were those of r e h a b i l i -  t a t i o n and shortages o f l a b o u r . A c e r t a i n amount o f r i c e acreage t i v a t i o n through  had gone out o f c u l -  n e g l e c t , l a c k o f i r r i g a t i o n f a c i l i t i e s , and  the d e t e r i o r a t i o n i n the q u a l i t y o f seed, so t h a t t h e r e was  35 a heavy f a l l i n p r o d u c t i o n .  During  the war, t h e farmer  was  a l s o d i s c o u r a g e d from growing anything i n excess of h i s needs because o f the n o n - a v a i l a b i l i t y of other consumer goods.  Other  crops t o o , were s i m i l a r l y a f f e c t e d . Summary and C o n c l u s i o n In t h i s chapter we have been concerned  w i t h the develop-  ment o f the p a t t e r n of land use i n Malaya up t o 1947 •  First  3L ^E. H o l t , Report on the Malayan and B r i t i s h Borneo Rubber I n d u s t r y . U n i t e d S t a t e s Department of Commerce, December, 21, 1946, pp. 7-8. 35Qreat B r i t a i n , C o l o n i a l O f f i c e , B r i t i s h Dependencies i n t h e F a r E a s t . 1945-49, London. Her Majesty's S t a t i o n e r y O f f i c e , 1950, CMD7709, p. 2 5 .  21  we examined this pattern i t s e l f , from which we noted that rubber was the chief export crop, while rice was the most important subsistence crop.  Then we went on to consider the  rubber rice land use pattern. Rubber was introduced into Malaya by the British. The extension of British rule over Malaya provided the concomitants of investment, capital and security for investment. After a period of rapid growth, the rubber industry between 1932-1939 was  intermittently under restriction schemes.  These schemes have acted as an obstacle to the expansion of rubber in Malaya, particularly smallholders' rubber.  Re-  planting also had to be postponed until the post war period. In connection with rice i t was noted that the aim of o f f i c i a l policy was to achieve self-sufficiency.  Attempts  were made to dissuade the smallholders from moving into rubber.  However such attempts were not very successful. The development of the rubber-rice land use pattern  in Malaya reveals a dualistic characteristic of economic growth, giving the country a predominant export sector and a subsistence sector of somewhat lesser importance. the subject of the next chapter.  This i s  The pre-war development of  land use also sets the stage for post war developments as we shall see in subsequent chapters.  CHAPTER II SUGGESTED EFFECTS OF THE LAND USE PATTERN ON ECONOMIC DEVELOPMENT In the last chapter we traced the development of the land use pattern with i t s emphasis on two crops, rubber and rice.  This pattern of production gives the country two dis-  tinct sectors, one of exports and one of subsistence production.  The interpretation of this "dual" feature of some  underdeveloped countries has led to a large number of theories, which may be classified in the following manner: sociological dualism; technological dualism, and colonialism and the "backwash" effects of International Trade.  1  Our f i r s t step  wil»l be to review these theories of underdevelopment; our second to see how far the conclusions of these theories f i t the economic process in Malaya. Sociological Dualism 2  The leading exponent of the above theory i s J.H. Boeke, whose theory i s based largely, on his Indonesian experience. Boeke gives the following definition of a dual society: • This classification i s derived from B. Higgins, Economic Development. Principles. Problems and Policies. W.W. Norton 1959, See especially Part 4. 2  J.H. Boeke, Economics and Economic Policy of Dual Societies.New York, Institute of Pacific Relations, 1953, Cited as Economics; The Evolution of the Netherlands Indies Economy. New York, Institute of Pacific Relations, 1946. Cited as Evolution; The Structure of the Netherlands Indian Economy, New York, Institute of Pacific Relations, 1942, Cited as Structure.  23 S o c i a l dualism i s the c l a s h i n g of an imported s o c i a l system w i t h an indigenous system of another style.^ T h i s dualism i s m a n i f e s t c h i e f l y by way s e c t o r s , one producing exports and  one  of the  two  subsistence products. 4  Boeke a l s o regards t h i s dualism as a "form The  of d i s i n t e g r a t i o n . "  s u b s i s t e n c e s e c t o r o f a d u a l i s t i c economy has  two  main c h a r a c t e r i s t i c s — l i m i t e d needs and the d e s i r e f o r speculative  profits. L i m i t e d needs e s s e n t i a l l y mean backward-sloping  curves o f l a b o u r and r i s k t a k i n g .  supply  Such needs are o f t e n  s o c i a l r a t h e r than economic i n the sense that commodities are valued i n terms of p r e s t i g e r a t h e r than i n terms of t h e i r value-in-use. A p o s s i b l e reason f o r backward-sloping i s the importance ences.  supply  of group as opposed t o i n d i v i d u a l  curves prefer-  Where the group i s important, i n c e n t i v e s t o save  i n v e s t become r a t h e r d i l u t e d , to share the proceeds  and  s i n c e the i n d i v i d u a l has always  from h i s investment  or labour.5  In a Western s o c i e t y (that i s an advanced economy) on the o t h e r hand, needs are not l i m i t e d .  T h e r e f o r e w i t h the  scarce r e s o u r c e s at the d i s p o s a l of the i n d i v i d u a l the lem of c h o i c e must a r i s e .  prob-  Choice i s e s s e n t i a l t o t h e t h e o r y  Boeke, Economics, p. 4 S e e B o e k e s The I n t e r e s t s of the V o i c e l e s s F a r E a s t . L e i d e n , U n i v e r s i t a i r e Pers L e i d e n , 1948, pp. 1-3. Here he s t a t e s t h a t d u a l i t y means h e t e r o g e n e i t y . 4  !  C f . W.A. Lewis, The Theory of Economic Growth.London. George A l l e n and. Unwin, 1955, pp. 57-60, 113-120. y  of value.  Boeke ''concludesthat because of their limited needs,  the theory of value i s not applicable to underdeveloped economies. The second subsistence characteristic of the dualistic 7  economy i s the almost complete absence of profit seeking. Speculative profits "attract the oriental, but these profits lack the element of regularity and continuity which Chartf  acterises the idea of income".  Personal satisfaction ap-  pears to be more important than profit maximisation.  Boeke  also mentions that the subsistence sector i s characterised by an aversion to capital, lack of business qualities, inelastic supplies, lack of organisation, discipline or any kind of book-keeping.9 Because of these differences between eastern and western societies, Boeke warns us "not to transplant the tender, delicate hot house plants of western theory to tropical soil where an early death awaits them". ^ 1  Boeke's general conclusion regarding economic policy in underdeveloped economies i s for the advanced countries to leave them well alone, for any economic or technical aid  7  I b i d . . p. 30.  &  °Loc. c i t . ^See Higgins, op. c i t . , pp. 277-278. ^Boeke, Economics, p. 143.  25  efforts to develop them along western lines w i l l merely accentuate their dualistic features and hasten the process of disintegration.  Higgins"'' points out that Boeke has l i t t l e 1  to suggest by way of a positive policy solution for the technical and capital aid approach which he deplores apart from a back to the village approach. While there i s no denying thajt the phenomena of dualism exists in underdeveloped economies, Boeke s explanation 12 T  i s unsatisfactory because i t i s purely sociological.  As we  shall see below, dualism i s more readily explained in economic and technological terms.  Also the two characteristics  attributed by Boeke to the subsistence sector of an underdeveloped economy may be disputed. In connection with limited wants, Higgins-^ shows that both the marginal propensity to consume and the marginal 14  propensity to import are high in Indonesia.  Bauer and Yamey,  too, deny the validity of the proposition of limited wants. They B. Higgins, "The Dualistic Theory of Underdeveloped Areas," Economic Development and Cultural Change, volume 4 , No. 2. (January 1956), p. 103. 12  Higgins, Economic Development, p. 26*1.  13  I b i d . . p. 282.  "^P.T. Bauer, and B.S. Yamey, The Economics of Underdeveloped Countries, Cambridge, At the University Press, 1959, pp. 86-93.  26  quote numerous examples from many underdeveloped c o u n t r i e s which suggest t h a t most producers are aware of the t u n i t i e s open t o them.  oppor-  Moreover i f arguments f o r l i m i t e d  wants were t r u e then arguments i n favour of economic ment would be weakened  considerably.  I t i s again hard t o share  Boeke's pessimism  the p o s s i b i l i t y of t e c h n o l o g i c a l progress i e t i e s when we  underdeveloped c o u n t r i e s . production The curve  regarding  i n eastern  soc-  look at the growing number of e n t e r p r i s e s  e f f i c i e n t l y organised and  export  develop-  operated The  by the r e s i d e n t s of the  post war  expansion of n a t i v e  i s a case i n p o i n t .  second c h a r a c t e r i s t i c , the backward-sloping  supply  of e f f o r t , i s taken t o be proved by the f a c t t h a t i n  underdeveloped economies l a b o u r can be made t o work more by lowering wages, s i n c e a minimum sum taxes,  of money i s needed t o  s e t t l e debts or f o r s u b s i s t e n c e .  as i t i s necessary  pay  This i s true i n s o f a r  to earn a c e r t a i n minimum sum,  as w e l l as  where the n a t i v e s are on the f r i n g e of the money economy. But  c o n s i d e r i n g the r a p i d development of new  wants i n under-  developed economies i t seems d i f f i c u l t t o b e l i e v e t h a t curves  supply  o f . l a b o u r would be backward-sloping over the l o n g Hence the value of Boeke's a n a l y s i s i s merely t h a t  run. he  r e c o g n i s e s the d u a l i s t i c f e a t u r e s of an underdeveloped economy.  H i g g i n s l 5 d i s c a r d s Boeke's t h e o r y of s o c i o l o g i c a l  i g g i n s , Economic Development, p. 2 0 9 .  dual-  27  ism on the grounds that the theory of technological dualism which we consider next, provides a more acceptable  explanation  of the causes of dualism in underdeveloped economies. Technological Dualism The basic causes of technological dualism appear to be the "population explosion" and the nature of the investment in underdeveloped economies.  Basically technological dualism  means that production techniques in the export and subsistence sectors are quite different.  We begin with a discussion  of population growth. The i n i t i a l l y favourable impact of the contact of underdeveloped countries with the West was n u l l i f i e d by population g r o w t h . R i s i n g per capita incomes were not sustained long enough to bring about a f a l l in f e r t i l i t y r a t e s .  17  Also the "industrialisation" which launched the "population explosion" did not provide employment opportunities for the  ^For Malaya a distinction i s necessary. The population growth which occurred was due to immigration and not to natural increase. H iggins, Economic Development, p. 314. A population explosion occurred for several reasons. Mortality rates were reduced due largely to improved health services and the improvement of transportation reduced the incidence of famine. Higgins also mentions that the establishment of law and order hampered the freedom of the natives to k i l l each other. 17  28  whole increase in population.  Per capita incomes therefore  fell. Foreign investment was attracted into primary production for export and resulted in a greater degree of "indust r i a l i s a t i o n " than urbanisation.  Hence checks on family lS  size which result from urbanisation did not occur. We w i l l now turn to the problem of technological dual19  ism i t s e l f .  This problem of population growth and "indust-  r i a l i s a t i o n " i s reflected in the different factor proportions in the two sectors of the economies of underdeveloped countries. The usual analysis of the production functions i s in terms of two sectors, two factors of production and two goods The two sectors are an export sector comprising the plantations, mines, o i l fields and refineries.  The  subsistence  sector i s engaged in the production of food crops and handicrafts.  The export sector i s capital intensive and i s charac  The "industrialisation" which occurred stopped at the primary stage in most countries. The development of secondary and tertiary industries was very limited since the processing was done in the investing countries. !^The version being discussed is that of Higgins. his Economic Development. pp. 3 2 5 - 3 3 3 . 20  See  See for example, R. Eckaus, "The Factor Proportions Problem in Underdeveloped Areas," American Economic Review, volume 4 5 , No. 4 (September 1 9 5 5 ) , pp. 5 3 9 - 5 6 9 ; and D.W. Jorgenson, "The Development of a-Dual Economy," Economic Journal,volume 71 (June 1 9 6 1 ) , pp. 3 0 9 - 3 3 4 .  29  terised by relatively fixed technical coefficients.  The  subsistence sector has relatively variable technical coefficients and i s much more labour intensive. The two factors of production are capital and improved land, and labour.  The  products are industrial raw materials for export and goods for 21  domestic consumption. Since industrialisation resulted in an increase in population and did not at the same time provide increased employment opportunities, the surplus labour was forced to seek employment in the subsistence sector where techniques consequently became steadily more labour intensive. Thus i r r i gated rice, a more labour intensive technique, took the place 22 of shifting rice cultivation.  Disguised unemployment also  began to appear. Therefore investment in primary production and the extractive industries for export brought l i t t l e or no structural change to the underdeveloped economies.  It resulted in  rising rates of population growth but did not at the same time provide increasing opportunities for employment. The concentration on production for export resulted in technological dualism. 21  In some underdeveloped countries, for example Burma, Indo-China and Thailand, the export products are also subsistence goods. 22  Higgins, Economic Development, p. 3 2 9  30  We may now examine another version of this model, the Myint model ^ of the dualistic theory of underdevelop2  ment. The following are the features of his model.  Initi-  ally the underdeveloped economy started with a sparse population in relation to potential natural resources. With the advent of colonial rule i t s resources are developed in the direction of a few specialised lines of primary products for export.  The natives of the country "enjoy a perfect equality  of formal legal rights in their economic relations with other , 24 people" (that i s with the foreigners). Thus the basic features of the Myint model are the same as those of Higgins' model of technological dualism , But Myint attempts to explain why there was no movement of factors between the two sectors as well as points out the plural feature of underdeveloped economies. In spite of foreign investment, Myint suggests that "there was l i t t l e specialisation beyond a natural adaptabilH. Myint, "An Interpretation of Economic Backwardness," Oxford Economic Papers, volume 6, No. 2 (June 1954), pp. 132-163, and "The Gains from International Trade and the Backward Countries," Review of Economic Studies, volume 22, No. 2, 1954-1955, pp. 129-146. 2 k.  Myint, "The Gains -from International Trade and the Backward Countries," p. 145.  31  ity to the tropical climate among the backward, peoples in their role as unskilled labour or peasant producers",  25  since  specialisation occurred in traditional crops. This i s true of Burma (an example which Myint probably had in mind) but in other underdeveloped countries new crops were introduced, for example, rubber and o i l palms in Malaya. Myint also makes a distinction between the dual and plural aspects of an underdeveloped economy.  By the latter  i s meant that even the middlemen between the big European concerns and the indigenous population are foreigners.  27  Ex-  amples of this are the Chinese and Indians in South-east Asia, the Lebanese and Chinese in the West Indies, and the Syrians in West Africa.  Myint considers these foreign middlemen as  undesirable since they deprive the indigenous population of the "educating and stimulating effect of direct contact". However these middlemen have accumulated capital, provided s k i l l s and aptitudes not present or developed among the local people.  By permeating the exchange economy more extensively  than the large scale European enterprises, their influence has generally been more widespread and has affected large num-  25  p.  "An Interpretation of Economic Backwardness,"  Myint  153. 26  'Ibid •  >  p.  157.  For example, where the natives produced rubber or rice for export, the middlemen between the native producers and world markets were generally Indians or Chinese.  32  bers of local people directly.  28  Myint also points out that there were barriers to specialisation.  (Higgins mentions that techniques i n the  subsistence sector remained the same but does not give any reason for i t . ) s k i l l s occurred.  Without specialisation no improvement i n In the export sector the high turn-over of 29  labour meant that l i t t l e effective training was accomplished. The implied assumption of the theory of technological dualism i s that there i s a lack of factor mobility in underdeveloped economies.  According to traditional economic  theory, the marginal productivity of capital ought to be higher i n the subsistence sector, where the ratio of labour to capital i s higher than in the export sector.  There i s some  evidence that the returns to capital (for example, interest on moneylending) are higher i n the subsistence sector than i n the export sector.  Interest rates on loans range from sixteen 30  to one hundred per cent.  The rural capitalist i s also able  to earn profits on speculative investment i n stocks of food crops.  Because of the higher returns on capital i n the sub-  sistence sector the rural capitalist i s naturally not attracted into industrial investment. 28 c  On the other hand foreign capital  See Bauer and Yamey, op. c i t . , pp. 106-112.  ^Myint, "An interpretation of Economic Backwardness," p. 154. 2  -^Higgins, Economic Development, p. 341.  33  does not flow into the subsistence sector even though returns on capital are higher there because knowledge of that sector i s a scarce factor.  The high rates of interest earned  by moneylenders are based on personal knowledge of and contact with the villagers which foreign capitalists do not have. Labour does not flow into the export sector because technical coefficients in that sector are relatively fixed. Hence the conclusion of both Higgins and Myint seems to be that there exists a "vicious c i r c l e " i n underdeveloped 31 economies.  Both offer more or less the same solution to  break this "vicious circle".  They point out that the only way  to reduce the redundancy of labour in the subsistence sector 32 is to increase the supplies of capital and land. of land in overpopulated  The supply  areas can only be increased by i n -  ducing the peasants to move out of agriculture. This means heavy investment in both the export and subsistence sectors and that neither agricultural investment nor industrialisation can by i t s e l f break this "vicious circle".  Since foreign aid  by i t s e l f i s unlikely to relieve underdeveloped countries of the necessity of earning most of the foreign exchange, the ^Loc. c i t . 32 v Myint, The (Sains from International Trade and the Backward Countries," p. 146.  34  only way to earn more foreign exchange in the short run i s by expanding exports.33 While Boeke merely stressed the differences between an eastern and a western society, Higgins and Myint take us a step further and explain why and how the phenomena of dualism emerged.  Their approach i s more useful than that of Boeke  since i t i s economic as opposed to sociological. Colonialism and the "Backwash" Effects of International Trade Some economists argue that International Trade has not encouraged economic growth in underdeveloped economies, but has retarded i t by accentuating the dualistic.characteristics of such economies.  Among these writers we w i l l consider Hla  Myint and Gunnar Myrdal.  The two features of their theories  are that in underdeveloped countries conditions are such that the "backwash" (unfavourable) effects outweigh the "spread" (stimulating) effects. They also maintain that international trade brought l i t t l e in the way of educative effects. While the theories of technological dualism attempt to explain how the phenomena of dualism emerged, the theories being considered in this section stress the "backwash" effects of international trade.  Here there i s also a greater attempt  to explain the non-diffusion of s k i l l s .  Loc. c i t  35  We w i l l consider Myint s T  theory f i r s t .  Myint at-  tempts to explain why the growth of foreign trade failed to bring overall economic growth to many underdeveloped countries.  If we consider two countries, for instance, Indonesia  and Malaya, we note that between ports increased by about ten times.  and 1920 Indonesian exBetween 1906 and 1950 35  Malayan exports grew by nearly fourteen times.  The question  being asked in this connection i s why the increase in the value of exports had no "multiplier effects on per capita i n comes". Myint l i s t s several factors which prevented this development;  the high rate of labour turn-over, the willingness  of labour to accept low wages, the conviction among employers that the supply curve of labour was backward-sloping and the general lack of industrial s k i l l s which made the employers 36 feel that i t was d i f f i c u l t to recruit labour.  These factors  also provided an incentive to shift to capital intensive methods. -^H. Myint, "The Gains from International Trade and the Backward Countries," op. cit.,and "The Classical Theory of International Trade and the Underdeveloped Areas," Economic Journal. Volume 68 (June 195^), pp. 317-337. -^G.C. Allen and A.G. Donnithorne, Western Enterprise in Indonesia and Malaya. New York, Macmillan, 1957> pp. 291, 293. 3 % y i n t , "The Gains from International Trade and the Backward Countries," p. 140.  56  Generally the techniques adopted l e f t labour productivity very low and afforded few opportunities for training.  Three types of labour were needed by foreign enter-  prises.  Managerial and skilled labour were generally brought  into the country, the unskilled labour was recruited locally, but the tasks they were asked to perform were not very much different from those they performed in the subsistence sector.  The local people were not taught s k i l l s nor put into  positions where they could learn western attitudes and techniques.  This intermediate kindcof a technique requiring a  f a i r l y large number of skilled workers was shunned by the foreign entrepreneurs in underdeveloped economies.  Under the  British system, this type of training tended to be too limited both in range and volume, largely because of the hostility of the local European population to any widespread  expansion.37  Myint also argues that the subsistence sector i s confronted with monopolies and monopsonies without the capacity for developing effective countervailing power of the sort that there i s in advanced economies.3& Essentially his argument seems to be that international trade had l i t t l e educative effects on the people ex-  37  'T.H.Silcock, The Commonwealth Economy of South-east Asia, London, Cambridge University Press, 1959, p. 87. 38 Myint, "The Gains from International Trade and the Backward Countries," p. 141. J  37  cept in the development of new wants.  Myint also suggests  that investment in education merely leads to "disguised i n 39 tellectual unemployment".  By this he probably means that  university trained persons are performing tasks which are not appropriate to their training.^®  He admits that trans-  port was greatly improved and that new minerals were discovered, but he maintains that while investment of this nature adds to total resources, i t does not make existing resources 41  more productive.  In his view the present contribution of  western enterprise to the domestic (peasant) export sector was merely to act as middlemen between the peasants and the world markets, and to stimulate new wants (the demand for imports) on the part of the peasants. (Here at least Myint goes beyond! Boeke.) It i s true the "demonstration effect" i s quite strong in underdeveloped economies, but Myint f a i l s to point out that incomes have f i r s t to be earned before the new wants 3 9  Ibid.,143.  ^ T h i s situation has transpired in some of the larger cities in India and probably in Burma too. For instance, we may find law graduates merely doing clerical jobs in a legal firm. ^Myint, "The Classical Theory of International Trade and the Underdeveloped Areas," p. 325. This may be disputed. For example in Malaya, t i n was mined by the Chinese before the arrival of the British. With the British came capital intensive mining methods; geological surveys too were carried out, so that the mineral resources did become more productive.  38  can be satisfied.  Thus the peasant was probably forced to  increase his output before he could satisfy his new wants. Myints points out further that the expansion of the export sector did not result in a decline in domestic pro42  duction because labour was in surplus or was easily available. The result of the ease with which labour was available led to the use of labour intensive methods. (This i s essentially the same conclusion as that reached by Higgins in his theory of technological dualism.)  "Indeed," says Myint, "we may say that  these countries remain underdeveloped precisely because they have not succeeded i n building up a labour intensive export trade to cope with their growing populations".^ Thus Myint's thesis i s that there were no dynamic gains from specialisation for underdeveloped countries. International trade merely led to the perpetuation of the primitive techniques of the subsistence sector.  There were no  multiplier effects because of the "colonial" nature of the investment.  Myint, as we show in the next section of this  chapter, neglects the indirect effects of export production which make a substantial contribution to economic growth. i 2  Indonesia and Malaya respectively are examples of this. 43  Myint, "The Classical Theory of International Trade and the Underdeveloped Areas," p. 331.  39  The arguments of Myrdal,  44  whose theory we consider  next, are similar to those of Myint to the extent that both argue that there were no dynamic gains from international specialisation for the underdeveloped countries.  However  Myrdal contends that trade for the underdeveloped countries, far from resulting in international equality of marginal products and incomes, results in cumulative disequilibrium. Myrdal writes that not only are there inequalities between countries, but that such inequalities exist also within countries.  Demographic factors and international trade per-  petuate these inequalities.  Demographic factors are likely  to add to i t because population growth i s likely to be higher in the poorer regions.^  (Here again we may note a sim-  i l a r i t y between Myrdal s theory and that of Higgins' tech!  nological dualism.  The latter points out the occurrence of  the population explosion.) Trade also aggravates this process, for the more forward regions are likely to experience increasing returns while 46 industry in the backward regions i s l i k e l y to be thwarted. Expansion in one region i s likely to have both "spread"  ^G. Myrdal, Economic Theory and Underdeveloped Areas, London, Duckworth, 1 9 5 7 . 4 5  46  I b i d . . p. 2 9 . I b i d . , p. 3 4 .  40  and "backwash" effects.  However there i s no reason for  equilibrium between these two effects, as ...there i s no tendency towards automatic self stabilisation in the social system. The system i s not by i t s e l f moving towards any sort of balance between forces, but i s constantly on the move away from such a situation. In the normal case a change does not c a l l for countervailing changes but, instead, supporting changes, which move in the same direction as the f i r s t change but much further.4-7 According to Myrdal, regional disparities are greater in poorer than in richer regions.  The present pattern of  production reflects colonial policy rather than true comp48  arative advantage.  In advanced countries production of  primary products generally stimulated the expansion of seccondary and tertiary industries.  This has not occurred i n  underdeveloped economies. (Again Myrdal i s saying the same thing as Higgins i n his theory of technological dualism.) Indeed Myrdal even goes so far asto suggest that i t may be advantageous for underdeveloped countries to concentrate their resources on improving subsistence production and man49  ufacturing.  He recommends labour intensive techniques for  two reasons.  First capital i s not likely to flow into under-  developed countries, in fact capital would flow out i n the ^ I b i d . . p. 13. 49  I b i d . , p. 52.  ^ I b i d . . p. 60.  absence of exchange control.  Secondly the surplus labour SO  can no longer be reduced by international migration.' Myrdal's policy recommendation i s in some respects similar to the back to the village approach of Boeke, which we noted earlier.  The implication of Myrdal's solution i s that under-  developed countries should abandon the production of primary products over which they have a comparative advantage. Insofar as Malaya i s concerned, the available evidence suggests that the abandonment of rubber production in favour of rice would probably mean economic disaster. In a recent review article, P.T. Bauer presents a biting criticism of Myrdal's theory.''  1  Bauer says that en-  claves are merely catch phrases and that there i s no prescriptive law that a l l communities must develop simultaneous52  ly and equally.  The fact that foreign personnel, enterprise  and capital played a large part i n the development of the export sectors does not mean that the process has not benefited the local population.^  These sectors are not cut off  5°Ibid., p. 5 1 . -*lp.T. Bauer, "International Economic Development," Economic Journal, volume 69 (March 1 9 5 9 ) . 52  I b i d . , p. 1 1 0 .  53  This i s precisely what we show when we apply the Dualistic theories to Malaya.  1+2  from the rest of the economy but are the focal points of the f i r s t impact of development.  The time necessary for the  diffusion of this development depends among other things on the quality of the population and the institutions of the particular community.^ Conclusion A l l the three sets of theories discussed above point to the dualistic characteristic of some underdeveloped countries.  However i t i s only i n the theory of technologic-  al dualism that we observe how this dualism emerged.  Both  the theories of technological dualism and colonialism and the "backwash" effects of international trade argue that there were no dynamic gains from trade on underdeveloped countries.  Myrdal goes further when he maintains that there  is a tendency towards cumulative disequilibrium, such that both international and inter-regional inequalities are i n creasing. While Boeke offers an extreme policy solution to the problems of underdeveloped economies--a back to the village approach--Myrdal argues that underdeveloped countries should concentrate their resources on subsistence production and domestic manufacturing.  Bauer, op. c i t . , p. 40.  43  The general conclusion of a l l these theories i s that there exists a "vicious c i r c l e " in underdeveloped economies and that the general outlook regarding future economic development i s quite pessimistic. However in the next section of this chapter we attempt to show that this i s not the case, at least for Malaya. The Dualistic Theories and Malaya In the previous section of this chapter we discussed several theories of underdevelopment.  The main thesis of  these theories i s that contact with the West only generated a limited amount of economic development.  The general con-  clusion of these theories i s that developed countries are caught in a "vicious c i r c l e " of poverty and that the development prospects for such countries are very bleak.  In this  section our task w i l l be to see how far these propositions can be fitted to the economic process in Malaya. What sort of an economic environment has Malaya's contact with the West generated? and'backwash" effects.  It has generated both "spread"  The former w i l l be discussed f i r s t .  The economic l i f e of the country has revolved largely around export production and to a lesser extent around subsistence production. Production for export has not only resulted in an extension of the cultivated area, but i t has also been accomplished by the establishment and improvement of agricultural  44  holdings, which i n fact constitutes fixed capital formation. The agricultural export sector can be interpreted to i n clude rubber and to:alesser extent o i l palms, coconuts, pineapples and tea.  Production of estate rubber has not been  confined to the Europeans as the following figures indicate. TABLE IV OWNERSHIP OF ESTATE ACREAGE UNDER RUBBER, 1 9 5 3 , ANALYSED BY RACE Race  Million acres  per cent  European Chinese Indian  1.6 .26 .05  83 14 3  Total  1.91  100  Source: J.J. Puthucheary, Ownership and Control in the Malayan Economy. Singapore, Eastern Universities Press, I 9 6 0 , p. 2 7 . Moreover when we look at the racial distribution of rubber smallholdings, i t i s clear that the Malays, the i n digenous race, are important i n this group. Thus in fact a large part of the export sector i s owned and operated by the local population.  Since the war,  the Chinese and Indian smallholders cannot be regarded as "foreigners" because they are now citizens of the country. It i s also argued by the dualistic theorists that the  45  export sector i s not l i k e l y to lead to general economic growth because such sectors do not become a part of the indigenous economy. Malaya.  This does not seem to be the case i n  Rubber though i n i t i a l l y introduced by Europeans,  is being produced by the local population, who emulated the techniques of, and are able to benefit from, the research of the estate owners. TABLE  V  OWNERSHIP OF RUBBER SMALLHOLDINGS, 1 9 5 3 , ANALYSED BY RACE  Race Malays Chinese Indians Total  Million acres  per cent  .65 .4 .45  43.3 26.9 30.1  1.50  100.0  Source: J.J. Puthucheary, op. c i t . . p. 4 . Besides about half of the smallholdings are operated by Malays.  Most of them also own or operate rice farms.  They may not have entered the exchange economy in producing rice, but they definitely do so when they produce rubber. Thus in Malaya there i s only a small section of the population which i s not in contact with the export sector.  This  section i s at least much smaller than in countries where the  46  subsistence sectors are much larger.  The export sector i s  being integrated into the rest of the economy. Smallholding agriculture plays an important part i n this transition. Economic activity does not stop with primary production of rubber.  Many of Malaya's secondary industries are  associated with the processing of rubber.  These indus-  tries afford opportunities for the expansion of employment, markets and incomes.  Although separate figures for numbers  employed i n rubber processing industries are not available, we may broadly indicate their extent by pointing out such activities.55  These include rubber milling and pack-  ing, and the manufacture of rubber goods.  (For example, b i -  cycle tyres and tubes, and rubber foot wear.) The industries indirectly connected with rubber have been engineering, repair work, electrical installation, motor vehicle workshops and dock-yards.  A tyre factory i s in the process of  being established by Dunlop, and i s expected to employ about 600 people when working to f u l l capacity.56 One reason for the lack of manufacturing i n the past has been the smallness of the Malayan market.  With the post  For a l i s t of secondary industries in Malaya, see Federation of Malaya, Annual Report, 1956. Kuala Lumpur, Government Printer, 1957, p. 128. ?:?  "Dunlop Production early i n 1963,"  30 May, 1962, p. 6.  Straits Budget,  47  war growth of population and the prospect of a wider federation, the size of the market i s likely to be increased. This may lead to further processing of primary products and hence to further integration of the export sector with the rest of the economy. Sometimes the establishment of the secondary industries may lead to a certain amount of import .substitution, where the commodities produced by these industries compete with the commodities being produced formerly by the subsistence sector.  This situation has not transpired in Malaya, since  there was no indigenous manufacturing comparable to that which existed, for example, in India. Perhaps the substitution was of a different nature.  The Malays substituted rub-  ber for rice to a certain extent but they remained selfsufficient.  The immigrant Indians and Chinese were directed  to specific occupations, so that the increased demand for rice came largely from this group.  Thus we cannot say de-  f i n i t e l y whether there was any import substitution. Both primary production and secondary industries lead to the training of labour, although the former may lead to less training than the latter.  Before the war immigrant  labour was used both for primary production and processing. The Malays were not employed in the processing industries. Today these immigrant labourers are citizens of the country, so that i f we are willing to forget racial distinctions we may say that the citizens of the country have acquired a cer-  48  tain amount of s k i l l , this being part of an industrial discipline. Some examples may be quoted.  In both primary pro-  duction and secondary production, work involved the operation, repair and maintenance of machinery.  This machinery was  no doubt very rudimentary, and the level of s k i l l acquired very low.  Whatever training occurred, however, should be  compared with the situation when there was no training at a l l . So far we have discussed the direct effects of contact with the West. The indirect effects.are the fiscal i n f l u ences. Public investment made possible by increased government revenue i s one of the most obvious examples of development. Approximately twenty-nine per cent57 f federal re0  venue i s derived from export duties on rubber.  This has been  used to provide education, transportation and social services and has benefited both the export and subsistence sectors. Such expenditure has helped to increase productivity directly or indirectly.  Thus, even though the revenue originated  from the export sector, i t has resulted in wide "spread" effects. A country's export sector may be important in serving  This figure i s derived from pages 97 and 100 of the Annual Report, 1956. op. c i t . J  49  as a p r o p u l s i v e f o r c e .  The export base has played a  v i t a l r o l e i n determining the l e v e l of a b s o l u t e and per c a p i t a income i n Malaya.  The "spread" e f f e c t s i n t h i s connec-  t i o n have been the e x t e n s i o n of the c u l t i v a t e d area and the consequent e x t e n s i o n of the exchange economy, the e s t a b l i s h ment of secondary i n d u s t r i e s p r o c e s s i n g primary  products,  some t r a i n i n g of l a b o u r and the a c c r u a l of government revenue which has promoted economic development  indirectly.  Thus f a r we have d i s c u s s e d the "spread"  e f f e c t s of  the i n t e r n a t i o n a l trade c o n t a c t s with the West. lows are the "backwash" e f f e c t s , which Myint  What  fol-  a l l e g e s perpet-  uate the low p r o d u c t i v i t y and hence low incomes of the subsistence .sector. In the r i c e s u b s i s t e n c e s e c t o r t h e r e have been no p e r c e p t i b l e changes i n methods o f p r o d u c t i o n . i s low and hence incomes are low. prevalent.  Productivity  Underemployment  i s also  T h i s conforms w i t h the p a t t e r n i n d i c a t e d by Myint.  C e r t a i n f a c t o r s are r e s p o n s i b l e f o r t h i s .  Unequal  development has c r e a t e d two d i s t i n c t wage l e v e l s , one f o r the s u b s i s t e n c e s e c t o r and one f o r the export higher i n the export  sector.  s e c t o r and are maintained  l e v e l by t r a d e union a c t i v i t y .  at a h i g h e r  Real wages are a l s o h i g h e r  s i n c e i n t h i s s e c t o r government l e g i s l a t i o n i s both and e n f o r c e a b l e .  Wages are  enforced  In the subsistence "establishment" a l l  l a b o u r works and shares i n the produce more o r l e s s e q u a l l y ..'an  MAP I I I  50  When wages i n the export sector f a l l , labour tends t o move i n t o the subsistence sector and can obtain employment there since t e c h n i c a l c o e f f i c i e n t s are r e l a t i v e l y v a r i a b l e . Hence t h i s movement of labour i n t o the subsistence sector lowers the r e a l wage. Connected w i t h the above i s the problem of the d i f f u s i o n of s k i l l s .  We noted e a r l i e r t h a t there had been a  c e r t a i n amount of t r a i n i n g .  Further t r a i n i n g was  prevented  by l i n g u i s t i c b a r r i e r s , ignorance and. conservatism.  Tech-  n o l o g i c a l dualism, a c h a r a c t e r i s t i c of underdeveloped countries was a l s o r e s p o n s i b l e .  There was a l s o a n a t u r a l i n -  d i f f e r e n c e on the part of the f o r e i g n entrepreneurs to undertaking the d i r e c t t r a i n i n g of labour.  The a d m i n i s t r a t i o n ,  too, d i d i t s part i n helping t o perpetuate the e x i s t i n g ways of l i v i n g and consequently discouraged movement out of the subsistence sector as we noted i n Chapter 1.5 " s  Thus very  l i t t l e s p e c i a l i s e d t r a i n i n g occurred. Perhaps a d i r e c t consequence of the pattern of economic 59  development was the c r e a t i o n of the Malay Reservations,  58 59  See Chapter I , pp. 1 6 - 1 7 .  I n t e r n a t i o n a l Bank f o r Reconstruction and Development , The Economic Development of Malaya. Singapore, Government P r i n t e r , 1955, p» 227, Hereafter r e f e r r e d t o as the Bank Mission Report. See a l s o , J.B. Ooi, "Rural Developments i n T r o p i c a l Areas," Journal of T r o p i c a l Geography, volume 12 (March 1 9 5 9 ) , pp. 19^19^  51  on which either the ownership or operation of land by nonMalays i s prohibited. (The accompanying map, Map III, shows their extent.)  The law applies to rice land and prohibits  i t s transfer, charge or lease to non-Malays.  This law can be  regarded as an outcome of the "dual" and "plural" pattern of growth. gration.  The present Malayan nation i s a product of immiAs a result the Malays became a minority in their  own country.  The main reason for the emergence of the Malay  Reservations Enactment(1913) was to preserve the Malay ownership of land as well as to set aside sufficient land for the Malays in view of their relatively weak position vis-a-vis the non-Malays. 60  Our concern i s not with the efficacy of this law. Rather we are concerned with i t s effect on land use.  The  Malay Reservations impede development i n several ways. create local shortages of land for non-Malays.  They  As we point  out in Chapter V this i s a factor responsible i n some measure for the "break-up" of rubber estates. On the other hand, the Malays are themselves reluctant to move to the margins of the Reservations.  Since the margins  of such lands are under jungle with no social amenities, there In this connection see, J.B. Ooi, op. c i t . . p. 1 9 7 See Chapter V, p.  1:5:1..  52  is l i t t l e incentive to move to them. Even as early as 1920 the Government had to admit that the Malays preferred to settle on land outside the Reservations because of i t s saleability.  Since these lands may not be pledged, the  ability of the Malays to raise loans i s restricted. This non-use of lands represents a waste of resources from the point of view of society especially when there i s a demand for land.  If the rate of population growth can be  taken as an indicator of the future demand for land, then the demand for land by non-Malays i s l i k e l y to be greater than the demand from Malays.  For the rural Malaysian (indigenous Malays  and immigrant Indonesians) has a relatively low f e r t i l i t y and high mortality, while the Indian and Chinese have a high f e r t i l i t y and medium mortality, and high f e r t i l i t y and low mortality respectively.^  3  Since the opportunities for em-  ployment in industry are relatively limited, there i s likely to be a greater demand for land for agricultural purposes from these two races. Thus the Malay Reservations while trying to protect the economic position of the Malays, have created certain factors  ? J.B. Ooi, op. c i t . . p. 1 9 7 . 2:  k^T.E. Smith, Population Growth in Malaya, London, Royal Institute of International Affairs, 1952, p. 1.  53  which make for the inefficient allocation and use of land. These reservations have in fact become an obstacle to land development. Hence the "backwash" effects of the contact with the West have been, not only the perpetuation of the backwardness of the subsistence sector and the limited degree of training, but also the creation of the Malay Reservations with their special effects on land use. Conclusion Let us now summarise the effects of international trade 64  on Malaya.  The cultivation of rubber  for export has made  the Malayan economy f a i r l y advanced by Asian stands, and has given her a per capita level of national income which, in 1953, was the highest in the Far East.^5  This has been  the direct outcome of specialisation for the International market.  In this foreign capital, enterprise and labour have  played an important part. There have been "backwash," effects too.  Production and  incomes are low in the subsistence sector, when compared with those in the export sector. However the subsistence sector i s not cut off from the Tin mining has also been a contributory factor. ^The Bank Mission Report, p. 9.  6  rest of the economy.  I t i s being i n t e g r a t e d i n t o the r e s t  of the economy by developmental measures.  This i s being  done by g i v i n g the peasants rubber smallholdings under the  66 Land Settlements Schemes.  This should r e s u l t i n f u r t h e r  contact w i t h the exchange economy, as w e l l as r a i s e the l e v e l of incomes.  I t seems t o be merely a question of time before  t h i s i s achieved, so that i t does not seem as i f there i s a tendency towards cumulative d i s e q u i l i b r i u m .  Malaya could  have hardly a t t a i n e d her present l i v i n g standards i f there had been such a tendency. Dualism i s present, but i t does not appear t o be l e a d ing i n the d i r e c t i o n to be expected from the d u a l i s t i c t h e o r i e s of underdevelopment.  See Chapter VI, pp.  1 6 5 - 1 6 6  GHAE-TER:: I I I OBSTACLES- TO LAND UTILISATION IN THE POST WAR PERIOD The contents of t h i s chapter can be d i v i d e d i n t o three p a r t s — i n the f i r s t we w i l l consider the i n s t i t u t i o n a l obstacles to good land u t i l i s a t i o n ; i n the second we w i l l enquire why there has been no new investment i n rubber est a t e s ; i n the t h i r d we w i l l examine the r i c e land use p o l i c y . Before proceeding with the above we w i l l b r i e f l y compare the land use of 1 9 4 7 with that of 1 9 5 8 . TABLE VI A COMPARISON OF LAND USE, 1 9 4 7 AND 1 9 5 8 1947 (acres) Rubber Rice Coconuts O i l Palms Pineapples Tea  Market Gardens Other Food Crops " Total  3,48;,000 813,538 512,000 78,405 11,920 9,015 15,019 146,329 5,067,226  1958 (acres)  per cent 68.7  per cent  10.1 1.6 .2 .2 .3  3,520,000 908,590 517,000 122,000 44,360 10,590 ,26,640  63.7 16.4 9.4 2.2 .8 .2 .5  2.9  379,110  6.9  5,528,290  100.0  1 6 . 2  100.0  Source: 1 9 4 7 - - T a b l e I , Chapter I , p . 3 . '. 1 9 5 8 - - F e d e r a t i o n of Malaya, Annual Report of the Department of A g r i c u l t u r e , 1 9 5 8 , Kuala Lumpur, Government P r i n t e r , 1 9 5 9 , pp. 9 5 - 9 8 . I t i s evident from the table that there have been no significant  changes i n land use since 1 9 4 7 . Only the area  56  upder food crops (rice, market gardens, and other food crops) shows some change.  This appears to be in conformity with the  government policy of "attaining self-sufficiency in the es1 sential foodstuffs".  The reasons for the lack of any sig-  nificant change in the area under rubber as well as other obstacles to land development are considered in the following sections. Institutional obstacles In this section our remarks w i l l be quite general and we w i l l touch on the following aspects: o f f i c i a l policies regarding land alienation and the "Emergency". A prior question has to be asked before we consider the actual obstacles. Why should we expect an extension of the cultivated area in the post war period?  The reasons for  such an expectation l i e s in the fact that Malaya i s predominantly an agricultural country, with a rapidly growing population  and with limited opportunities for employment outside  of agriculture. We observed from Table VI that there has been no significant increase in the cultivated area.  Population pressure  Federation of Malaya, Annual Report of the Department of Agriculture. 1958. Kuala Lumpur, Government Printer, 1959, p. 1. The rate of growth of the population i s 3 i per cent, per annum.  57  has become apparent i n some areas.  There i s a great deal of  land i n r e l a t i o n to the present population,3 i s under highland, jungle and swamp.  but much of i t  Population pressure as  i t e x i s t s i s on the c u l t i v a t e d land. In Chapter I I we pointed out that a "backwash" e f f e c t of the contact with the Vilest was the c r e a t i o n of the Malay Reservations.  About 19.3 per cent of the t o t a l land area  i s under such r e s e r v a t i o n s . ^  Most of the land s u i t a b l e  f o r r i c e farming i s i n t h i s area and t h i s can only be owned and operated by Malays. from t h i s area.  Non-Malays are e f f e c t i v e l y barred  As we point out i n Chapter V the Malay Res-  ervations are a contributory f a c t o r i n the "break-up" of rubber estates. About 24.6 per cent of the t o t a l land area i s f o r e s t reserves.5  The Forestry Department appears to be opposed  to the c l e a r i n g of land f o r c u l t i v a t i o n of rubber on i t s ex-  The density of population i n Malaya i s only 115 per square m i l e . The comparable f i g u r e s f o r Japan, the United States and The Soviet Union are 617, 50 and 23 r e s p e c t i v e l y . ^"J.B. Ooi, "Rural Development i n T r o p i c a l Areas," Journal of T r o p i c a l Geography, volume 12 (March 1959), p. 197. See also Chapter I I , pp. 50-53. 5  Federation of Malaya, Annual Report, 1956, Kuala Lumpur, Government P i n t e r , 1957, p. 184. r  5*  tensive reserves.  The  S t a t e governments are a l s o u n w i l l i n g  t o a l l o w r u b b e r t o be c u l t i v a t e d on l a n d s u i t a b l e f o r f o o d crops.  Bauer i s of the o p i n i o n t h a t the r e l u c t a n c e t o a l i e n -  a t e l a n d i s r e s p o n s i b l e f o r the growing i n t e r e s t of Malayan 6 Rubber Companies i n rubber p r o d u c t i o n i n A f r i c a . Thus the e x i s t e n c e of l a r g e r e s e r v e s of l a n d and r e l u c t a n c e t o a l i e n a t e l a n d may t e n s i o n of the a g r i c u l t u r a l  be r e s p o n s i b l e f o r non  ex-  area.  Land work i s delayed by two experienced  the  f a c t o r s , t h e s h o r t a g e of  l a n d o f f i c e r s and the s h o r t a g e of f u n d s .  f i r s t f a c t o r i s c l o s e l y r e l a t e d t o the e d u c a t i o n a l and  The con-  s t i t u t i o n a l p a t t e r n of M a l a y a , which d r a i n s away a h i g h  pro-  7 p o r t i o n of M a l a y s i n t o the a d m i n i s t r a t i v e s e r v i c e . ' Arrears i n l a n d work have a l s o been a c c e n t u a t e d by t h e "Emergency"  8 and r e s e t t l e m e n t The ficulty.  schemes.  s h o r t a g e o f S t a t e f u n d s i s an a d m i n i s t r a t i v e d i f The  nature  of the revenue a l l o c a t i o n between the  °P.T. Bauer, "Malayan Rubber P o l i c i e s , " P o l i t i c a l Science Q u a r t e r l y , volume 12, No. 1 (March 1957), p. 92. t h i s c o n n e c t i o n see a l s o Chapter V, p.33. 7  In  T  .H. S i l c o c k , The Economy of M a l a y a . S i n g a p o r e , Donald Moore, I 9 6 0 , p. 32. T h e "Emergency" 1948-1960, r e f e r s t o the r e v o l t of the Malayan Communist P a r t y . F o r r e s e t t l e m e n t schemes see, I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development, The Economic Development of M a l a y a , S i n g a p o r e , Government P r i n t e r , 1955, p. 224. H e r e a f t e r r e f e r r e d t o as t h e Bank M i s s i o n R e p o r t . g  59  federal and state governments makes i t d i f f i c u l t  for the  latter to find sufficient revenue for expansion at the local level.^ The high "quit-rents" charged by the government may also impede cultivation and development.  These are often  greater than the net yield obtainable from the land and also bear l i t t l e relation to the location or f e r t i l i t y of the l a n d but  only vary according to the tyoe of crop cultivated. 11  The "Emergency" 1948-1960  has been an important ob-  stacle to land development both from the point of view of the government and private enterprise.  Insofar as the govern-  ment i s concerned, land work has had to be shelved and given a lower priority.  In addition the "Emergency" has resulted  in a heavy financial drain, which i s reflected in the nonimplementation of development projects. Large areas were not only unsafe but movement was a l so restricted.  Since the security of l i f e and property were  H.H.H. King, The New Malayan Nation. New York, Institute of Pacific Relations, 1957, p. 2 7 . For a discussion of the system of revenue allocation,see, T.H. Huan, "The New System of Revenue Allocation to the States Settlements in the Federation of Malaya", Malayan Economic Review, volume 2, No. 1 (April 1957), pp. 79-STT^ C f . P.T. Bauer, Economic Analysis and Policy in Underdeveloped Areas, London, Cambridge University Press, 1 9 5 7 , 10  ppTT5-56.~  See  Bank Mission Report, pp.  11-12.  60  threatened, p r i v a t e land development was consequently d i s couraged. The "Emergency" a l s o e n t a i l e d a c e r t a i n amount of resettlement, so that between 1948 and 1951 there was a marked reducation i n the area under market gardens w i t h a consequent 12 increase i n the imports of f r e s h vegetables. Hence the o f f i c i a l p o l i c i e s toward land a l i e n a t i o n and the "Emergency" have impeded land development i n the post war p e r i o d .  The existence of large Malay Reservations and  Forest Reserves together with the delay i n implementing j e c t s has impeded land development d i r e c t l y .  pro-  The "Emergency"  has created p o l i t i c a l and economic u n c e r t a i n t y and hence d i s couraged p r i v a t e e n t e r p r i s e i n d i r e c t l y . Investment  i n Rubber  The f o l l o w i n g d i s c u s s i o n w i l l r e l a t e only to the l a c k of investment, p a r t i c u l a r l y f o r e i g n investment, i n estate rubber.  Smallholding rubber investment i s discussed i n a d i f -  ferent context i n Chapter VI.  I t should be pointed out that  while smallholding rubber i s being promoted a c t i v e l y by the government, no attempt i s being made to a t t r a c t new  capital  For example, the area under food crops f e l l from  9 5 , 7 2 7 acres at the end of 1 9 4 8 to 6 7 , 4 6 5 acres at the end 1951. Imports of f r e s h vegetables rose from 7 , 3 2 6 tons i n 1 9 4 8 t o 1 2 , 6 8 0 tons i n 1 9 5 1 . See Great B r i t a i n , C o l o n i a l  of  O f f i c e , An Economic Survey of the C o l o n i a l T e r r i t o r i e s , volume 5 , The Far Eastern T e r r i t o r i e s , London, Her Majesty's S t a t i o n e r y O f f i c e , 1 9 5 5 , p . 18,  61  into estate rubber. What are the principal factors which attract the foreign investor?  ^hese include a favourable market and  promise of profits, the level of taxation, freedom from restrictive legislation and the attitude of the government. Of the four factors mentioned, we w i l l give special attention to the f i r s t and the second. here i s no restrictive legisT  lation regarding foreign investment and remittance of d i v i dends, in Malaya  and the attitude of the government i s very  favourable towards foreign investment, so that these two factors may be said to be satisfied. In relation to the market for rubber we w i l l con13  sider the competition from synthetic  rubber and the ex-  pansion of the synthetic rubber industry in the post war period. Competition between the two rubbers provides an interesting study of the close interplay between the technical and economic aspects of factor substitution in production. Such substitution can take various forms and degrees. t a l may replace labour, or i t may  Capi-  involve a. restricted cate-  gory of substitution, for example, o i l , gas or water replacing coal in the production of power. The term synthetic i s used to cover the whole range of polymeric elastomers.  62  The e l a s t i c i t y of s u b s t i t u t i o n i s a t e c h n i c a l quest i o n r e l a t i n g to the p a r t i c u l a r productive process and i t s technology.  There are three p o s s i b l e s i t u a t i o n s of competi-  t i o n between n a t u r a l and synthetic r u b b e r . ^ Zone A:  Where synthetic rubber enjoys t e c h n i c a l 15 superiority  and there i s no competition  from n a t u r a l rubber, Zone B:  Where n a t u r a l rubber enjoys t e c h n i c a l superi o r i t y and there i s no competition from synt h e t i c rubber,  Zone C:  Where there i s some degree of competition between the two.  G e n e r a l i s i n g from the exp erience of the United States over s e v e r a l years, a rough d i v i s i o n of the " t e c h n i c a l " demand f o r n a t u r a l and synthetic rubbers was evolved i n the trade and widely accepted.  Un the b a s i s of t e c h n i c a l consid-  erations manufacturers p r e f e r synthetic rubber f o r t h i r t y eight per cent of t h e i r products"'" (Zone A ) , such as passenger 0  The zone terminology used below i s taken from T.fi. McHale, "The Competition between S y n t h e t i c and N a t u r a l Rubber," Malayan Economic Review, volume 6, No. 1 ( A p r i l 1961), p. 24. " ^ F r a d i s c u s s i o n of the t e c h n i c a l s u p e r i o r i t y of s y n t h e t i c rubber, see McHale, op. c i t . , pp. 24-25. 0  Io  These f i g u r e s are based on an a n a l y s i s made by Dr. J.N. S t r e e t of the Firestone Rubber Company i n 1954. See L.A. M i l l s , Malaya, A P o l i t i c a l and Economic A p p r a i s a l , Minneapolis, U n i v e r s i t y of Minnesota Press, 1958, p. 162. See also P.O. Satchaga, "The Future of Malaya's Natural Rubber, "Malayan Economic Review, volume 1, No. 1 (June 1956), p. 43.  63  tyre treads  and w i r e i n s u l a t i o n .  On the o t h e r hand n a t u r a l  r u b b e r i s p r e f e r r e d f o r twenty-seven per  cent of t h e i r  p r o d u c t s (Zone B ) , such as a e r o p l a n e and  the l a r g e r s i z e of  17 truck tyres. '  For the r e m a i n i n g t h i r t y - f i v e per  (Zone C ) , the c h o i c e between n a t u r a l and c e n t e r e d around p r i c e c o n s i d e r a t i o n s .  cent  synthetic rubber  has  Thus i f the p r i c e of  n a t u r a l r u b b e r i s l o w e r than t h a t o f s y n t h e t i c r u b b e r , then n a t u r a l rubber i s s e l e c t e d . Recent developments i n the s y n t h e t i c r u b b e r f i e l d threaten  t o v i r t u a l l y e l i m i n a t e Zone B where n a t u r a l  e n j o y s a t e c h n i c a l s u p e r i o r i t y and there i s competition of s t e r e o - r e g u l a r  to increase  between the two.  °  The  Zone C where development  s y n t h e t i c r u b b e r s means t h a t the  t i o n of t h e s e f o r n a t u r a l r u b b e r now  rubber  substitu-  becomes t e c h n i c a l l y  feasible. I t i s i n t h i s c o n n e c t i o n t h a t the q u e s t i o n becomes i m p o r t a n t . age  The  of  research  American as w e l l as a l a r g e per  cent-  of the f r e e w o r l d s y n t h e t i c r u b b e r i n d u s t r y i s o p e r a t e d  by f i n a n c i a l l y s t r o n g o i l r e f i n i n g and r u b b e r m a n u f a c t u r i n g • companies.^9  H i s t o r i c a l l y t h e s e two  noted f o r t h e i r high.rate 1 7  Mills,  i n d u s t r i e s have been  of t e c h n o l o g i c a l  op", c i t . , p.  innovation.  162.  18  McHale, op.  c i t . , p.  24.  C . F . P h i l l i p s , "The C o m p e t i t i v e P o t e n t i a l of Synt h e t i c Rubber, " Land Economics, volume 3 6 , No. 4. (November 1 9  I960),  p.  326.  64  Innovation ception.  i n t h e s y n t h e t i c rubber i n d u s t r y has been no exI n the U n i t e d  States alone, during  1951-1956, op)  the amount spent on r e s e a r c h  was $ 2 7 , 3 8 9 , 0 0 0 .  I n con-  t r a s t , i n Malaya t h e a n n u a l amount spent on r e s e a r c h  since  21  n  1949 i s about f l , 4 5 0 , 0 0 0 .  I n I n d o n e s i a , Indo-China  and C e y l o n s m a l l e r sums have been s p e n t .  2 2  The t o t a l  amount spent on r e s e a r c h  i n S o u t h - e a s t A s i a i s f a r l e s s than  t h a t spent i n t h e U n i t e d  States.  ducers a r e c o n f r o n t e d i c a l l y progressive of recent  Thus n a t u r a l rubber p r o -  by a f i n a n c i a l l y s t r o n g and t e c h n o l o g -  synthetic rubber i n d u s t r y .  On t h e b a s i s  t e c h n o l o g i c a l developments i n t h e s y n t h e t i c r u b b e r  i n d u s t r y t h e r e i s a s t r o n g l i k e l i h o o d t h a t Zone A w i l l a b l y be i n c r e a s e d  prob-  i n the f u t u r e .  We w i l l t u r n n e x t t o t h e " c o m p e t i t i v e "  Zone C, where  the c h o i c e between n a t u r a l and s y n t h e t i c r u b b e r has c e n t e r e d around p'rice  considerations.  The f o l l o w i n g t a b l e shows t h a t except f o r 1949 and 1954 t h e p r i c e o f n a t u r a l r u b b e r has been s u b s t a n t i a l l y h i g h er than t h a t o f s y n t h e t i c rubber. Of)  M i l l s , op. c i t . . p. 1 6 4 .  2 1  I b i d . , p. 1 6 6 .  22  Loc. c i t .  65  Not  o n l y the r e l a t i v e cheapness of the  synthetic  product but a l s o i t s r e l a t i v e l y s t a b l e p r i c e are i n i t s f a v -  23  Since 1 9 5 2 the p r i c e of s y n t h e t i c rubber has been  our.  TABLE  VII  RUBBER PRICES, 1947-1960  New  Year  York P r i c e s (U.S. c e n t s per pound)  N a t u r a l Rubber  Synthetic  18.5 18.5  21.0 22.0 17.6 41.1 59.1  1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960  13.5 19.0  25.0 23.5 23.0  38.6 24.2 • 23.6  23.0  23.0  39.1 34.2 31.2 28.1 36.6 38.2  Source:  Rubber  23.8 23.9  23.9  23.9  23.9  United N a t i o n s , Food and A g r i c u l t u r a l Organisaa t i o n , Yearbook of A g r i c u l t u r a l S t a t i s t i c s . I960, Rome 1961, Table 112, p. 235.  s t a b l e at about twenty-three  cents a pound, while the p r i c e 2ZL  of n a t u r a l rubber has f l u c t u a t e d v i o l e n t l y .  Much of the  A f u r t h e r f a c t o r i n f a v o u r of s y n t h e t i c rubber i s t h e u n i f o r m i t y of the product compared w i t h the v a r i a b i l i t y of n a t u r a l rubber. Manufacturers n a t u r a l l y p r e f e r a product which i s designed to meet t h e i r exact s p e c i f i c a t i o n s . ^No way has been found of keeping the p r i c e of n a t u r a l rubber s t a b l e . The prewar r e s t r i c t i o n schemes enjoyed a very l i m i t e d measure of success. A f t e r the war the y e a r l y d i s c u s s i o n s under the a e g i s of the I n t e r n a t i o n a l Rubber Study Group have not r e s u l t e d i n any i n t e r n a t i o n a l agreement. 2  66 relative stability of the prices of synthetic rubber may  be  attributed to the oligopolistic nature of the synthetic rub25 ber industry,  which consists of only about  half-a-dozen  leading synthetic rubber manufacturers who among them control 2.  most of the production.  These firms are vertically integrated  and although the total number of consumers i s large, the big consumers are few and many of them are also producers.  Both  production and consumption are substantially controlled by a few big companies and hence price stability i s not too d i f 2.7 f i c u l t to achieve. The organisation of the natural rubber industry i s markedly different.  Natural rubber i s grown in almost every  country in South-east Asia and to a lesser extent in Africa. Competition i s more or less perfect so that neither producers nor consumers have any control over the price. However, free market price movements for natural rubber i f tied to synthetic rubber substitutes may become more stable Only the American synthetic rubber industry i s being considered. 26  For a description of the structure of the synthetic rubber industry, See R. Solo, "The New Threat of Synthetic to Natural Rubber," Southern Economic Journal, volume 2 2 , No. 1, (July 1955), pp. 55-64. and P.W. Bidwell. Raw Materials, A Study of American Policy. New York, Harper and Brothers, 1958, p. 2 5 2 . ?'J.S. Bain, Barriers to New Competition. Cambridge, Harvard University Press, 1956, mentions that prices may be maintained at a certain level in order to prevent entry. See p. 151. 2  67  At the same time the price which the consumers in Zone B would be willing to pay w i l l be determined by demand schedules interacting with a combined natural-synthetic rubber supply schedule, rather than with the supply curve of natural rubber alone.  This combined supply curve w i l l probably keep prices  at a lower level than would be the case i f the supply were 28  available from natural rubber alone. Even i f long run prices of natural rubber are likely to be stable and compare favourably with those of synthetic rubber the increasing consumption of synthetic rubber and the possibility that the market for natural rubber may disappear in the long run may discourage investment in natural rubber. We w i l l now briefly survey world supply and demand of both natural and synthetic rubber. Prior to World War Two, production of natural rubber was greater than consumption.  As we noted in Chapter I the  industry was under restriction  schemes.  In contrast, the  post was period has been one of increasing demand because of the expansion of the automobile industry and the development of new uses for rubber. The following table summarises the world supply and T.R. McHale, op-, c i t . . p. 27  68  demand position of natural and synthetic rubber in I960. TABLE VIII ESTIMATE OF WORLD RUBBER PRODUCTION AND CONSUMPTION , I960 (000 tons) Production Country United States Malaya Indonesia Rest of World  Natural 715 650 660  2025  Synthetic*  Total  460  1440 715 650 1120  1900  3925  1440  Stockpile Deliveries United States United Kingdom  90 60  90 60 2175  1900  4075  485 170 1375  1080 105  1565 275 1940  2030  1750  3780  Consumption United States United Kingdom Rest of World  565 .  *excluding Communist countries. Source: "Asian Rubber", Far Eastern Economic Review, Volume 22, No. 3 (16 July 1959), p. 85. It is evident from Table VIII that supply and demand of natural rubber are' "equated by stockpile releases. The Ad  69  Hoc Rubber Committee of the United States Office of Defence Mobilisation (1956) estimated that the natural rubber i n dustry would not be able to meet world requirements. ^ 2  In-  sofar as rubber manufacturers were concerned there was a decided but slow switch i n favour of synthetic rubber in view TABLE IX FREE WORLD RUBBER CONSUMPTION 1950 AND PROJECTED 1975 CONSUMPTION Free United States Other Countries  Total Free World  1950  1950  Natural Synthetic Total New Rubber Reclaimed Rubber Total consumption  582 1320 300 1620  (a) Not separately  p  SOURCE:  1975 (a) (a) 2500 800 3300  738  r  1950  o  j  e  785 40 825 125  950 c  t  1975  1975  (a) 1523 (a) 624 2500 2147 200. 421 2900 2568 e  d  .  '  2300 2700 5000 1200 6200 •  President's Materials Policy Commission, Resources for Freedom (Paley Report), volume II, Washington D.C., Government Printing Office, 1952, p. 102.  of the fact that their future demands of natural rubber might not be met, in spite of replanting, because of rising costs of production and p o l i t i c a l uncertainties.3®  2:9  A similar fear  L.A. Mills, op. c i t . . p. 160.  3-J. Davis, The Canadian Chemical Industry.Ottawa. Royal Commission on Canada's Economic Prospects, March 1957, p. 53.  70  was expressed by the Paley Commission,  whose projections  for rubber comsumption are given on the previous page. It i s noted from the above table that the consumption of synthetic rubber i s expected to increase over four times while that of natural rubber only one and a half times. l e t a rate of growth of one and a half times in fifteen years should attract investment.  The increasing consumption of  synthetic by i t s largest consumer the United States, and the establishment of synthetic rubber plants in the rest of the world probably portend a less favourable market for natural rubber.  Hence natural rubber may not be as attractive to  the foreign investor as i t was in the past. The following brief survey of the consumption of natural and synthetic rubber shows the increasing consumption of synthetic rubber and indicates that a larger synthetic rubber capacity i s planned in most of the industrial countries. Since 1951, the percentage of consumption of natural rubber in the United States has dropped from forty-eight per  The President's Materials Policy Commission, (Paley Commission), Resources for Freedom, volume 2, Washington, D.C., United States Printing Office, 1952, pp. 99-102. 3  71  cent to thirty-six per cent.^  In other countries the  ratio has been much higher and. varied between ninety-six and eighty-eight per cent.  The main reason for the higher  ratio was the absence of synthetic rubber factories in these countries and the "dollar" shortage which prevented imports from the United States and Canada.  The picture has  changed considerably since then and more synthetic rubber plants are being established in Western Europe, Japan, India, and Russia.  American exports of synthetic rubber have also  risen considerably and permission has been granted to import i t into the United Kingdom. 33 The figures on the following page compiled by the Economist show the capacity of synthetic rubber plants in the free world. The following table does not contain data from the Communist countries.  However i t is estimated that in 1957  the capacity of synthetic rubber plants in the Soviet Union was about 300,000 tons.^4 The production of synthetic rubber i s being increased' considerably in all.the industrial countries.  32  In comparison  The Rubber Act of 194$ requires that Manufacturers must use at least 510,000 long tons of synthetic every year. ^ L . A . Mills, op. c i t . . pp. 160-162. Ibid., p. 161  72  with natural rubber the synthetic rubber industry has a c r i t i c a l time advantage in placing i t s product on the market. The rubber tree comes into f u l l production only after ten to fourteen years.  A synthetic rubber plant can be construct-  ed in a relatively short period of time.  For example, a  Canadian plant was designed and constructed in a period of two years.35  Another example i s the British plant which was com-  pleted in eighteen months and i s designed to run continuously 36  throughout the year.  Moreover synthetic rubber plants can  be strategically located in proximity to major sources of raw materials or markets, thus decreasing costs of transport substantially. TABLE X EXISTING AND PLANNED SYNTHETIC RUBBER CAPACITY IN THE FREE WORLD, I960 (000 LONG TONS) All Types  Unitd W  Exist? ing Planned  o  r  l  d  Can-  S t a t e s Ada  2175 1747 165 3110 2015 165  UnitHoi- Eur- Jap® GerJdom S " many France Italy land ope an d  K  n  J  91 172  59 156  20 120  50 80  5  85  38 617 106 225  Source: "Expansion Ahead," Economist , volume 195 > (28 May I960), p. 898. 35 ., p. 53. "J. Davis, op. cit 36«Gr-S from Britain," Economist, volume 189 ( l l October, 1958), p. 177.  73  In this discussion on synthetic rubber we have noted that even in the one zone in which the two rubbers compete on the basis of price alone, the prices of synthetic rubber are relatively lower and more stable than that of natural rubber.  Furthermore in the post war period the demand for  natural rubber has exceeded supply and the deficiency has been made up by stockpile releases.  The fear that natural rub-  ber production w i l l be unable to meet increasing world requirements has been a contributory factor in the expansion of the synthetic rubber industry in the industrial countries. With further technological developments not only i s the price of synthetic rubber likely to f a l l but also substitution between natural and synthetic rubber may become i n f i n i t e l y elastic.  Thus Zone B may be virtually eliminated and even  Zone C may be reduced considerably.  The above factors then  may reduce investment in natural rubber to a rate considerably lower than that when the industry was in i t s infancy, that i s in the period before the 1930s. The increasing competition from synthetic rubber has been the most important factor affecting investment i n natural rubber.  A subsidiary factor has been the level of tax-  ation in the rubber industry in Malaya. The principal Malayan taxes levied on rubber are i n come tax and export duty.  The current rate of income tax c:  74  on company p r o f i t s i s f o r t y p e r c e n t .  The e x p o r t d u t y  is  ad v a l o r e m , s t a r t i n g a t f o u r per cent when t h e e x p o r t p r i c e of r u b b e r does not exceed s i x t y c e n t s , and becoming p r o g r e s s i v e l y s t e e p e r as t h e p r i c e of rubber i n c r e a s e s .  It falls  l a r g e l y on the p r o d u c e r s and cannot be s h i f t e d e a s i l y t o the consumer s i n c e t h e demand f o r rubber i s v e r y e l a s t i c . While income t a x i s l e v i e d o n l y on p r o f i t s  earned,  e x p o r t duty has t o be p a i d on every pound of r u b b e r e x p o r t e d i r r e s p e c t i v e o f whether the company i s making a p r o f i t o r n o t .  The e x p o r t duty c o n s i s t s o f t h e f o l l o w i n g f o u r p a r t s : ( i ) Accrues t o g e n e r a l government revenue and amounts t o f o u r per cent ad valorem when the p r i c e of r u b b e r does not exceed s i x t y c e n t s . When the p r i c e i s h i g h e r t h e d u t y i s c a l c u l a t e d t h u s : 4 . 5 5 P - 63 where P i s t h e weekly n o t i f i e d p r i c e of r u b b e r ; 10 ( i i ) l e v i e d when t h e p r i c e o f r u b b e r i s more than $1 and c a l c u l a t e d t h u s : 2.5P - 250 where P i s t h e weekly n o t 10  i f i e d p r i c e of r u b b e r T h i s i s r e f u n d a b l e when the p r i c e o f r u b b e r remains f o r e i g h t s u c c e s s i v e weeks below $1; ( i i i ) Research c e s s - - t h r e e q u a r t e r c e n t s p e r p o u n d — goes t o a r e s e a r c h f u n d . ( i v ) a r e p l a n t i n g c e s s of 4 i c e n t s . The p a r t c o l l e c t e d on s m a l l h o l d i n g r u b b e r i s p a i d i n t o the s m a l l h o l d e r r e p l a n t i n g f u n d , w h i l e t h a t c o l l e c t e d on e s t a t e r u b b e r i s r e p a i d t o the e x t e n t o f r e p l a n t i n g e x p e n d i t u r e i n c u r r e d s i n c e 1946.  See Appendix I , R e p l a n t i n g Schemes i n the Rubber I n d u s t r y . See a l s o C.Y. Lim "Export Taxes on Rubber i n M a l a y a , a Survey of P o s t war Development," Malayan Economic Review, volume 5, No. 2 (October I 9 6 0 ) , pp. 4 6 - 5 5 8 , and "The Malayan Rubber R e p l a n t i n g Taxes," Malayan Economic Review, volume 6, No. 2 (October 1 9 6 l ) , pp. 4 3 - 5 2 .  75  It  i s a l s o r e g a r d e d as  i s much h e a v i e r  being  than that  d i s c r i m i n a t o r y since the  l e v i e d on e x p o r t s  rate  of o i l palms  and  coconuts. The  Mission  ( t h e Mudie M i s s i o n ) sixty  cents  of E n q u i r y  i n t o the  estimated  that with  a pound a low  Rubber I n d u s t r y , the  y i e l d i n g estate  1954,  rubber p r i c e at  c o u l d not  both  pay 3 8  export It  d u t y and  also f e l t  proportion  set aside  an  a d e q u a t e amount f o r r e p l a n t i n g .  t h a t M a l a y a n income t a x d r a i n e d  o f p r o f i t s as  t h e y were made.  A l a r g e number o f t h e istered and  up  i n the t o 1957  Report again p a n i e s as ber  United  described  companies were t a x e d  United  (the " s t e r l i n g "  Kingdom t a x a t i o n  improvident  at the  and  deductible  i n the  o f r o a d s and  Although the  y e a r i n w h i c h i t was  drains  f o r the  The  cost  reg-  Mudie  o f r u b b e r com-  u n f a i r , since  same r a t e s a s t h o s e  Kingdom d e d u c t i o n s d i d n o t  of rubber t r e e s .  are  companies),  Kingdom, where c o n d i t i o n s were s e t t l e d . " ^ - * -  lowable United iation  7  t o double t a x a t i o n . ^  United  "both excessive,  large  Malayan rubber e s t a t e s  Kingdom  were s u b j e c t  off a  include  in  rub-  the  Also a l deprec-  of replanting  i n c u r r e d , the  was  making  p u r p o s e o f r e p l a n t i n g was  not.  38" ^ R.F. M u d i e , ( C h a i r m a n ) R e p o r t o f t h e M i s s i o n o f E n q u i r y i n t o t h e R u b b e r I n d u s t r y o f M a l a y a , 1954,Kuala Lumpur. Government P r i n t e r , 1954, p. 35. H e r e a f t e r r e f e r r e d t o as t h e Mudie R e p o r t . 39 oc. c i t . L  ^For  changes s i n c e 1957  ^ M u d i e Report, p.  36.  see Chapter V, p.  138.  76  T h i s was r e g a r d e d as new  42  capital formation.  Moreover the  ,  r e p l a n t i n g grant o f $400 was r e g a r d e d as income and hence s u b j e c t t o taxation.43 I n c o n t r a s t the " d o l l a r "  (that i s those r e g i s t e r e d i n  Malaya) companies' c o s t o f r e p l a n t i n g was t r e a t e d as an expense o f o p e r a t i o n a c c o r d i n g t o M a l a y a n t a x laws and c o u l d  44 be w r i t t e n o f f over a p e r i o d o f t e n y e a r s .  Hence the  " s t e r l i n g " rubber companies were i n a r e l a t i v e l y disadvantageous p o s i t i o n v i s - ^ a - v i s the " d o l l a r " r u b b e r companies.  Also  as we p o i n t out i n Chapter V~45  was  the l e v e l o f t a x a t i o n  p a r t l y r e s p o n s i b l e f o r the s a l e of " s t e r l i n g " r u b b e r companies. Hence new f o r e i g n i n v e s t m e n t i n Malayan r u b b e r e s t a t e s appears t o be l i m i t e d . t a x i n Malaya;  B e f o r e t h e war t h e r e was no income  p o l i t i c a l u n c e r t a i n t i e s which d i d not  exist  i n the prewar p e r i o d a l s o d i s c o u r a g e the i n v e s t o r today. velopments  i n neighbouring rubber producing c o u n t r i e s a l s o  ^ F o r R e p l a n t i n g schemes i n the R b b e r I n d u s t r y see Appendix I . 2  u  43  L.A. M i l l s ,  op. c i t . , p.  ^Loc. c i t .  45  De-  \ <  See Chapter V, p.  137.  ^  198.  77 make t h e i n v e s t o r c a u t i o u s . c i t e d as examples. may  Indonesia  and Ceylon may  be  F e a r of s i m i l a r developments i n M a l a y a  d e t e r f o r e i g n investment  i n rubber.  However i n s p i t e of the i n c r e a s i n g c o m p e t i t i o n from s y n t h e t i c r u b b e r and the h i g h e r l e v e l o f post war t a x a t i o n , the n a t u r a l r u b b e r i n d u s t r y o f M a l a y a has been s e l l i n g a l l t h a t i t can produce.  B e s i d e s e a r n i n g good p r o f i t s i t has  been r e p l a n t i n g a t a r a t e o f about t h r e e per cent a y e a r . When we c o n s i d e r t h e d i v i d e n d s p a i d , c o m p l a i n t s of over t a x a t i o n and r i s i n g c o s t s o f p r o d u c t i o n seem t o suggest t h e lame n t s of t h e poor r i c h  man.  The f i g u r e s on t h e f o l l o w i n g page compiled by  the  Economist f o r c e r t a i n " s t e r l i n g " r u b b e r e s t a t e s show t h a t r e l a t i v e l y high d i v i d e n d s are s t i l l being p a i d . Y i e l d s range from e i g h t t o t h i r t e e n per cent and  are  d e s c r i b e d by the Economist as r e f l e c t i n g "a f a v o u r a b l e o u t look f o r the n a t u r a l rubber i n d u s t r y . " I n t h i s c o n n e c t i o n then we may no investment  i n rubber.  ask a g a i n why  there i s  The g e n e r a l c o n c l u s i o n appears t o  ^ I n I n d o n e s i a income t a x t a k e s between f o r t y t o f i f t y two per cent of t h e rubber e s t a t e ' s p r o f i t s , a f t e r w h i c h f o r t y per cent o f t h e balance has t o be p a i d i n t o the account o f the Bank o f I n d o n e s i a . The remainder i s then s u b j e c t t o an exchange surcharge of f o r t y per c e n t , a f t e r w h i c h i t can be t r a n s f e r r e d abroad.. F o r e i g n e s t a t e s a l s o f a c e the "threat of n a t i o n a l i s a t i o n . See L . A . M i l l s , op. c i t . , p. 1 7 7 . ^ P . C . Ratchaga,"The F u t u r e of Malaya's N a t u r a l Rubber," Maiayan.Economic R e v i e w volume 1 , No. 1 (June p. 4 3 . f  1 9 5 6 )  78  be t h a t the n a t u r a l rubber i n d u s t r y i s plagued by uncertainty.  F i r s t there i s p o l i t i c a l uncertainty.  i n v e s t o r s a r e no l o n g e r  Foreign  c e r t a i n about t h e s e c u r i t y o f t h e i r  i n v e s t m e n t s i n newly independent  countries.  TABLE X I EARNINGS OF SOME "STERLING" RUBBER ESTATES, NOVEMBER 1959  Issued Value of Share (shillings)  Estate  H i g h l a n d s and Lowlands. K u a l a Lumpur Labu C h e v i o t London A s i a t i c Malacca Petaling Seafield United Sera Betong Source:  Total Planted Acreage  43,800  Price of shares on November 1 1 .  2 20 2 2 20 2 2  22,317 14,869 35,725 20,707 27,301 33,033  6 l |  20  37,461  9o  Dividend per cent  8.2 10.2 9.1 7.4 8.0  8/6 40  a/ii  56/6  9/\0h  7.1 8.2  13.6  " P r o s p e r i t y i n Rubber," Economist, volume 1 9 3 (14 November, 1 9 5 9 ) , p. 6 T 8 T Secondly t h e r e  ive research  i s economic u n c e r t a i n t y .  i n s y n t h e t i c rubber, there  With extens-  i s every p o s s i b i l i t y  t h a t i n t h e l o n g r u n not o n l y w i l l t h e p r i c e o f s y n t h e t i c f a l l , and w i t h i t t h e p r i c e o f n a t u r a l r u b b e r , b u t t h a t t h e e l a s t i c i t y o f s u b s t i t u t i o n between t h e two may s h o r t l y become almost i n f i n i t e .  I n f a c t w i t h t h e development o f s t e r e o -  79  r e g u l a r s y n t h e t i c rubber, t e c h n i c a l s u b s t i t u t i o n p o s s i b i l i t i e s o f s y n t h e t i c f o r n a t u r a l r u b b e r now t u a l l y complete.  seem t o be  vir-  Thus t h e f u t u r e o f the n a t u r a l r u b b e r i n -  d u s t r y i s p r o b a b l y l e s s p r o m i s i n g now  than at any o t h e r t i m e  in i t s history. T h i s w i l l i n t u r n have e f f e c t s on l a n d use s i n c e t h e r e l a t i v e u n a t t r a c t i v e n e s s of the n a t u r a l rubber i n d u s t r y as a field  o f investment i s tantamount  t o the n o n - e x t e n s i o n o f  the acreage under r u b b e r , a t l e a s t by the e s t a t e s .  Perhaps  t h i s i s one r e a s o n why  initiat-  ive  the government i s t a k i n g the  i n e s t a b l i s h i n g rubber s m a l l h o l d i n g s .  Land Use P o l i c y f o r R i c e As we p o i n t e d out e a r l i e r i n t h i s c h a p t e r , the dec l a r e d p o l i c y of the government i s t o a t t a i n i n e s s e n t i a l f o o d s t u f f s , namely r i c e .  Two  self-sufficiency  factors are res-  p o n s i b l e f o r t h i s a t t i t u d e : t h e e x p e r i e n c e s of t h e o c c u p a t i o n and the p o l i t i c a l ducing areas.  Japanese  i n s e c u r i t y o f the main r i c e p r o -  I n t h i s s e c t i o n we w i l l examine the measures  t a k e n t o a c h i e v e t h i s goalLas w e l l as attempt t o a p p r a i s e t h i s policy. There are two s i d e s t o t h i s p o l i c y , the f i r s t i s the e x t e n s i o n o f r i c e acreage and t h e second i s t h e improvement of mon  rice yields.  To a c e r t a i n e x t e n t we w i l l f i n d t h a t com-  f a c t o r s a f f e c t b o t h these a s p e c t s . The o b s t a c l e s w h i c h l i e i n t h e way  of the g o a l of s e l f -  86  s u f f i c i e n c y are b o t h p h y s i c a l and economic;  each of t h e s e  w i l l be examined i n t u r n . The mountainous and. rugged n a t u r e of the c o u n t r y l i m i t s a g r i c u l t u r a l e x p a n s i o n i n g e n e r a l and t h e e x p a n s i o n o f r i c e i n p a r t i c u l a r , s i n c e wet r i c e cannot be c u l t i v a t e d  on  l a n d over f i f t y f e e t i n Malaya.' C l i m a t i c c o n d i t i o n s are on t h e whole not v e r y f a v o u r able t o r i c e c u l t i v a t i o n .  The h i g h e r t e m p e r a t u r e s  result  i n r a p i d v e g e t a t i v e growth but y i e l d s a r e l o w e r t h a n i n t h e temperate r i c e growing r e g i o n s . Most Malayan of  s o i l s are poor when compared w i t h t h o s e  the temperate r e g i o n s , s i n c e t h e y are l i a b l e t o r a p i d  terioration.  de-  Thus double c r o p p i n g of r i c e i s r a r e r t h a n i n  o t h e r r i c e p r o d u c i n g a r e a s b o t h i n temperate and r e g i o n s because of poor  tropical  soils.  The most i m p o r t a n t f a c t o r d e t e r m i n i n g r i c e y i e l d s i s t h e s u p p l y of wat^er. portant.  Both the q u a n t i t y and q u a l i t y are im-  I n Malaya a good d e a l o f r i c e l a n d has been known 4" 9  to  be abandoned because t h e w a t e r c o n t a i n e d m i n i n g e f f l u e n t .  48 • E.H.G. Dobby, South E a s t A s i a , London, U n i v e r s i t y o f London P r e s s , 1958 ( s i x t h e d i t i o n ) , p. 107. 49  • J.B. O o i , " R u r a l Development i n T r o p i c a l A r e a s , w i t h s p e c i a l r e f e r e n c e t o M a l a y a , " J o u r n a l of T r o p i c a l Geography, volume 12 (March 1959), p. 111.  81  The R i c e P r o d u c t i o n Committee 1 9 5 3 , r e p o r t e d t h a t t h e r e was  a l a c k of r e g u l a t e d water s u p p l i e s i n a l l the e l e v -  en s t a t e s of t h e F e d e r a t i o n and " i n v e r y few a r e a s have t h e i r r i g a t i o n works more than a supplementary e f f e c t by i n g and d i s t r i b u t i n g w a t e r from r a i n f a l l . "  The  d i f f i c u l t y i n t h i s c o n n e c t i o n i s the shortage s o n n e l and  conserv-  immediate  of s k i l l e d  per-  equipment.  The most i m p o r t a n t  economic f a c t o r a f f e c t i n g  rice  c u l t i v a t i o n i s the h i g h e r o p p o r t u n i t y incomes a v a i l a b l e from the c u l t i v a t i o n of rubber. even., d u r i n g the D e p r e s s i o n ,  As we p o i n t e d out i n Chapter I , ^ i t was  terms of t r a d e were a g a i n s t r u b b e r .  o n l y i n 1 9 3 2 t h a t the A n u m e r i c a l example i n  terms o f p r e s e n t p r i c e s w i l l h e l p t o b r i n g out t h i s r e l a t i o n ship.  F e d e r a t i o n of M a l a y a , Report o f the R i c e P r o d u c t i o n Committee.volume 1 , Kuala Lumpur, Government P r i n t e r , 1 9 5 3 ,  pp. 7 5 - 7 7 .  See Chapter I,pp . 17-]£and e s p e c i a l l y Table I I I . (  82  From one a c r e o f r u b b e r , ^  2 n  e  t income  From one acre, o f r i c e , 5 3 n e t income  =  $520 - $ 97  Thus we see t h a t t h e n e t income o b t a i n a b l e from r u b b e r i s more t h a n f i v e t i m e s g r e a t e r t h a n t h a t o b t a i n a b l e from  rice.  This f i g u r e i s a r r i v e d at thus: 927 pounds ( y i e l d from one a c r e o f rubber) x $1.08 ( p r i c e o f r u b b e r p e r pound) z $1003. ( c o s t o f p r o d u c t i o n a t 52 c e n t s a a pound) - $ 5 2 0 — n e t proceeds from one a c r e o f r u b b e r . $1003--$4$3  Source: ( i ) y i e l d p e r a c r e and p r i c e o f r u b b e r , Rubber S t a t i s t i c s Handbook. J ^ 6 0 , K u a l a Lumpur, Department o f S t a t i s t i c s , 1961, p. 3 2 , 5 3 . ( i i ) Cost o f p r o d u c t i o n — R . Ma, "Company P r o f i t s and P r i c e s i n t h e Rubber I n d u s t r y i n M a l a y a , 1947-1953." Malayan Economic Review, volume 4, No. 2 (October 1959), p. 3 0 .  •53 This figure i s a r r i v e d at thus: 2102 pounds ( y i e l d from one a c r e o f r i c e ) x $0.11.3 c e n t s ( p r i c e o f r i c e per pound) =  $237.  $ 2 3 7 — $ 1 4 0 (cost of p r o d u c t i o n per acre) z $97  "  Source: ( i ) Y i e l d p e r a c r e — P r o d u c t i o n Yearbook. I 9 6 0 , Rome, Food and A g r i c u l t u r a l O r g a n i s a t i o n 1961, Table 1$, pp. 5152.  ( i i ) The p r i c e p e r pound i s based on t h e government minimum p r i c e o f $15 a p i c u l (1 p i c u l = 133 pounds). ( i i i ) Cost o f p r o d u c t i o n - - d e r i v e d from J . J . Puthuc h e a r y , Ownership and C o n t r o l i n t h e Malayan Economy, S i n g a p o r e , E a s t e r n U n i v e r s i t i e s P r e s s , I 9 6 0 , T a b l e 4, p. 15.  83  As we p o i n t out i n Chapter VI i t i s c o n s i d e r a b l y cheaper f o r Malaya t o import r i c e than t o produce i t h e r s e l f I t seems from the R i c e P r o d u c t i o n Committee's Report t h a t t h i s f a c t o r of t h e h i g h e r o p p o r t u n i t y incomes from rubber i s under-emphasised.  The  Committee seems t o be more con-  cerned w i t h what i t c a l l s " c u l t u r e change". The a l t e r i n g of t h e p r i c e s t r u c t u r e has been a r e s p o n s i b l e f a c t o r . Changes i n t h e l e v e l of l i v i n g has changed t h e o u t l o o k of the r u r a l p o p u l a t i o n . The demonstration; e f f e c t has been a t work. The t e d i o u s n a t u r e of p a d i p l a n t i n g , t h e h i g h e r e a r n i n g s a v a i l a b l e from a l t e r n a t i v e o c c u p a t i o n s and the a t t r a c t i v e n e s s of town l i f e have important e f f e c t s , p a r t i c u l a r l y i n m a r g i n a l r i c e l a n d s where p o o r e r s o i l s and l e s s f a v o u r a b l e c l i m a t i c c o n d i t i o n s a f f o r d r e l a t i v e l y lower r e t u r n s f o r t h e same or g r e a t e r exp e n d i t u r e of labour.'55 I t seems from t h e above t h a t the Committee laments the movement out of r i c e p r o d u c t i o n , which m i g h t , i n t h e l o n g r u n , be a good t h i n g i f incomes a r e t o be  increased.  I t even goes so f a r as t o suggest t h a t a h i g h e r subs i d y may  a l t e r t h e s i t u a t i o n and encourage more p l a n t i n g  of r i c e . £ 6  However a h i g h e r s u b s i d y may  can be expected  be warranted  ifit  t o r a i s e s o c i a l p r o d u c t i v i t y w h i c h would  ^ S e e Chapter VI,-p. 168. The e x p o r t p r i c e of T h a i l a n d r i c e i s $9 per p i c u l , w h i l e the guaranteed minimum p r i c e i n M a l a y a f o r d o m e s t i c a l l y produced r i c e i s $15 per p i c u l . 55  ;  R i c e P r o d u c t i o n Committee R e p o r t , p. Loc. c i t  4.  84  outweigh t h e l o s s i n w e l f a r e t o t h e consumers t h r o u g h  higher  p r i c e s of r i c e . However c e r t a i n government measures have been t a k e n both t o i n c r e a s e y i e l d s and t o keep t h e peasant i n r i c e ing.  These i n c l u d e t h e e x p e r i m e n t a t i o n w i t h double  farm-  cropping,  the e x t e n s i o n of d r a i n a g e and i r r i g a t i o n and minimum p r i c e s f o r d o m e s t i c a l l y produced r i c e .  B e f o r e examining  these  fac-  t o r s we w i l l c o n s i d e r how Malayan y i e l d s compare w i t h t h o s e of other r i c e producing  areas. TABLE X I I  RICE YIELDS OF THE MAJOR RICE PRODUCING COUNTRIES 1959/1960  Country  Pounds per a c r e  Burma Ceylon India Indonesia Japan Malaya Taiwan Thailand  .1500 1364 1168 1514 4180 2102 2614 1224  Italy Spain  4610 5074  Australia  5194  Source: P r o d u c t i o n Yearbook, I960, volume 1 4 . Rome Food and A g r i c u l t u r a l O r g a n i s a t i o n , 1 9 6 1 , ' Table 1 8 , pp. 50-51.  85  I t is:evident from t h e above t a b l e t h a t y i e l d s a r e t h e h i g h e s t i n South-east A s i a .  Malayan  But when com-  pared w i t h those o f t h e temperate r e g i o n s t h e y a r e v e r y low. As we p o i n t e d out e a r l i e r t h e c l i m a t e o f M a l a y a i s not p a r t i c u l a r l y suited to r i c e production.  And as G r i s t p o i n t s  •out, r i c e i s i n f a c t b e t t e r s u i t e d t o t h e s u b - t r o p i c a l and 57•  warm temperate  zones t h a n t o t h e t r o p i c s .  The f i r s t p o l i c y o f i n c r e a s i n g r i c e p r o d u c t i o n by means o f double c r o p p i n g has t o be viewed a g a i n s t t h e water problem. to  I n o r d e r t h a t t h i s p o l i c y be e f f e c t i v e t h e r e has  be complete w a t e r c o n t r o l throughout t h e y e a r . ^ 8  But  t h r e e - f i f t h s o f t h e r i c e a r e a s a r e w i t h o u t d r a i n a g e and i r r i g a t i o n f a c i l i t i e s even f o r t h e main crop.-59 heavy r a i n f a l l  In spite of  and t h e l a r g e number o f streams and r i v e r s ,  the topography o f Malaya does n o t f a v o u r t h e c o n s t r u c t i o n of  r e s e r v o i r s , so t h a t t h e r e remain e x t e n s i v e a r e a s o f r i c e  60 l a n d where adequate  i r r i g a t i o n f a c i l i t i e s do not e x i s t . '  A g a i n t o p l a n t two c r o p s a y e a r a s h o r t e r m a t u r i n g seed would have t o r e p l a c e t h e l o n g e r m a t u r i n g v a r i e t y . Acc o r d i n g t o G r i s t t h e r e i s no e v i d e n c e t h a t t h e y i e l d s from ''D.H. G r i s t , Rice,London, Longmans Green, 1953, pp. 268-269. 5  - 5 % i c e P r o d u c t i o n Committee R e p o r t , p. 60. 59  "J.B. O o i , op. c i t . , p. 116. ^Loc. c i t .  86  the two  s h o r t c r o p s would be g r e a t e r t h a n t h a t from  one  61 crop. The  second p o l i c y measure, the e x t e n s i o n of i r r i g a t i o n  w o r k s , has been r e s p o n s i b l e f o r the e x p a n s i o n i n r i c e a c r e age and f o r i n c r e a s e d yields per a c r e .  An i n d i c a t i o n o f t h i s  i s the f a c t t h a t of the t o t a l p l a n t e d r i c e acreage o f 864,000 a c r e s i n 1950-51 about 225,000 a c r e s , or over t w e n t y f i v e per c e n t , were w i t h i n a r e a s where i r r i g a t i o n works have been e s t a b l i s h e d or improved l a r g e l y d u r i n g t h e l a s t twenty years. 6 2  a  The t h i r d p o l i c y measure w h i c h we w i l l d i s c u s s i s t h a t o f f i x i n g minimum p r i c e s f o r r i c e , d e s i g n e d the c u l t i v a t o r who,  to a s s i s t  in. the absence o f a minimum p r i c e , would  be unable t o s e l l h i s c r o p .  The  aim t h e n i s t o s h i e l d  c u l t i v a t o r from t h e f u l l impact of c o m p e t i t i o n from r i c e . This is.believed  t o be n e c e s s a r y  imported  because  ... economic s t a n d a r d s i n M a l a y a are i n g e n e r a l s u b s t a n t i a l l y h i g h e r t h a n i n the major r i c e exp o r t i n g c o u n t r i e s o f A s i a . And t h i s i s a l s o t r u e s p e c i f i c a l l y i n the case of the Malayan p a d i c u l t i v a t o r as compared w i t h h i s c o u n t e r p a r t i n the n e i g h b o u r i n g r i c e s u r p l u s a r e a s . . . . 6 3  6l  G r i s t , op. c i t . , p. The 63  29.  Bank M i s s i o n R e p o r t , p. 1 8 7 .  I b i d . , p.  49.  the  87  However i t may  be argued t h a t t h e impairment o f the  r i c e c u l t i v a t o r ' s p o s i t i o n i s a n a t u r a l economic development and perhaps s h o u l d be a l l o w e d t o t a k e p l a c e .  Traditional  o c c u p a t i o n a l i m m o b i l i t y among r i c e f a r m e r s , and the l a c k o f a l t e r n a t i v e employment o p p o r t u n i t i e s a r e not c o n c l u s i v e r e a sons f o r c o n t i n u i n g r i c e p r o d u c t i o n as an o u t l e t f o r a r a p i d l y growing l a b o u r f o r c e .  F o r i t i s t h e amount of r i c e  duced t h a t i s i m p o r t a n t and not t h e number of r i c e  pro-  farmers.  A l l t h e t h r e e measures, t h a t i s double c r o p p i n g , t h e e x t e n s i o n of d r a i n a g e and  i r r i g a t i o n , and minimum p r i c e s  f o r d o m e s t i c a l l y produced r i c e , r e p r e s e n t measures w h i c h a r e t a k e n t o both extend prove y i e l d s . rice  the a r e a under r i c e as w e l l as t o im-  They a l s o r e p r e s e n t a p r e - o c c u p a t i o n w i t h  self-sufficiency. As the Bank M i s s i o n R e p o r t  observes,  I t i s not a s e r i o u s e x a g g e r a t i o n t o say t h a t a g r i c u l t u r a l development has been c o n c e i v e d l a r g e l y i n terms of measures w h i c h o f f e r t h e g r e a t e s t t e c h n i c a l s h o r t run p o s s i b i l i t i e s f o r a d d i t i o n a l r i c e o u t p u t . . . I n s u f f i c i e n t a t t e n t i o n has been g i v e n t o the r e l a t i v e advantages o f e x p e n d i t u r e s and use of l a n d f o r o t h e r c r o p s . I n view o f M a l a y a ' s h i g h r a t i o of p o p u l a t i o n t o r i c e l a n d s compared t o o t h e r Southe a s t A s i a n c o u n t r i e s and i t s v e r y h i g h r a t e of popu l a t i o n growth a n y t h i n g a p p r o a c h i n g r i c e s e l f s u f f i c i ency does not appear... p r a c t i c a b l e . . . W i t h w o r l d r i c e p r i c e s now d e c l i n i n g . . . g r e a t e r a t t e n t i o n s h o u l d be g i v e n t o o t h e r r e l a t i v e economic advantages of o t h e r crops.P^-  6  ^ I b i d . , pp. 41-42.  38  To support  t h i s view i t s h o u l d be noted t h a t i t i s  r u b b e r r e p l a n t i n g as a g a i n s t new p l a n t i n g w h i c h has r e c e i v e d a l a r g e p r o p o r t i o n of o f f i c i a l f u n d s .  I n s p i t e of the f a c t  t h a t r i c e s e l f - s u f f i c i e n c y i s n o t f e a s i b l e f o r economic, p h y s i c a l and t e c h n i c a l r e a s o n s ,  t h e government i s s t i l l  care-  f u l t o a v o i d undue a l i e n a t i o n o f l a n d s u i t a b l e f o r r i c e c u l t i v a t i o n t o other  crops.  Thus any c o n s i d e r a b l e i n c r e a s e i n t h e a r e a under r i c e would i n v o l v e t h e c l e a r i n g o f some l a n d under S u b s t a n t i a l c a p i t a l expenditure  rubber.  would be r e q u i r e d f o r t h e  purpose and even t h e n r e t u r n s would be l o w . The f o l l o w i n g q u o t a t i o n summarises our c o n c l u s i o n on t h e food ficiency  self-suf-  policy:  There would be no p r o s p e c t o f r e c o v e r i n g t h e c a p i t a l e x p e n d i t u r e from t h e proceeds o f t h e rice. On t h e c o n t r a r y t h e r i c e growers would need a s s i s t a n c e p r o b a b l y by q u a n t i t a t i v e r e s t r i c t i o n on t h e i m p o r t s o f r i c e , r a i s i n g t h e p r i c e o f r i c e t o t h e whole p o p u l a t i o n ...v"5 Summary T h i s c h a p t e r a s s e r t e d t h a t t h e r e have been no s i g n i f i c a n t changes i n t h e c u l t i v a t e d a r e a i n t h e p e r i o d 1947-1960. for  this.  I n s t i t u t i o n a l o b s t a c l e s were i n p a r t r e s p o n s i b l e These were m a i n l y t h e o f f i c i a l p o l i c i e s on l a n d  a l i e n a t i o n and t h e "Emergency".  Benham, The Colombo P l a n and Other E s s a y s , London and New Y o r k , R o y a l I n s t i t u t e o f I n t e r n a t i o n a l A f f a i r s , 1956, p. 46.  89  I n the second s e c t i o n of t h i s c h a p t e r we q u e r i e d l a c k of new,  f o r e i g n investment i n rubber e s t a t e s .  the  Our  g e n e r a l c o n c l u s i o n was t h a t the rubber i n d u s t r y i s p l a g u e d by u n c e r t a i n t y and t h a t t h i s i s r e s p o n s i b l e f o r t h e r e l a t i v e u n a t t r a c t i v e n e s s of the n a t u r a l rubber i n d u s t r y as a f i e l d of i n v e s t m e n t . and economic.  The u n c e r t a i n t y i s o f two k i n d s ,  political  The economic aspect concerns l a r g e l y the  growth i n t h e post war p e r i o d o f t h e s y n t h e t i c r u b b e r i n d u s t r y , as w e l l as t h e p o s s i b i l i t y t h a t w i t h t h e development of s t e r e o - r e g u l a r s y n t h e t i c r u b b e r , t e c h n i c a l s u b s t i t u t i o n p o s s i b i l i t i e s o f s y n t h e t i c f o r n a t u r a l r u b b e r now v i r t u a l l y complete.  seem t o be  Thus t h e f u t u r e o f t h e n a t u r a l r u b b e r  i n d u s t r y i s p r o b a b l y l e s s p r o m i s i n g now t h a n a t any o t h e r time i n i t s h i s t o r y .  I n s o f a r as l a n d use i s concerned, t h e  r e l a t i v e u n a t t r a c t i v e n e s s o f the n a t u r a l r u b b e r i n d u s t r y as a f i e l d of investment i s tantamount t o t h e n o n - e x t e n s i o n o f the acreage under r u b b e r . I n t h e t h i r d s e c t i o n of t h i s c h a p t e r we  discussed  t h e p o l i c y o f s e l f - s u f f i c i e n c y i n f o o d s t u f f s , namely r i c e . We  c o n c l u d e d t h a t both e c o n o m i c a l l y and p h y s i c a l l y t h i s i s not  feasible.  Hence the measures t a k e n by t h e government t o  a c h i e v e s e l f - s u f f i c i e n c y i n r i c e r e f l e c t t h e f a c t t h a t the o p p o r t u n i t y c o s t s o f p r o d u c i n g a l t e r n a t i v e c r o p s are b e i n g neglected.  The p r e - o c c u p a t i o n w i t h t h i s o b j e c t i v e l i m i t s the  p o s s i b i l i t y of l a n d development i n o t h e r f i e l d s .  90  Thus a l l the. t h r e e t o p i c s d i s c u s s e d i n t h i s  chapter  have i n one way or a n o t h e r prevented t h e e x t e n s i o n o f t h e cultivated  a r e a i n t h e p e r i o d 1947-1960.  p o l i c i e s oh l a n d a l i e n a t i o n policy period.  i n particular  The  official  i n g e n e r a l , and t h e r i c e l a n d  are p o l i c i e s i n h e r i t e d  from t h e c o l o n i a l  Perhaps i t i s here t h a t ' t h e d u a l i s t i c t h e o r i e s and  their implications, come r e l e v a n t .  w h i c h we d i s c u s s e d i n Chapter I T , be-  The p o l i c i e s b e i n g pursued a r e d u a l i s t i c  i n t h e sense t h a t t h e a l l o c a t i o n  of r e s o u r c e s  a c t i v i t i e s , that i s r i c e , w i l l probably the d u a l i s t i c f e a t u r e s o f the economy.  to  subsistence  help to accentuate  CHAPTER IV A COMPARISON OF ESTATES AND SMALLHOLDINGS AS PRODUCERS OF RUBBER The  purpose o f t h i s c h a p t e r i s t o compare t h e r e -  lative efficiency of r u b b e r .  o f e s t a t e s and s m a l l h o l d e r s a s p r o d u c e r s  The comparison i s n e c e s s a r y  because b o t h t h e  "break-up" o f e s t a t e s and t h e l a n d development schemes^" a r e c r e a t i n g a t r e n d towards more s m a l l h o l d i n g s .  T h i s comparison  should h e l p us t o d e t e r m i n e whether t h e above-mentioned developments a r e h a r m f u l  or b e n e f i c i a l  t o t h e economy.  The  main p o i n t s o f comparison w i l l c o v e r o r g a n i s a t i o n , p r o d u c t i o n and  replanting.  Organisation The  p l a n t e d a r e a under r u b b e r a t t h e end o f 1959 was i  3.8 m i l l i o n a c r e s o f w h i c h the e s t a t e acreage was about f i f t y one p e r cent and t h e s m a l l h o l d i n g acreage was about f o r t y nine per cent.  I t i s estimated that while the smallholding '  acreage was o n l y 1.8 m i l l i o n a c r e s i n 1959, new p l a n t i n g , replanting.and "fragmentation"  2  w i l l give a t o t a l smallhold-  i n g acreage o f 2.5 m i l l i o n a c r e s by 1970.3  The "break-up" o f e s t a t e s i s d i s c u s s e d i n Chapter V. Land development schemes a r e d i s c u s s e d i n Chapter V I . 2  "fragmentation"  i s d i s c u s s e d i n Chapter V.  " M a l a y a n Rubber P r o d u c t i o n , 1960-170." N a t u r a l Rubber News, ( A p r i l 1961), p. 8 . 3  92  A comparison f o r t h e purpose of e v a l u a t i n g the r e l a t i v e e f f i c i e n c y of the two t y p e s of p r o d u c e r s may  not show  d e f i n i t e r e s u l t s owing l a r g e l y t o the p a u c i t y of d a t a , e s p e c i a l l y that r e l a t i n g to smallholdings. There are two r e a s o n s f o r the l a c k of d a t a .  There  i s f i r s t the d i f f i c u l t y o f c o l l e c t i n g d a t a from t h e s m a l l holdings.  A l s o , t h e y are not r e q u i r e d t o submit any  re-  t u r n s , w h i l e the e s t a t e s have t o submit r e g u l a r r e t u r n s t o the government.  P a r t i c u l a r l y a f t e r 1934,  r e s t r i c t i o n scheme was  introduced, the f i g u r e s f o r e s t a t e  p r o d u c t i o n , p l a n t e d and tapped a r e a s may reasonably lic  accurate.^  when the r u b b e r  be taken t o be  Moreover most of the e s t a t e s are pub-  c o r p o r a t i o n s ; i n f o r m a t i o n on w h i c h i s p u b l i s h e d i n s e v e r 5  al  sources. F o r example, i n the Rubber S t a t i s t i c s Handbook, the  best source 1.5  of i n f o r m a t i o n on t h e i n d u s t r y , t h e f i g u r e  m i l l i o n a c r e s f o r s m a l l h o l d i n g s i s s t a t e d t o be an  timate only.  of es-  I t f o l l o w s that f i g u r e s f o r y i e l d s per acre  a l s o only estimates.  are  T h e i r acreage f i g u r e s are based s o l e l y  C f . Report of the M i s s i o n of E n q u i r y i n t o the Rubber I n d u s t r y of M a l a y a . 1954, R.F. Mudie, chairman, K u a l a Lumpur, Government P r i n t e r , 1954, p. 4. ( H e r e a f t e r c i t e d as the Mudie Report). 4  5  F o r example, (a) Zorn and L e i g h h u n t , Manual of Rubber P l a n t i n g Companies. (b) F a c t s and F i g u r e s . S i n g a p o r e , F r a s e r and Co. (c) The S t r a i t s Times D i r e c t o r y . S i n g a p o r e .  93  on a r e a r e c o r d e d as " a l i e n a t e d f o r r u b b e r " , and t h e r e have been no r e g u l a r checks t o a s c e r t a i n whether r u b b e r  has  a c u a l l y been p l a n t e d . S m a l l h o l d e r s ' p r o d u c t i o n may  6  ably accurate.  be t a k e n t o be  reason-  These f i g u r e s a r e o b t a i n e d by d e d u c t i n g  e s t a t e s ' p r o d u c t i o n from t h e t o t a l net e x p o r t s a f t e r making allowances f o r l o c a l manufacturing  and s t o c k s o f e s t a t e s and  dealers. What i s ; an " e s t a t e " ?  As e s t a t e i s d e f i n e d as  l a n d s c o n t i g u o u s o r non-contiguous 100  a g g r e g a t i n g not l e s s  than  a c r e s i n a r e a , p l a n t e d w i t h rubber o r on which t h e p l a n t -  i n g of r u b b e r i s p e r m i t t e d , and under a s i n g l e l e g a l ownership.''' E s t a t e s are l a r g e r u n i t s operated w i t h c a p i t a l and employing d a i l y wage.  substantial  a l a r g e labour f o r c e i n r e c e i p t of a  The wide ranges i n t h e s i z e o f e s t a t e s i s i n d i -  c a t e d by Table XIII which a l s o shows the d i s t r i b u t i o n  by  race. I n 1956,  ( f o u r y e a r s e a r l i e r ) t h e r e were e s t i m a t e d t o  be about 393>000 s m a l l h o l d i n g s .  Mudie R e p o r t , p.  A d e t a i l e d a n a l y s i s as i n  5.  7  See F e d e r a t i o n of M a l a y a , Rubber S t a t i s t i c a l Handbook. I960. K u a l a Lumpur, Department of S t a t i s t i c s , 1961, p.3. By the same token,-a s m a l l h o l d i n g i s an a r e a c o n t i g u o u s o r non-contiguous a g g r e g a t i n g l e s s t h a n 100 a c r e s p l a n t e d w i t h rubber o r on which the p l a n t i n g o f rubber i s p e r m i t t e d and under a s i n g l e l e g a l ownership.  TABLE X I I I ESTATE ACREAGE UNDER RUBBER, I960, ANALYSED BY SIZE  GROUP  AND RACE  S i z e Group  No. o f Estat.es  Acreage  No. o f E tates s  European  Acreage  No. o f Estates  Asian  Acreage  Total 284,818  0-499  41  11,030  1418  273,788  1459  500-999  69  52,327  211  151,682  280  204,009  1000-1999  172  251,014  105  142,761  277  393,775  2000-2999  79  197,835  23  54,297  102  254,132  3000-4999  86  337,451  14  52,115  100  388,566  5000 & over  45  219,174  16,698  56  415,872  492  1,170,831  77,341  2274  1,942,172  Total  Source:  i l l 1782  Rubber S t a t i s t i c s Handbook, I 9 6 0 , K u a l a Lumpur, Department o f S t a t i s t i c s , 1 9 6 1 , Table 3 , p. 1 0 . .  95  the case of the estates i s not available. 8 lowing rough figures may be helpful.  However the f o l -  In the size group  0-25 acres there were some 3^6,321 holdings and in the size group 25-100 acres there were 6,754 holdings. The majority of the smallholding acreage i s cultivated by family labour, each operating two to five acres. They are sometimes assisted by sharecroppers, especially when rubber prices are high.  The non-Malay (that i s , Chinese  and Indian) holdings vary between ten to one hundred acre®; They are usually tapped with the help of outside labour, paid on the basis of shares or piece rates.9  The greater part of  these are owned by absentee, non-resident businessmen, artisans or tradesmen or Indian moneylenders.-^  This i s a sig-  nificant factor for i t disproves the usual idea that the smallholdings are owner-operated.  A recent survey of rubber pro-  duction on a Malay Reservation shows that absentee ownership L.A. Mills, Malaya. A P o l i t i c a l and Economic Appraisal , Minneapolis, University of Minnesota Press, 1958, p. 186. %".H. Silcock, The Commonwealth Economy of South-east Asia, London, Cambridge University Press, 1959, p. 10. P.T. Bauer, The Rubber Industry. A Study in Competition and Monopoly. London. Longmans Green..1948. p. 4. 10  96  anditenancy  a r e q u i t e common here t o o .  11  Of t h e 73.6 p e r  cent o f t h e l o t s i n p r o d u c t i o n , o n l y a v e r y s m a l l number were b e i n g operated  by t h e owners, as shown by Table X I V . TABLE  XIV  OPERATION OF THE PRODUCING FARMS  °/o o f a l l p r o d u c i n g  Operated by R e g i s t e r e d owner Owner s r e l a t i v e Tenant o r s h a r e c r o p p e r  areas  5.7 14.4 79.9  f  Source: E.K. F i s k , " P r o d u c t i v i t y and Income from an E s t a b l i s h e d Malay R e s e r v a t i o n , " Malayan Economic Review, volume 6, No. 1 (April-1961), p. 17. The  o v e r a l l degree o f tenancy on s m a l l h o l d i n g s i s n o t  known w i t h a c c u r a c y , but as t h e above t a b l e suggests be a s u b s t a n t i a l p r o p o r t i o n .  i t must  Puthuchearyl2 mentions t h a t  s e v e n t y - f i v e p e r cent o f t h e I n d i a n owned h o l d i n g s a r e o p e r a t e d by t e n a n t s o r s h a r e - c r o p p e r s .  Thus i t appears t h a t t h r e e -  q u a r t e r s o f a l l s m a l l h o l d i n g s a r e tenant  operated.  There a r e s e v e r a l reasons f o r tenancy and s h a r e - c r o p p i n g on s m a l l h o l d i n g s .  Those s m a l l h o l d i n g s which have been  E.K. F i s k , " P r o d u c t i v i t y from Rubber on an E s t a b l i s h e d Malay R e s e r v a t i o n , " Malayan Economic Review, volume 6, No. 1 ( A p r i l 1961), p. 16. 1 J . J . P u t h u c h e a r y , Ownership and C o n t r o l i n t h e Malayan Economy. S i n g a p o r e , E a s t e r n U n i v e r s i t i e s P r e s s , I960, p. 19. 2  97  p l a n t e d by shopkeepers and urban d w e l l e r s a r e o f t e n too to j u s t i f y wage l a b o u r and The  t e n a n t s here may  the s u p e r v i s i o n t h a t t h i s  entails.  be owners of n e i g h b o u r i n g h o l d i n g s  want t o augment t h e i r income. who  small  Or they may  who  be e s t a t e t a p p e r s  a r e a t t r a c t e d by the p r o s p e c t o f h i g h e r  earnings.  Such  13 t e n a n t s are m a i n l y I n d i a n o r C h i n e s e . The  e s t a t e s , e s p e c i a l l y the European owned e s t a t e s ,  a l s o d i f f e r from the s m a l l h o l d i n g s and a d m i n i s t r a t i o n . predominate."^  t a l a c c u m u l a t i o n was  r e s t was  organisation  Here "agancy houses" or s e c r e t a r i a l  At t h e b e g i n n i n g  of t h e p r o f i t s was  i n r e s p e c t of  s m a l l and  of the t w e n t i e t h  of r e c e n t o r i g i n .  century  on a l a r g e s c a l e was  capi-  A large part  r e m i t t e d t o B r i t a i n and t o C h i n a , and 15  i n v e s t e d i n mortgages and r e a l e s t a t e . ^  firms  the  Investment  p o s s i b l e o n l y through the agency houses,  which were the agents o f i n v e s t m e n t not o n l y i n the p l a n t a t i o n i n d u s t r i e s but a l s o i n the t i n mines. The  agency houses have s u b s t a n t i a l f i n a n c i a l i n t e r e s t s  i n the r u b b e r companies which t h e y c o n t r o l .  Such i n t e r e s t s  can t a k e a number of f o r m s . ; P r h a p s the most i m p o r t a n t i s e  I b i d . , p.  20.  14 F o r a h i s t o r i c a l development of agency houses or s e c r e t a r i a l f i r m s see G.C. A l l e n and A.G. D o n n i t h o r n e , Western E n t e r p r i s e i n I n d o n e s i a and Malaya.New York, M a e m i l l a n , 1957, pp. 52-58 ^Ong-Siang Song, One Hundred Y e a r s of the H i s t o r y o f S i n g a p o r e , London, John Murray, 1923, p. 116. '  98  the h o l d i n g o f shares i n t h e companies. supposed  Such h o l d i n g s a r e  t o be s u b s t a n t i a l "as has been shown by t h e s u c c e s s  of t h e agency houses i n d e f e a t i n g t h e t a k e - o v e r e f f o r t s t h a t 16 were made d u r i n g t h e Korean boom". Another form o f f i n a n c i a l i n t e r e s t i s t h e s h a r e s h e l d by r u b b e r companies, t r o l l e d by agency houses i n o t h e r r u b b e r companies.  con-  The  i n t e r e s t s and c o n t r o l l i n g powers o f such f i r m s a r e r e f l e c t e d i n the f o l l o w i n g  statement:  The i n t e r e s t s o f t h e s e c r e t a r i a l f i r m s were a l s o r e f l e c t e d t o a c e r t a i n extent i n the investment p o l i c y o f r u b b e r companies. An e x a m i n a t i o n o f company r e p o r t s and a c c o u n t s f r e q u e n t l y r e v e a l s under t h e heading 'other i n v e s t m e n t s ' l a r g e h o l d i n g s o f o t h e r p l a n t a t i o n companies. These a r e i n v a r i a b l y i n e n t e r p r i s e s managed by t h e same s e c r e t a r i a l o r agency f i r m . The l i q u i d f u n d s o f one company a r e used t o f a c i l i t a t e t h e f o r m a t i o n o f a n o t h e r company, t o ensure t h a t t h e l a t t e r w i l l be managed and i t s produce s o l d by t h e same ... f i r m . 1 ? T h i s a s p e c t o f c o - o p e r a t i o n and c o n t r o l which i s obv i o u s l y n o t found among t h e s m a l l h o l d e r s amounts t o an i n t e g r a t i o n o f almost t h e whole r u b b e r p l a n t a t i o n i n d u s t r y , and e n a b l e s c o l l e c t i v e a c t i o n t o t a k e p l a c e .  This i s best  seen i n wage n e g o t i a t i o n s , when t h e Malayan P l a n t a t i o n Indust r i e s Employers' A s s o c i a t i o n (MPIEA) a c t s i n t h e i n t e r e s t s o f  16. P u t h u c h e a r y , op. c i t  p. 33.  17 Bauer, The Rubber I n d u s t r y , pp. 11-12.  99  estate producers.  1 d  Racially however, the estate sector of the industry is not a homogenous one.  Of the 1 . 9 4 2 million acres under  estate rubber, 1 . 2 million are European owned, and the rest owned by Asians.  The fundamental difference in organisation  between them i s in the size of estates  19  and the degree of  concentration and control. Asian estate rubber i s for the most part owned by families, partnerships or private limited companies. Only twenty-five per cent of the European estates are privately owned; the rest are public companies. ^ In 2  the former there i s concentration of ownership, while in the 21  latter i t i s one of control. Production The differences in organisation between estates and 18  Other instruments for collective action are the various Planters' Associations, which enable them to take joint action against not only labour and p o l i t i c a l problems, but also to meet the challenge of an almost united body of American consumers. The Planters also support the Natural Rubber Development Board (Washington D.C.) which does a great deal of market research. 19  See Table X I I I . p.94.  •  ^Rubber Statistics Handbook, 1953. Kuala Lumpur, Department of Statistics, 1954, p. 38. 21  European estates are further subdivided into "sterling" and "dollar" companies. The distinction rests on the place of incorporation. The former are incorporated in the United Kingdom and the latter in Malaya or Singapore.  100  smallholdings are r e f l e c t e d i n the techniques which are discussed The  of production  next.  r a t i o n a l course  o f p r o d u c t i o n i s n o t t h e same f o r  e s t a t e s and s m a l l h o l d i n g s , because t h e former have s u b s t a n t i a l amounts o f c a p i t a l and employ l a r g e numbers o f l a b o u r . s m a l l h o l d e r has l i t t l e the h o l d i n g i t s e l f .  The  c a p i t a l a p a r t from t h a t r e p r e s e n t e d by  Thus t h e s m a l l h o l d e r appears t o maximise  the g r o s s y i e l d p e r a c r e w h i l e t h e e s t a t e maximises t h e r e t u r n on a l l c a p i t a l employed. I n a d d i t i o n , i f we r e g a r d t h e e s t a t e as a c o r p o r a t i o n and t h e s m a l l h o l d i n g as an i n d i v i d u a l e n t e r p r i s e , we can d i s t i n g u i s h between d i f f e r e n t g o a l s .  I n t h e case o f t h e  c o r p o r a t i o n , c a r e e r g o a l s o f managers and t h e managers' aim of c a p t u r i n g a c e r t a i n share o f t h e market may o v e r r i d e considerations of p r o f i t maximisation.  2 2  I n t h e case o f t h e  s m a l l h o l d e r maximum s a t i s f a c t i o n may be more important maximum p r o f i t s . 3 2  maximisation  Merely  than  because g o a l s o t h e r than p r o f i t  a r e p r e s e n t , i t does n o t n e c e s s a r i l y f o l l o w  t h a t behaviour  patterns are non-rational.  E s t a t e p r o d u c t i o n i s b o t h c a p i t a l and l a b o u r i n t e n s -  See W.J. Baumol, Economic Theory and O p e r a t i o n s Analysis.Englewood C l i f f s , P r e n t i c e H a l l - 1961, Chapter 10. And B u s i n e s s B e h a v i o u r . V a l u e and Growth, New Y o r k , M a c m i l l a n , 1959, Chapters 6-8. -'See T. de S c i t o v s k y , "Notes on p r o f i t m a x i m i s a t i o n and i t s i m p l i c a t i o n s " , Review o f Economic S t u d i e s , volume 11, No. 1  (1943), PP. 57-60.  101  i v e and. overhead c o s t s on e s t a t e s a r e a l s o heavy.  The  e s t a t e s m a i n t a i n an e l a b o r a t e h i e r a r c h y of o f f i c i a l s . i n c l u d e the foreman, c o n d u c t o r , v i s i t i n g agents,  These  a s s i s t a n t manager, manager,  engineers, accountants,  t h e agency house-  s e c r e t a r i a l f i r m and the board o f d i r e c t o r s . 4  On t h e s m a l l -  2  h o l d i n g t h e r e i s o n l y t h e owner o r o p e r a t o r , h i s f a m i l y , 25  sharetappers  and a headman.  The  e s t a t e a l s o r e l i e s on a  l a r g e l a b o u r f o r c e f o r t a p p i n g , weeding, and m a n u f a c t u r i n g rubber.  I t i s o b l i g e d by law t o p r o v i d e h o u s i n g ,  medical  c a r e and  other amenities f o r the labour f o r c e .  The  of  small-  h o l d e r t o o r e l i e s on o u t s i d e l a b o u r but h i s dependence i s o f a d i f f e r e n t n a t u r e and,  i n current production, i t very r a r e -  l y extends beyond t a p p i n g An e x a m i n a t i o n  operations.  2 7  of some c o s t o f p r o d u c t i o n f i g u r e s f o r  e s t a t e s r e v e a l s c e r t a i n f e a t u r e s o f the c o s t s t r u c t u r e . P.T.  Bauer has computed such c o s t s f o r the Great 28  and f o r 1 9 4 0 .  I n a r e c e n t a r t i c l e R. Ma  has  Depression  computed  ^P.T. Bauer, R e p o r t on a V i s i t t o Rubber Growing S m a l l h o l d i n g s i n M a l a y a , J u l y - S e p t e m b e r , 1 9 5 6 , London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1 9 4 $ , p. 2 2 . 2  5LOC.  cit.  26  These are d i s c u s s e d i n Chapter V on the consequences of s u b d i v i s i o n . See below p . 1 5 7 . 27  Bauer, Report on a v i s i t , p. 8 0 .  ? 8  Bauer, "Some A s p e c t s o f the Malayan Rubber Slump, Economica.N.S. volume 1 1 , No. 4 1 (November 1 9 4 4 ) , and Rubber I n d u s t r y , p. 2 7 1 . See a l s o Mudie R e p o r t . C h a p t e r 3 , pp. 8 - 1 0 . 1929-1933," pp. 1 9 0 - 1 9 8 ,  102  similar figures for 1958.  There i s a marked degree of  similarity between his (1958) and Bauer's (1940) proportions, even though the f.o.b. cost in 1940 was only 14.7 cents per pound. TABLE XV COSTS OF PRODUCTION OF ONE POUND OF ESTATE RUBBER, 1940 AND 1958 Bauer (1940)  Ma (1958) per cent  Collection etc... Upkeep,cultivation Export duty General changes . (including depreciation) Total  Source:  41  17 9 33  100  cents/lb. per, cent Collection, Processing, des-  21  41  6 9  11 17  Depreciation ....  14 2  27 4  Total  52  100  Upkeep, cultivaGeneral expendi-  Bauer, The Rubber Industry. London, Longmans Green, 1948« p. 2 7 1 . Ma, "Company Profits and Prices in the Rubber Industry in Malaya, 1947-1950" Malayan Economic Review, volume 4, No. 2 (October 1959), p. 30.  R. Ma, "Company Profits and Prices in the Rubber Industry in Malaya, 1947-1958." Malayan Economic Review, volume 4, No. 2 (October 1959), p. 3 0 .  103  From Table XV we n o t i c e t h a t the f i r s t two i n Ma's  items  f i g u r e s are m a i n l y d i r e c t l a b o u r c o s t s and c o n s t i t u t e  f i f t y - t w o per cent of t o t a l c o s t s .  E s t a t e l a b o u r c o s t s though  h i g h , have not l e d t o any i n v e n t i o n comparable t o the t i n dredge.  Labour e f f i c i e n c y over the p e r i o d 1947-1958 has r e 30 mained almost s t a b l e but wages have d o u b l e d . The output per worker can o n l y i n c r e a s e w i t h i n c r e a s i n g y i e l d s ,  since  31 there i s very l i t t l e  scope f o r m e c h a n i s a t i o n .  w i t h h i g h y i e l d i n g m a t e r i a l i s an i m p o r t a n t  Replanting way  of  reducing  costs.32 The  s i m i l a r nature  of t h e p r o p o r t i o n s o f the  two  s e t s of f i g u r e s c i t e d above, shows t h a t the c o s t s t r u c t u r e of e s t a t e s i s q u i t e r i g i d .  The  very high proportion  of  l a b o u r c o s t s and t h e almost n e g l i g i b l e scope f o r mechanisat i o n a r e l i k e l y t o keep the c o s t s t r u c t u r e f a i r l y r i g i d .  The  h i g h p r o p o r t i o n of l a b o u r c o s t s i s one f a c t o r d e t e r m i n i n g  the  response of e s t a t e p r o d u c t i o n t o changing r u b b e r p r i c e s . The  Supply of Rubber To maximise p r o f i t s , i t might appear t h a t t h e  30  strict-  T  Loc. c i t . 31 Except i n weeding, where m e c h a n i c a l methods are gradually replacing arsenite spraying. 32  Chapter.  R e p l a n t i n g i s d i s c u s s e d i n the l a t t e r p a r t of t h i s  104  ly  r a t i o n a l c o u r s e , f o r both e s t a t e s and s m a l l h o l d i n g s  would be t o v a r y t h e amount 'of t a p p i n g and hence t h e number of  workers w i t h t h e p r i c e o f r u b b e r .  But, f o r the e s t a t e  i t i s not so easy t o v a r y the amount of t a p p e r s , t o such f r e q u e n t and r a p i d changes, as those which o c c u r i n t h e p r i c e of rubber. is  B e s i d e s almost a l l the r u b b e r not tapped  irretrievably lost.  Rubber t r e e s do produce more l a t e x  a f t e r a p e r i o d of r e s t but t h i s p r a c t i c e i f extended beyond a few months r e s u l t s i n a net l o s s o f p r o d u c t .  Often, estates  have t o f u l f i l f o r w a r d c o n t r a c t s , s i n c e some are s u b s i d i a r i e s of  rubber manufacturers.  T h i s p r o c e d u r e , t o o , would p r e -  vent e s t a t e s from v a r y i n g output w i t h p r i c e s .  Hence t h e  e s t a t e s i n p a r t i c u l a r operate b o t h t h e i r p r o c e s s i n g p l a n t s and p l a n t a t i o n s t o c a p a c i t y . The h i g h f i x e d c o s t s o f e s t a t e s a r e r e f l e c t e d i n t h e response of r u b b e r p r o d u c t i o n t o marked and p r o t r a c t e d p r i c e changes,  When p r i c e s a r e f a l l i n g ' e s t a t e s show r e l u c t a n c e t o  c u r t a i l p r o d u c t i o n , s i n c e as we have seen, a h i g h p r o p o r t i o n of ion  t h e i r t o t a l c o s t s c o n s i s t s o f f i x e d c h a r g e s , and a r e d u c t o f output would r a i s e u n i t c o s t s . Although e s t a t e production' i s - h i g h l y unresponsive t o  ing  p r i c e s , c o s t s a r e more f l e x i b l e .  may  be a c h i e v e d i n maintenance  managers' s a l a r i e s . is  fall-  F o r example, economies  work, s t a f f bonuses and  To spread out t h e h i g h overheads t h e r e  some scope f o r a m a l g a m a t i o n w i t h c o n t i g u o u s e s t a t e s .  How-  105  ever, the proportion of the wage b i l l remains the same because wages are geared to the price of rubber.  The estate  also cannot economise on the services required by law.33 Thus in spite of high fixed costs certain economies can be effected even in estate costs of production. In fact, the ability of the estates to withstand the severe slump in rubber prices during the great depression shows that there i s considerable f l e x i b i l i t y in operation.34 In the^response of smallholder rubber production to changing prices, i t i s important to distinguish between two sub-categories of smallholders. Those smallholders who are solely dependent on rubber as a source of income, react differently from those who have other sources of income. The former strive to maintain a minimum cash income. Hence they may expand output with falling prices.  It i s not known  with accuracy how large a proportion of smallholders f a l l into this group, but i t i s generally believed to be less than 35 half. As for the second sub-category of smallholders, when 33j. Wilson, The Singapore Rubber Market. Singapore, Eastern Universities Press, 1958, p. 19. 3^Bauer, "Some Aspects of the Malayan Rubber Slump, 1929-1933," Economica, N . S . K . volume 11, No. 41 (November 1944), pp. 190-198. •^T.H. Silcock, The Economy of Malaya. Singapore, Donald Moore, I960, p. 22.  106  p r i c e s are low, they g r a d u a l l y c o n t r a c t output and  concen-  36  t r a t e on o t h e r The analysed The  crops.  s m a l l h o l d e r s ' response t o p r i c e changes can  i n terms of an income and a s u b s t i t u t i o n  be  effect.  a l t e r n a t i v e s i n t h i s case would be more income or more  leisure.  As i n the o r d i n a r y t h e o r y of t h e consumer, the sub-  s t i t u t i o n e f f e c t of a r i s e i n the p r i c e o f l e i s u r e w i l l make him want t o purchase l e s s l e i s u r e .  Thus the  substitution  e f f e c t w i l l tend t o i n c r e a s e h i s s u p p l y o f l a b o u r . a l s o t r a n s f e r h i s l a b o u r from o t h e r uses t o But the income e f f e c t w i l l work i n the d i r e c t i o n of t h e s u b s t i t u t i o n e f f e c t . p r i c e of r u b b e r w i l l holder.  He  rubber. opposite  An i n c r e a s e i n the  i n c r e a s e t h e r e a l income of the  F e e l i n g s u b s t a n t i a l l y r i c h e r he may  now  small-  f e e l that  can a f f o r d more l e i s u r e , though by the s u b s t i t u t i o n t h i s has become more e x p e n s i v e .  will  he  effect  Thus the income e f f e c t o f an  i n c r e a s e i n the p r i c e of r u b b e r i s l i k e l y t o be an  increased  demand f o r l e i s u r e . More p r a c t i c a l l y , the amount of work the  smallholder  i s w i l l i n g t o do depends on t h e wages b e i n g p a i d by bouring estates.  neigh-  Thus he w i l l h i r e h i m s e l f out i f wages  U n i t e d N a t i o n s , Impact o f S e l e c t e d S y n t h e t i c s on t h e Demand f o r N a t u r a l P r o d u c t s i n I n t e r n a t i o n a l Trade, New Y o r k , Department of Economic A f f a i r s , 1953, p. 61.  107  are v e r y h i g h . p r i c e s he may  On the o t h e r hand, even i n t i m e s o f  low  d e c i d e t o h i r e h i m s e l f out i f h i s m a r g i n a l  c o s t s of p r o d u c t i o n are g r e a t e r t h a n the wages b e i n g  paid  37 by the e s t a t e s .  Bauer,  makes t h e p o i n t t h a t s m a l l h o l d e r s '  c o s t s are n i l or almost n e g l i g i b l e . t h a t c o s t s s h o u l d be c o n s i d e r e d o t h e r w i s e we  S i l c o c k ^ p o i n t s out 3  i n terms of o p p o r t u n i t y c o s t s ,  get the i m p r e s s i o n t h a t the s m a l l h o l d e r i s un-  a f f e c t e d by e i t h e r the l e v e l of wages or the p r i c e s of a l t e r n a t i v e crops o r of consumer goods. Thus t h e response of s m a l l h o l d e r s t o p r i c e changes depends on whether t h e y have a l t e r n a t i v e sources  of income.  I t a l s o depends on t h e wages b e i n g p a i d by the e s t a t e s , and the v a l u e p l a c e d on l e i s u r e .  Hence i t may  be more d i f -  f i c u l t t o d e r i v e the s u p p l y curve of s m a l l h o l d e r s ' The  rubber.  observed response o f s m a l l h o l d e r s i s g e n e r a l l y  q u i c k e r t h a n t h a t of e s t a t e s .  E s t a t e and  other labour i s  a t t r a c t e d t o and from e s t a t e s i n times of h i g h e r p r i c e s by o f f e r s of s h a r e - t a p p i n g .  I t seems t h e r e f o r e t h a t  p r o d u c t i o n p l a n s are l a r g e l y o f a s h o r t run n a t u r e .  smallholder It i s  not c l e a r whether the s m a l l h o l d e r t a k e s user, c o s t i n t o consideration.  U n l i k e the s m a l l h o l d e r s , t h e e s t a t e s are r e l u c -  Bauer,. Report on a V i s i t , p. 38  22.  T.H. S i l c o c k , "A Note on the Working of the Rubber R e g u l a t i o n , " Economic J o u r n a l , volume 58 (June 1 9 4 8 ) , pp. 229230.  108  tant to resort to "slaughter tapping".  The d i f f e r e n c e s  i n e s t a t e and s m a l l h o l d e r response t o p r i c e changes a r e r e fleeted i n the following t a b l e . TABLE XVI ANNUAL PERCENTAGE CHANGES ON PREVIOUS YEARS' FIGURES IN THE PRICE AND IN MALAYAN OUTPUT OF RUBBER,  Year  Average Annual Rubber P r i c e R.S•S.L.  1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958  13.1 - 9.5 183.2 56.7 - 43.3  -  29.9  -  8.3  0.0 69.7 - 15.2  -  9.7  Malayan E s t a t e s  11.9 . - 0.7 - 6.0 -12.7 4.0 0.0 1.2 2.0 - 0.3 4.8 6.0  I948-I958  Output Smallholdings  3.0 -8.1 17.2 -12.9 -12.3 - 4.1 3.6 13.7 - 4.2 - 2.0 - 1.4  Source: R. Ma, "Company P r o f i t s and P r i c e s i n the Rubber I n d u s t r y i n M a l a y a , 1 9 4 7 - 1 9 5 8 , " Malayan Economic Review. Volume 4 , No. 2(October 1 9 5 9 ) , T a b l e 5 , p. 3 9 . The f i g u r e s show t h a t s m a l l h o l d e r s ' p r o d u c t i o n i s s l i g h t l y more e l a s t i c . Having l o o k e d a t t h e supply o f r u b b e r from e s t a t e s and s m a l l h o l d i n g s , we w i l l now t u r n t o c e r t a i n o t h e r a s p e c t s of p r o d u c t i o n , namely p l a n t i n g d e n s i t y , b a r k consumption, weeding, t h e c h o i c e o f p l a n t i n g m a t e r i a l , p r o c e s s i n g market-  109  ing, the availability of credit, and research. Planting Density Generally planting density decreases with the size of the holding.  The smallholder has less capital for production,  His aim i s to maximise output per surface area by planting 39 densely.  Closer planting also facilitates collection and  minimises the cost of transportation. The estate which employs hired labour tries to maximise the profit per acre, and the higher profit per tree, resulting from a higher yield per tapper, i s supposed to offset the reduction in gross receipts due to the lower stand.  Thus the different  planting densities are merely a reflection of different factor proportions available to the two producers of rubber. Today the smallholder i s losing the partial advantage which he derived from close planting of seedling trees, because the optimum density of high yielding 'trees i s about 40 120. Bark Consumption Another aspect of production i s that of bark consumption and bark reserves.^  1  In the case of rubber a decision  ^^Bauer, Report on a v i s i t , p. 86. ^J.B. Ooi, "The Rubber Industry in the Federation of Malaya, ' Journal of Tropical Geography, volume 15, (June 1961), p. 53. 1  ^-For details of Bauer's investigations see his Rubber Industry, especially pp. 56-59.  110  on t h e d e s i r a b i l i t y o f consuming bark r e s e r v e s i n v o l v e s t h e concept o f t h e u s e r c o s t .  The u s e r c o s t , o f a u n i t o f o u t -  put i n t h e s h o r t p e r i o d , may be d e f i n e d as t h e r e d u c t i o n i n the discounted  v a l u e o f expected f u t u r e q u a s i - r e n t s o f a  p i e c e o f equipment, t h r o u g h u s i n g i t f o r t h e p r o d u c t i o n o f t h a t u n i t o f o u t p u t , r a t h e r than l e a v i n g i t unused. v i d e s a l i n k between t h e p r e s e n t  I t pro-  and f u t u r e and i n t r o d u c e s 42  t h e element o f time i n t o t h e c o s t  curve.  43  According  t o Bauer,  t h e concept i s s i g n i f i c a n t f o r  the r u b b e r i n d u s t r y f o r two r e a s o n s . b a r k removed r e v e a l s c l e a r l y  F i r s t , t h e amount o f  the nature  o f t h e u s e r c o s t as  an o p p o r t u n i t y c o s t i n terms o f f u t u r e o u t p u t .  F o r example,  i f a t r e e i s l e f t untapped, bark r e s e r v e s w i l l be g r e a t e r , with the p o s s i b i l i t y of higher y i e l d s i n the f u t u r e . S e c o n d l y , d e c i s i o n s r e g a r d i n g t h e s c a l e o f output a r e made by p e r s o n s "more i n t e r e s t e d i n t h e c o n t i n u e d of t h e companies t h a n i n t h e m a x i m i s a t i o n  existence  of p r o f i t s " ^  Thus t h e u s e r c o s t may p r o v i d e a s u i t a b l e l i n k between t h e motives of p r o f i t maximisation 1  and t h e c o n t i n u e d  existence of  0  ^ F o r a d i s c u s s i o n o f u s e r c o s t , see A.D. S c o t t , "Notes on User C o s t , " Economic J o u r n a l , volume 6 3 (June 1953),  pp.  368-384.  ^ B a u e r , "Rubber P r o d u c t i o n C o s t s d u r i n g t h e Great D e p r e s s i o n , " Economic J o u r n a l , volume 53(December 1 9 4 3 ) , 3  pp.  33-34.  -  ^ B a u e r , The Rubber I n d u s t r y , p. 3 6 4 .  Ill  the  companies. The amount o f bark consumption depends on t h e s k i l l  of t h e t a p p e r and t h e t y p e o f t a p p i n g system adopted. d u c t i o n methods o f s m a l l h o l d e r s a r e o f t e n c r i t i c i s e d q u e s t i o n o f bark consumption, h i g h e r percentage o f t h e b a r k .  Proon t h e  s i n c e s m a l l h o l d e r s remove a Bauer^5 doubts whether as  much as f i v e p e r cent o f t h e t o t a l s m a l l h o l d i n g s were o v e r t a p p e d , except i n t h e e a r l i e s t days o f t h e i n d u s t r y .  More-  o v e r he a s s e r t s t h a t p e a s a n t s o f any r a c e o r n a t i o n a l i t y are  not l i k e l y t o r u i n t h e i r h o l d i n g s w i l l f u l l y , a t l e a s t  one which i s d i f f i c u l t t o r e p l a c e . ^  However he f a i l s t o  c o n s i d e r i g n o r a n c e , which i s perhaps t h e most i m p o r t a n t exp l a n a t i o n o f t h e maluse o f r e s o u r c e s . the  Thus i t appears t h a t  s m a l l h o l d e r does n o t t a k e i n t o c o n s i d e r a t i o n t h e u s e r  c o s t , s i n c e h i s bark consumption estates.  i s h i g h e r than that o f t h e  Consequently h i s r u b b e r t r e e s w i l l have t o be r e -  planted e a r l i e r than t h a t of e s t a t e s .  This e a r l i e r rate of  replacement may be r e g a r d e d as an a d d i t i o n a l c o s t o f production. Weeding N e g l e c t o f weeding  i s s a i d t o make t h e s m a l l h o l d e r s  Bauer, Report on a V i s i t , p. 7 7 . ' I b i d . , p. 7 5 .  112  the more e f f i c i e n t p r o d u c e r s .  Up t o the e a r l y post  war  y e a r s , e s t a t e s pursued a " c l e a n - w e e d i n g " p o l i c y , such t h a t the i n c i d e n c e of r o o t d i s e a s e was  found t o be g r e a t e r  e s t a t e s t h a n on s m a l l h o l d i n g s . ^  There i s a b e l i e f now  c o v e r c r o p s are n e c e s s a r y  on that  not o n l y t o p r o t e c t t h e s o i l from  e x c e s s i v e exposure and e r o s i o n , but a l s o t o a e r a t e and the s o i l , p r e s e r v e als.  draw  i t s s t r u c t u r e and e n r i c h i t w i t h miner-  Today e s t a t e s do p l a n t cover c r o p s .  However no  cover  crops are p l a n t e d on the Chinese and Malay s m a l l h o l d i n g s . I n s t e a d spaces between the t r e e s are p l a n t e d w i t h cash c r o p s , f o r example gambier, t a p i o c a , p i n e a p p l e s and bananas. once a g a i n d i f f e r e n t p r o d u c t i o n p r a c t i c e s of the two  Thus, units  of p r o d u c t i o n are n o t i c e d . Planting Material But none of these l i g h t f a c t o r s i s as i m p o r t a n t planting material.  as  The d i f f e r e n c e s i n y i e l d s e i t h e r between,  e s t a t e s or between e s t a t e s and  s m a l l h o l d i n g s have been s a i d  t o be due m a i n l y t o d i f f e r e n c e s i n p l a n t i n g m a t e r i a l used. S t a t i s t i c a l i n v e s t i g a t i o n ^ c a r r i e d out by t h e Rubber Research I n s t i t u t e of Malaya i n 1957  4 7  I b i d . . p.  r e v e a l e d t h a t over an  22.  ig " R e p l a n t i n g i n M a l a y a , " N a t u r a l Rubber News. (January 1957), pp. 6-8.  area  1  of  1,021,000  per acre was  113.  acres of unselected material, the average yield 355  pounds per annum. Over 446,000 acres of  high-yielding material,49 the average yield per acre was 806 pounds per annum. At the Institute's experimental station, selected clones^ gave an annual yield of 1,500 to 2,000  pounds per acre.  And, over a period of ten years of  continuous tapping, when planted on well managed estates, the yield was from 1 , 2 0 0 to 1 , 6 0 0 pounds per acre. It i s theoretically possible to obtain yields as high as  2,000  pounds per acre from selected material, but the  average yields are lowered by the fact that the replacement of old rubber i s only gradual and the high proportion of production from unselected material reduces the average y i e l d . ^ In spite of the advantages of planting selected materi a l , some smallholders continue to plant unselected seedlings. For example, as much as forty-nine per cent of the  92,000  acres of rubber planted in 1 9 5 7 were of unselected seedlings^  LQ  ^Includes a l l clonal seedlings and clones of budgrafts approved by the Rubber Research Institute. 50  A  clone i s a group of plants a l l the individuals of which are obtained by vegetative propagation from a single parent tree whether directly or by multiplication. 51 The unselected seedlings are being replaced by replanting which i s discussed in the latter part of this chapter. CO J  J.B. Ooi, op. c i t . . p.  55.  2  114  The  greatest single factor contributing to t h i s i s ignor-  ance, and not t h a t c l o n a l s e e d l i n g s are not a v a i l a b l e . The  establishment  of s u p e r i o r p l a n t i n g m a t e r i a l i s  perhaps the most i m p o r t a n t n a t u r a l rubber production.  s i n g l e b r a n c h of r e s e a r c h i n F o r a t b e s t , c o v e r crops  and  f e r t i l i z e r s can r a i s e y i e l d s o n l y up t o the c a p a c i t y o f t h e trees.  The  development of h i g h y i e l d i n g m a t e r i a l a f f e c t s  the g e n e t i c a l c o n s t i t u t i o n of t h e t r e e s . F o r each i n d i v i d u a l p r o d u c e r of r u b b e r , whether he i s l a r g e or s m a l l , the c h o i c e of p l a n t i n g m a t e r i a l i s the most important  single d e c i s i o n , since i t i s i r r e v o c a b l e .  Plant-  i n g w i t h low y i e l d i n g m a t e r i a l e n t a i l s a l o s s o f v a l u a b l e l a n d w h i c h i s u n n e c e s s a r i l y t i e d up f o r at l e a s t t h i r t y - f i v e years.  The  same p i e c e of l a n d c o u l d be made t o y i e l d e i t h e r  a h i g h e r q u a n t i t y of rubber or c o u l d have been used f o r o t h e r crops. The  f o l l o w i n g t a b l e shows t h e percentage of h i g h  y i e l d i n g rubber t o t o t a l planted acreage.  There seems t o  be some c o r r e l a t i o n between t h e s i z e of e s t a t e s and amount of h i g h y i e l d i n g m a t e r i a l .  T h i s may  the  suggest t h a t  the  l a r g e r p r o d u c e r s are the more e f f i c i e n t and a l s o b e t t e r a b l e t o t a k e advantage of r e s e a r c h i n r u b b e r .  I t a l s o suggests  a h i g h e r degree o f r e p l a n t i n g w i t h h i g h y i e l d i n g r u b b e r by the l a r g e r u n i t s . perhaps s t r e n g t h e n s  The  d i f f e r e n c e between the two r a c e groups  the view t h a t European e s t a t e s are more  115  efficient. TABLE X V I I PERCENTAGE OF HIGHER YIELDING RUBBER TO TOTAL PLANTED ACREAGE, I 9 6 0 , BY SIZE, GROUP AND RACE  S i z e Group  European 51.0  0-499 500-000 1000-1999 2000-2999 5000  72.2  37.3 51.8 59.5 63.7 62.5 67.6  67.5  44.5  58.3  64.O  & over  Total a l l Estates  A l l Estates  36.8 44.3 48.3 51.0 53.0 52.5  73.8 65.9 67.1  3000-3999  Asian  Source:  Rubber S t a t i s t i c s Handbook.  Note:  A d e t a i l e d breakdown i s found i n I b i d . , T a b l e 6 , p. 1 3 .  I960.  Table  9b,  pp.  16.  Table XVILT shows t h e c o r r e s p o n d i n g y i e l d s p e r a c r e from s e l e c t e d and u n s e l e c t e d m a t e r i a l on European and A s i a n estates. U n f o r t u n a t e l y a s i m i l a r breakdown f o r s m a l l h o l d i n g s i s not a v a i l a b l e .  F i g u r e s f o r 1 9 5 5 i n d i c a t e t h a t some s i x t y  p e r cent were o b s o l e t e , t w e n t y - f o u r p e r cent were ready f o r p l a n t i n g and t e n p e r cent were o f moderate a g e . ^ 3  L.A. M i l l s , op. c i t . , p. 1 8 6 .  On t h e  116  b a s i s o f t h e s e f i g u r e s we may say t h a t comparable y i e l d s from s m a l l h o l d i n g s would be much l o w e r , even though t h e h o l d i n g s a r e more d e n s e l y  planted.  I n c o n n e c t i o n w i t h t h e use o f h i g h y i e l d i n g p l a n t i n g m a t e r i a l , t h e e s t a t e s appear t o be more e f f i c i e n t , s i n c e t h e p r o p o r t i o n o f h i g h y i e l d i n g t r e e s i s much h i g h e r on e s t a t e s . W i t h l a r g e r c a p i t a l r e s o u r c e s , t h e e s t a t e s a r e not o n l y a b l e t o i n i t i a t e but a l s o t o t a k e advantage o f r e s e a r c h . As we have seen, t h e s m a l l h o l d e r c o n t i n u e s t o p l a n t l o w y i e l d i n g m a t e r i a l e i t h e r because o f i g n o r a n c e  or i n e r t i a .  T h i s f a c t o r can i n h i b i t t h e e f f i c i e n t development o f the^rubber industry. TABLE  XVIII  YIELDS PER ACRE FROM SELECTED AND UNSELECTED MATERIAL, I960, BY S I Z E  S i z e Group  ;  GROUP AND RACE  *  Selected M a t e r i a l  Unselected M a t e r i a l ;  European  European  Asian  Asian  0-499 500-999 1000-1999 2000-2999 3000-4999  5000 & over  962 953 9^7 943 970 945  849 930 890 859 853 616  374 612 578 559 553 452  352 355 378 366 399 305  Total  960  830  537  356  Source:  Rubber S t a t i s t i c s Handbook, I960, adapted from Table 26, p. 3 3 .  117  P r o c e s s i n g of Rubber We w i l l now t u r n to" the p r o c e s s i n g o f r u b b e r , where d i f f e r e n c e s between e s t a t e s and s m a l l h o l d i n g s are r e f l e c t e d i n t h e grades of r u b b e r p r o d u c e d . ^  Rubber produced by-  e s t a t e s i s m a i n l y R.S.S. numbers 1 and 2, w h i l e s m a l l h o l d e r s g e n e r a l l y produce R.S.S. numbers 3 t o 5.^5  The h i g h e r  grades c a r r y a premium over t h e l o w e r g r a d e s .  The e s t a t e  w i t h i t s s u p e r i o r p r o c e s s i n g f a c i l i t i e s i s a b l e t o produce a more v a l u a b l e p r o d u c t , but i n d i c a t i o n s are t h a t i f cent r a l i s e d p r o c e s s i n g f a c i l i t i e s are e s t a b l i s h e d f o r s m a l l h o l d i n g s , a " c l e a n e r " product can be produced. about 1,000  F o r example,  t o n s o f " c l e a n " r u b b e r , t h a t i s R.S.S. numbers  56  1 and 2  are now b e i n g produced w i t h communal p r o c e s s i n g  f a c i l i t i e s at f i f t y - f o u r c e n t r e s . ^ F o r the purpose o f t h i s s t u d y , the o l d s r p r a c t i c e of u s i n g Ribbed Smoked Sheet (R.S.S.) numbers 1 to'5 w i l l be used. The c r i t e r i o n i s t h e degree of i m p u r i t y i n t h e s h e e t . S i n c e 1961 r u b b e r has been i n t e r n a t i o n a l l y c l a s s i f i e d i n t o t w e l v e g r a d e s . F o r d e t a i l s see, "Malayan Rubber C o n f e r ences," The Times Review o f I n d u s t r y . F e b r u a r y 1961, p. 69. 55  Great B r i t a i n , C o l o n i a l O f f i c e , An Economic Survey of t h e C o l o n i a l T e r r i t o r i e s , volume 5. The F a r E a s t e r n T e r r i t o r i e s . London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1955, p. 21. 56  The d i f f e r e n c e between R.S.S. 2 and 3 was t h e n 10 c e n t s a pound. " G o o d , C l e a n Rubber t h e Main Aim," N a t u r a l Rubber News, F e b r u a r y 1961, p. 15, and " I m p r o v i n g - S m a l l h o l d e r s ' Rubber," Rubber Developments.volume 13, No. 3 (Autumn I960), p. 78. 57  118  There i s no d e n y i n g t h a t s m a l l h o l d e r s can produce h i g h e r grades o f rubber i f they a r e p r o v i d e d w i t h t h e f a c ilities.  I f t h i s i s done, i t may g i v e t h e s m a l l h o l d i n g s  an advantage over t h e e s t a t e s , b u t economic t r e n d s appear t o i n d i c a t e t h a t t h e e s t a t e s may be a b l e t o secure f u r t h e r advantages.  The t r e n d towards t e c h n i c a l l y c l a s s i f i e d  rubber  and t h e e x p o r t o f l a t e x f a v o u r s e s t a t e s . 5 8 The f o l l o w i n g t a b l e i n d i c a t e s t h a t t h e r e i s a d e f i n i t e t r e n d towards t h e e x p o r t o f l a t e x a s opposed t o t h a t o f smoked  sheet. TABLE ,XIX " MALAYA, EXPORTS OF RIBBED SMOKED SHEET AND LATEX, 1950-1960  Ribbed Smoked Sheets  Year  74.6  548.0 483.O  1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 I960  61.0 47.2 73.8  439.8  398.4 382.6  402.2 406.8 376.7 406.8 462.7 443.5  93.3  111.3 90.1  107.4  114.9 129.9  113.9  Rubber S t a t i s t i c s Handbook, I960, adapted from Table 33, p. 40.  Source:  3  pp.  Latex  9-10.  S i l c o c k , The Commonwealth Economy o f S o u t h - e a s t A s i a ,  11.9-  I n t h e p r o c e s s i n g of r u b b e r t h e r e appear t o be d e f i n i t e economies o f s c a l e .  T h i s g i v e s t h e e s t a t e s , the  l a r g e r u n i t s of p r o d u c t i o n , an advantage not o n l y i n terms of lower c o s t s of p r o d u c t i o n but a l s o i n terms of a h i g h e r grade of rubber. for  A few s u c c e s s f u l c e n t r a l i s e d f a c i l i t i e s  s m a l l h o l d e r s have been e s t a b l i s h e d r e c e n t l y .  Until  such time t h a t a l l s m a l l h o l d i n g rubber i s produced t h u s , e s t a t e s w i l l c o n t i n u e t o be more e f f i c i e n t i n the of  the  processing  rubber.  Marketing  of Rubber  The m a r k e t i n g sideration.  of r u b b e r i s the n e x t p o i n t f o r con-  The m a r k e t i n g  on by agency houses.  of e s t a t e r u b b e r i s c a r r i e d  Here no i n t e r m e d i a r y i s needed.  b e r , (and a l s o o i l palms and  Rub-  c o c o n u t s ) are u s u a l l y t r a n s -  p o r t e d d i r e c t from e s t a t e s t o s h i p s on the i n s t r u c t i o n s of the managing a g e n t s .  One  r e a s o n f o r t h i s t y p e of i n t e g r -  a t i o n i s t h a t t h e use of i n t e r m e d i a r i e s and hence of the 59  p r i c e mechanism i n v o l v e s a c o s t . G e n e r a l l y o n l y a l i m i t e d degree of f u r t h e r v e r t i c a l i n t e g r a t i o n e x i s t s i n the e s t a t e s e c t o r of the i n d u s t r y . There are two i m p o r t a n t  N.S.  exceptions.  Dunlop, p r o b a b l y  the  -^See R.H. Coase, "The Nature of the F i r m , " Economica. volume 4, No. 16 (November 1937), pp. 390-391.  120  w o r l d ' s most important  consumer o f r u b b e r ,  e r a t e s some 75,000 a c r e s o f r u b b e r . a purchasing The  owns and op-  I n a d d i t i o n t h e y own  s u b s i d i a r y , which buys, packs and s h i p s  rubber.  o t h e r example i s the U n i t e d S t a t e s Rubber Company, w h i c h  owns 27,000 acres.°° I n t e r m e d i a r i e s are however, n e c e s s a r y of s m a l l h o l d e r s ' r u b b e r .  f o r the sale  The c o l l e c t i o n o f produce s t a r t s  a t t h e v i l l a g e shops w h i c h s e l l t o the d e a l e r s i n towns. These i n t u r n s e l l t o the e x p o r t e r s ' a g e n t s , who s h i p t h e produce. credit  The c o u n t e r p a r t o f t h i s m a r k e t i n g  chain i s the  chain.^ S i n c e the use o f i n t e r m e d i a r i e s i n v o l v e s a c o s t , t h e  l a r g e r t h e number o f i n t e r m e d i a r i e s the h i g h e r i s t h e of m a r k e t i n g .  Thus the s m a l l h o l d e r p r o b a b l y  receives a  lower p r i c e f o r a comparable grade o f r u b b e r t h a n t h e tate.  cost  es-  Hence i n terms o f the p r i c e r e c e i v e d f o r r u b b e r , t h e  e s t a t e i s the more e f f i c i e n t . The  A v a i l a b i l i t y of credit Next we s h a l l d i s c u s s t h e q u e s t i o n o f c r e d i t , where  P u t h u c h e a r y , op. c i t . , p. 60. For a d e s c r i p t i o n o f t h i s see, T.H. S i l c o c k , "From p i r a c y t o C r e d i t , " T.B. Lim, ed. Problems o f t h e Malayan Economy. S i n g a p o r e , Donald Moore, 1956, pp. 29-30.  t -  121  the e s t a t e s a r e a g a i n i n a somewhat advantageous p o s i t i o n . Where t h e e s t a t e s a r e p u b l i c companies, t h e i r a s s e t s can be exchanged i n t h e form o f shares and t h e y have ready t o t h e l o a n market.  access  But a s s e t s l i k e s m a l l h o l d i n g s can o n l y  be bought and s o l d as a whole.  The b u y i n g , s e l l i n g , and  l e a s i n g of p h y s i c a l assets i n small scale a g r i c u l t u r e are h i g h l y i n d i v i d u a l i s t i c t r a n s a c t i o n s . Loans a r e a g a i n h i g h l y individualistic transactions.  Both t h e amount and t h e p r i c e  a r e c l o s e l y r e l a t e d t o t h e borrower's  assets.  borrow i s f o r t h e most p a r t p e r s o n a l s e c u r i t y .  Security to Besides  l i m i t i n g t h e amount o f t h e l o a n , t h e v a l u e o f h i s a s s e t s i n f l u e n c e t h e r a t e of i n t e r e s t , because t h e s e r a t e s g e n e r a l l y 62 increase w i t h the r a t i o of the l o a n t o the a s s e t . However, even t h e e s t a t e has some l i m i t a t i o n s on i t s powers t o r a i s e funds f o r e x p a n s i o n .  I n a t t e m p t i n g t o ob-  t a i n c a p i t a l by t h e i s s u e o f s h a r e s , i t has t o meet competitive pricing conditions.  I t has t o m a i n t a i n a b a l a n c e  between d i v i d e n d s and r e - i n v e s t m e n t  o f funds i n such a way  as t o keep i t s s h a r e h o l d e r s s a t i s f i e d .  I n determining the  l e v e l o f r e t a i n e d e a r n i n g s , i t s l o n g term o b j e c t i v e s a r e i n volved.  T h i s w i l l be determined  i n such a way as t o a c h i e v e  I n Malaya t h e v i l l a g e shopkeeper p r o v i d e s t h e l o a n s to the c u l t i v a t o r t o d e l i v e r a s p e c i f i c q u a n t i t y of the produce t o h i m .  122  a balance  between i t s c u r r e n t f i n a n c i n g needs and t h e e f -  f e c t o f i t s d i v i d e n d h i s t o r y on t h e a v a i l a b i l i t y o f cash i n the f u t u r e .  T h e o r e t i c a l l y , i t w i l l choose a p r o d u c t i o n  p l a n which maximises t h e c a p i t a l i s e d p r e s e n t v a l u e o f t h e  63 stream o f expected  sales.  On t h e whole however, e s t a t e s have e a s i e r a c c e s s t o c r e d i t t h a n do s m a l l h o l d e r s .  This f a c t o r enables the es-  t a t e s t o expand p r o d u c t i o n , u n d e r t a k e r e p l a n t i n g , adopt new techniques- r a t h e r more e a s i l y t h a n t h e s m a l l h o l d e r s who have t o depend l a r g e l y on t h e i r own r e s o u r c e s w h i c h a r e l i m i t e d as i t i s . Research W i t h r e s p e c t t o r e s e a r c h and i t s a p p l i c a t i o n , t h e agency houses serve a u s e f u l purpose. I t i s v i r t u a l l y impossible f o r i n d i v i d u a l est a t e managers t o keep a b r e a s t o f t e c h n i c a l p r o g r e s s by c o n s t a n t r e a d i n g o f t h e p u b l i c a t i o n s of r e s e a r c h s t a t i o n s . I n p r a c t i c e these a r e r e a d and s i f t e d by t h e p l a n t i n g a d v i s e r s ( v i s i t i n g agents) o f t h e agency houses and m a t e r i a l o f v a l u e t o e s t a t e s i n t h e group i s embodied i n l e t t e r s c i r c u l a r i s e d t o a l l managers, who a r e a l s o by t h e same method t o l d o f t h e p r o g r e s s w i t h i n t h e group.64 T h i s f e a t u r e i s absent i n the s m a l l h o l d i n g s e c t o r o f t h e  ^ S e e W.J. Baumol, B u s i n e s s B e h a v i o u r , Growth, Chapter 6.  Value and  64Bauer, The Rubber I n d u s t r y , pp. 274-275.  123  i n d u s t r y , although  i t i s t r u e t h a t t h e Rubber Research  I n s t i t u t e through i t s Smallholders' Advisory  Service  a t t e m p t s t o p r o v i d e a c e r t a i n amount o f i n f o r m a t i o n ^ t o the s m a l l h o l d e r s on p l a n t i n g m a t e r i a l , weed and p e s t control.  The a t t e m p t s t o a p p l y r e s e a r c h a r e h i n d e r e d by prob-  lems of l i t e r a c y . probably  From t h e p o i n t o f view o f numbers, i t i s  e a s i e r t o a p p l y and c i r c u l a t e i n f o r m a t i o n on new  developments t o 2,274 e s t a t e s t h a n t o 393,166 s m a l l h o l d i n g s . The e s t a t e s have l a r g e r c a p i t a l r e s o u r c e s b o t h t o i n i t i a t e 66 and a p p l y r e s e a r c h . taken i n p e r s u a d i n g  And, as S i l c o c k  p o i n t s o u t , the time  and t e a c h i n g t h e s m a l l h o l d e r s t o use new  methods g i v e s the e s t a t e s a l e a d . Replanting We now t u r n t o r e p l a n t i n g .  R e p l a n t i n g i s analogous  t o t h e replacement o f c a p i t a l on a f a c t o r y , and t h e a b i l i t y t o r e p l a n t when t h e t r e e s become o b s o l e t e , i s one measure of e f f i c i e n c y i n t h e l o n g r u n .  B e s i d e s as we have seen r e -  p l a n t i n g w i t h h i g h y i e l d i n g m a t e r i a l g i v e s a d e c i d e d advantage. We have a l r e a d y shown t h a t t h e p r o p o r t i o n o f h i g h  'Tor t h e e f f i c a c y o f t h i s s e r v i c e , see Bauer, The Rubber I n d u s t r y . p p . 276-2$5, and Bauer, R e p o r t on a V i s i t , pp. 40-47. ' S i l c o c k , The. Economy o f M a l a y a , p. 26.  124 y i e l d i n g m a t e r i a l i s g r e a t e r on e s t a t e s t h a n on s m a l l h o l d ings.  T a b l e XX c o r r o b o r a t e s t h i s and shows a l s o t h e a c r e a g e  of r u b b e r new p l a n t e d and r e p l a n t e d d u r i n g t h e l a s t decade. TABLE XX AREA REPLANTED AND NEW PLANTED BY ESTATES AND SMALLHOLDINGS, 1951-1960  Year 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960  Estates 72.6 58.6 34.2 45.9 67.3 93.0 91.8 78.6 82.4 97.5  Smallholdings  Total  9.3 11.0 35.8 25.9 33.4 59.6 61.1 70.0 97.6 76.0  81.9 69.6 70.0 71.8 100.7 152.6 152.9 149.1 180.0 173.5  S o u r c e : "Rubber P r o d u c e r s ' C o u n c i l I960 R e p o r t , " N a t u r a l Rubber News. May 1961, p. 1. For both e s t a t e s and s m a l l h o l d i n g s t h e f i g u r e s show a marked i n c r e a s e s i n c e 1955.  This i s s i g n i f i c a n t f o r the  government and r e l a t e d r e p l a n t i n g schemes r e a l l y became e f f e c t i v e at that date.  However, a t t h e end o f I960, about  f i f t y - t w o p e r cent o f t h e 3.5 m i l l i o n a c r e s under r u b b e r  still  remained under o l d s e e d l i n g t r e e s ; f o r t y p e r cent o f t h e e s t a t e acreage and s i x t y - s e v e n p e r cent o f t h e s m a l l h o l d i n g acreage made up t h i s f i f t y - t w o p e r c e n t . ^  7  Thus t h e r e -  6?"Rubber P r o d u c e r s ' C o u n c i l , I960 R e p o r t , " N a t u r a l Rubber News. May 1961, p. 2.  125  p l a n t i n g performance of the s m a l l h o l d i n g s i s f a r behind  that  of the e s t a t e s . ^ There are b o t h economic and t e c h n i c a l d i f f i c u l t i e s 69  i n r e p l a n t i n g the v e r y s m a l l s m a l l h o l d i n g s .  I t i s said  t o be d i f f i c u l t f o r s m a l l h o l d i n g s of l e s s t h a n t w e n t y - f i v e a c r e s t o r e p l a n t because t h e y l a c k the r e s o u r c e s t o pay f o r not o n l y t h e heavy e x p e n d i t u r e  i n v o l v e d , but a l s o t o  forego  the l o s s of income r e s u l t i n g from the f e l l i n g of o l d t r e e s . R e p l a n t i n g would i n v o l v e a l o s s of income f o r a t l e a s t s i x y e a r s and a reduced income from the next s i x , u n t i l t r e e s reach m a t u r i t y .  The g r a n t s g i v e n under the  schemes cover the c o s t of r e p l a n t i n g but do not  the  Replanting  compensate  the s m a l l h o l d e r f o r the l o s s of income. The  second r e a s o n f o r s m a l l h o l d e r s ' i n a b i l i t y t o r e -  p l a n t i s the t e c h n i c a l i m p o s s i b i l i t y of r e p l a n t i n g s u c c e s s f u l l y p a r t of a h o l d i n g of o n l y a few a c r e s .  The  areas  I t i s q u i t e i n t e r e s t i n g t o note h e r e , the p r o g r e s s of r e p l a n t i n g i n I n d o n e s i a . Here government owned e s t a t e s ( t h e r e are none i n Malaya) are e x t e n s i v e l y r e p l a n t e d , but they are o n l y a s m a l l p a r t of the t o t a l . P r i v a t e l y owned e s t a t e s have done l i t t l e r e p l a n t i n g , the c h i e f reason b e i n g t h e u n s t a b l e p o l i t i c a l c o n d i t i o n s . I n many c a s e s , l e a s e s g r a n t e d by the Dutch are about t o e x p i r e and i t i s d o u b t f u l whether they w i l l be renewed. F o r e i g n owned e s t a t e s a l s o f a c e the t h r e a t of n a t i o n a l i s a t i o n . See L.A. M i l l s , o p . c i t . , p. 1 7 6 . Cf. Mudie R e p o r t . C h a p t e r  6,  pp.  24-34  126 r e p l a n t e d would be c l o s e l y surrounded by mature t r e e s w h i c h i n t e r c e p t t h e s u n l i g h t and t h e r o o t s of w h i c h compete f o r 70 f o o d w i t h the undeveloped r o o t l e t s . Root c o m p e t i t i o n may be reduced o r p o s s i b l y e l i m i n a t e d by c u t t i n g i s o l a t i o n 71 drains.  But t h i s e n t a i l s an a d d i t i o n a l c o s t .  Small-  h o l d e r s p r a c t i c e a rough and ready system o f r o t a t i o n ,  tap-  p i n g and r e s t i n g i n d i v i d u a l t r e e s and not an a r e a , as the e s t a t e s do.  They a r e t h e r e f o r e unable t o r e p l a n t p a r t of an  a r e a and t o t a p the r e s t . little  or no r e s e r v e l a n d .  Smallholdings  u n l i k e e s t a t e s have  I f t h e y do have any, i t i s un-  l i k e l y t o be vacant and would be p l a n t e d w i t h f r u i t t r e e s or other  crops. Of the s m a l l amount of r e p l a n t i n g on  smallholdings,  a l a r g e p r o p o r t i o n has been t h a t o f Chinese and smallholders.  Indian  U n l i k e t h e M a l a y s , t h e y not o n l y own a number  of h o l d i n g s but a l s o own l a r g e r s m a l l h o l d i n g s , and hence can forego  some income from t h o s e h o l d i n g s w h i c h a r e b e i n g r e -  planted. The percentage o f e s t a t e r e p l a n t i n g i s h i g h e r t h a n that of smallholdings. estates? 7 0  7 1  What i s t h e system f o l l o w e d by t h e  Some e s t a t e s have developed t h e p r a c t i c e o f B a u e r , The Rubber I n d u s t r y , p. 174. B a u e r , Report on a V i s i t , p. 2 5 .  charg-  127  ing  a g a i n s t revenue each yearly a sum e q u a l t o the c u r r e n t  c o s t of r e p l a n t i n g t h r e e t o t h r e e and a h a l f per c e n t .  7 2  The r u b b e r t r e e i s u n p r o d u c t i v e f o r t h e f i r s t s i x o r seven y e a r s of i t s l i f e .  The c o s t of c l e a r i n g , p l a n t i n g and  b r i n g i n g i t t o m a t u r i t y are w r i t t e n o f f over t h e l i f e of the t r e e ( t h i r t y - f i v e y e a r s ) , so t h a t a fund can be p r o v i d e d f o r i t s replacement.  I f a t h r e e p e r cent r a t e o f r e p l a n t i n g i s  used then t h e whole stand i s renewed every t h i r t y - t h r e e years.  At any t i m e , twenty-one per cent o f t h e p l a n t e d a r e a  would be immature.'''  3  Replacement o f r u b b e r i s analogous t o t h e r e p l a c e ment of c a p i t a l . 7 4 ference.  However, t h e r e i s a s i g n i f i c a n t  dif-  The c o n s t r u c t i o n of f i x e d c a p i t a l equipment a t  c e r t a i n d a t e s or d u r i n g c e r t a i n s h o r t p e r i o d s o f time g i v e s r i s e t o r e c e i v i n g outbursts of investment.  I n t h e case of  r u b b e r , t h e "renewal of c a p i t a l " i s r e f l e c t e d i n t h e f a l l i n p r o d u c t i o n and e x p o r t s . The t h r e e per cent r a t e o f r e p l a n t i n g g e n e r a l l y adv o c a t e d seems t o make no a l l o w a n c e f o r v a r i a t i o n s i n p r i c e s , c o s t s and o t h e r c o n d i t i o n s , economic o r non-economic.  It  ^ M u d i e R e p o r t , p . 9 . A fund f o r r e p l a n t i n g i s p r o v i d e d from the " R e s e r v e s " and " o t h e r i n v e s t m e n t s " o f t h e e s t a t e . 2  73  F o r d e t a i l s of t h e r e p l a n t i n g p r a c t i c e s of e s t a t e s , see Mudie R e p o r t , C h a p t e r 5, pp. 1 4 - 2 3 . 74 C f . C. von H a b e r l e r , P r o s p e r i t y and D e p r e s s i o n . Cambridge, Harvard U n i v e r s i t y P r e s s , 1958, pp. 8 9 - 9 2 .  123  may  represent  a s u i t a b l e s o l u t i o n f o r t h e economy as a  but  not f o r the i n d i v i d u a l  producer.  Whatever t h e system  of r e p l a n t i n g adopted,  the fact  remains  that  i t i s easier f o r estates  to replant,  possess  both  the land  f o r the purpose.  replanting rubber costs  increases  of production. on e s t a t e s  for  estate  rubber.  efficient  about  twofold,  The h i g h e r  rubber  to the fact that  seedling trees, with  output  ing  more  and t h e c a p i t a l  of obsolete,  Thus t h i s  the estates  high  they The  lowers  of high  costs  i s another  since  yielding  and hence  percentage  r e s u l t s i n lower  producers  whole,  of  yield-  production  factor contributing  on t h e w h o l e  appear  t o be t h e  of rubber.  Summary In this production and  c h a p t e r we  have been  o f r u b b e r by two t y p e s  the smallholdings.  e a c h , we  estates  appear With  the fees  have  estate  and r e p l a n t i n g .  t o be t h e more e f f i c i e n t  respect  to organisation,  I n t h e case ,  producers  costs  houses have been t h e agents crops but also  Under t h e broad  that the of rubber.  i t was n o t i c e d  s e c t o r , agency houses predominate. fixed  estates  o f i n v e s t i g a t i o n have  come t o t h e r e c u r r i n g c o n c l u s i o n  add t o t h e h i g h  plantation  with the  of producers, the  The m a i n p o i n t s  been o r g a n i s a t i o n , p r o d u c t i o n , of  concerned  that i n  Agency  house  o f e s t a t e s , but t h e agency  o f much  investment, not only i n  i n t i n mining.  heading  of .production,  the following  129 a s p e c t s were examined:  the s u p p l y o f r u b b e r ,  p l a n t i n g dens-  i t y , bark consumption, weeding, c h o i c e of p l a n t i n g , m a t e r i a l , processing, marketing, I t was  a v a i l a b i l i t y of c r e d i t and  n o t i c e d t h a t one o f the i m p o r t a n t  e s t a t e s and  s m a l l h o l d i n g s was  costs of production.  research.  d i f f e r e n c e s between  t h a t e s t a t e s have h i g h e r  Although  fixed  the s m a l l h o l d i n g s have the  advantage of f l e x i b i l i t y and lower c a p i t a l c o s t s , t h e y l a c k the knowledge and the t e c h n i q u e s tates.  o f p r o d u c t i o n of the  es-  On e s t a t e s the s c i e n t i f i c management of l a n d ,  the development of improved v a r i e t i e s and p r o c e s s i n g techn i q u e s , t o g e t h e r w i t h r e c r u i t i n g , h o u s i n g and  supervising  l a b o u r are handled i n a manner comparable w i t h the methods employed by l a r g e s c a l e i n d u s t r i a l e n t e r p r i s e s . e n t e r p r i s e s , e s t a t e s are a b l e t o s p e c i a l i s e .  Like  these  Specialisation  r e s u l t s i n higher p r o d u c t i v i t y . I n r e l a t i o n t o r e p l a n t i n g , i t was planting i s economically smallholdings.  observed t h a t r e -  and t e c h n i c a l l y u n f e a s i b l e f o r  E s t a t e s are t h e r e f o r e i n an advantageous  p o s i t i o n i n t h i s connection E s t a t e s and  once a g a i n .  s m a l l h o l d i n g s have c o e x i s t e d ever  the i n c e p t i o n of the r u b b e r i n d u s t r y i n M a l a y a , the l e a d i n g , w i t h the s m a l l h o l d e r s e m u l a t i n g .  c h a p t e r s , we  estates  P o l i t i c a l l y , how-  ever the t i d e has t u r n e d a g a i n s t the e s t a t e s . two  since  I n the next  d i s c u s s r e c e n t developments, the "break-up"  of e s t a t e s and the c r e a t i o n of t h e Land Development A u t h o r i t y , both of which a r e c r e a t i n g a t r e n d towards more s m a l l h o l d i n g s .  CHAPTER THE  "BREAK-UP" OF  Invthis c h a p t e r ment i n l a n d (The  period  1959).  use,  the  We  RUBBER ESTATES  we. p r o p o s e t o s t u d y a r e c e n t "break-up" of rubber  under c o n s i d e r a t i o n  T h i s development  economy o f  V  be  are  concerned with  divided  into three  e s t a t e s which r e p r e s e n t s s u b d i v i d e r s who fects  of  (1)  new  for i t s effects  on  the  the  various  broad the  represent  in size.  sections;  supply  the  aspects  of  This  the  of l a n d ;  rubber chapter  selling  the  of  buyers  demand f o r - l a n d ; and  and  the  ef-  (a)  an  subdivision.  Definition  estate  to March  Malaya.  e s t a t e s w h i c h have been d i m i n i s h i n g can  estates."'"  i s J a n u a r y 1956  i s important  develop-  o f Terms Used Break-up of a r u b b e r e s t a t e  i s sold  owner(s),  as (b)  a w h o l e and  this  parts  estate  o f an  occurs  area  when  i s subdivided  are  sold  to  by  the  different  buyers. (2) inology  Subdivision  of the  Land O f f i c e ,  a particular  title  issue  titles  o f new  For the Appendix I I .  can  occur  i n two  ways.  I n the  s u b d i v i s i o n takes place  i s surrendered i n i t s place.  method o f d a t a  t o the  when  government f o r  T h i s can  collection  term-  only take  and  the  place  i t s scope  see  131  place a f t e r a resurvey of the land.  Subdivision takes  p l a c e when (a) t h e o r i g i n a l owner o f an e s t a t e s u b d i v i d e s h i s e s t a t e f o r a s p e c i f i c purpose, f o r example, r e p l a n t i n g , (b) when t h e e s t a t e o f a deceased p e r s o n i s d i v i d e d among his beneficiaries. The terms o f s u b d i v i s i o n and f r a g m e n t a t i o n a r e g e n e r a l l y used i n t e r c h a n g e a b l y , p a r t i c u l a r l y i n government and o t h e r p u b l i c a t i o n s . F o r our p u r p o s e s , t h e term subd i v i s i o n o n l y w i l l be u s e d . between t h e t w o .  For there i s a d i s t i n c t i o n  The p r o c e s s o f d i v i d i n g up a p i e c e o f  2  land i s c a l l e d s u b d i v i s i o n . Fragmentation  o c c u r s when  p i e c e s o f l a n d on p a r t i c u l a r farms a r e s c a t t e r e d .  Hence  f r a g m e n t a t i o n as a concept r e l a t e s t o o p e r a t i o n , w h i l e subd i v i s i o n r e f e r s t o ownership.  The d i s t i n c t i o n i s s i g n i f i c -  a n t , because t h e d a t a t h a t i s a v a i l a b l e ( a l t h o u g h i t i s o f a l i m i t e d n a t u r e ) i s on s u b d i v i s i o n . F r a g m e n t a t i o n ably widespread,  i s prob-  but i t s e x t e n t i s not known w i t h any de-  3 gree o f accuracy.  See U.A. A z i z , "Land D i s i n t e g r a t i o n and Land P o l i c y i n M a l a y a , " Malayan Economic Review.volume 3 , No. 1 ( A p r i l 1 9 5 8 ) , p. 2 3 . See a l s o B.O. B i n n s , The C o n s o l i d a t i o n o f Fragmented A g r i c u l t u r a l H o l d i n g s . Washington, D.G., Food and A g r i c u l t u r a l O r g a n i s a t i o n , ' 1950, p. 5 .  3  ^For examples o f f r a g m e n t a t i o n i n o t h e r c o u n t r i e s , see U n i t e d N a t i o n s , Land Reform. New Y o r k , Department o f Economic A f f a i r s , 1951, pp. 1 1 - 1 2 .  1  132 The  Sale of Rubber E s t a t e s The  1957  s e l l i n g of rubber e s t a t e s was a t i t s peak i n  and 1 9 5 8 , t h a t i s the immediate p r e - and p o s t - i n d e -  pendence p e r i o d s .  Two types o f s a l e can be d i s t i n g u i s h e d :  when a whole rubber e s t a t e i s s o l d and when p o r t i o n s o f an e s t a t e are s o l d .  The d i s t i n c t i o n i s s i g n i f i c a n t , f o r the  reasons f o r t h e i r s a l e a r e d i f f e r e n t .  The former w i l l be  d e a l t w i t h f i r s t , the reasons f o r which may be termed p o l i t i c a l and economic. TABLE  XXI  NUMBER OF ESTATES SOLD, 1 9 5 6 - 1 9 5 8  Estates Sold Year  "Sterling"  Total "Dollar"  1956 1957 1958  10 23 20  2 2 3  12 25 23  Total  53  7  60  Source:  ( 1 ) Zorn and Leigh-Hunt, Manual of Rubber P l a n t ing Companies. London, 1 9 5 6 - 1 9 5 9 . (2)  It  F r a s e r and Co., F a c t s and F i g u r e s . Singapore, 1956-1958.  i s evident  number o f " s t e r l i n g " ^  from Table XXI t h a t a r e l a t i v e l y  large  e s t a t e s were s o l d during t h e f i r s t  year  The d i s t i n c t i o n between " s t e r l i n g " and " d o l l a r " companies r e s t s on the p l a c e of i n c o r p o r a t i o n . The former are i n c o r p o r a t e d i n the United Kingdom and t h e l a t t e r i n Malaya or Singapore.  133  and  a h a l f of Malaya's independence.  B r i t i s h investors  were n a t u r a l l y a n x i o u s about the s e c u r i t y of t h e i r i n v e s t ments.  T h i s s e l l i n g - o f f has a l s o o c c u r r e d  i n o t h e r coun-  t r i e s on the achievement of independence, f o r example  Ceylon.  F e a r of p o l i t i c a l d i s p o s s e s s i o n by n a t i o n a l i z a t i o n , or o f h a v i n g p r o f i t s p r a c t i c a l l y e x t i n g u i s h e d by h e a v i e r t a x a t i o n was  another f a c t o r r e s p o n s i b l e f o r s a l e s .  s a l e s was  The  aim of such  t o move c a p i t a l t o a more secure p l a c e , f o r example  t o A f r i c a , where s u i t a b l e l a n d and  l a b o u r are a v a i l a b l e .  T h i s c o n c e r n over p o l i t i c a l changes l e d t o i n v e s t m e n t i n n 8 N i g e r i a . ' F i f t e e n r u b b e r companies w i t h e s t a t e s i n M a l a y a have i n v e s t e d more than $2 m i l l i o n i n N i g e r i a . 9  Malaya became independent on August 31,  These  1957.  S i n g a p o r e S t a n d a r d , 4 June 1958, p. 7. (Note: i t i s g e n e r a l l y not p o s s i b l e t o g i v e a r t i c l e t i t l e s , because a g r e a t d e a l of the r u b b e r news i s r e p o r t e d under Company news, on the F i n a n c i a l page.)  7  " $ 2 m i l l i o n Investment i n N i g e r i a , " S t r a i t s Times. 21 June, 1957, p. 7. A r u b b e r company may 9  own'several e s t a t e s .  The I l l u s h i n e s t a t e s a t Oban, N i g e r i a , are a j o i n t v e n t u r e between B r i t i s h f i r m s and t h e E a s t e r n Region Development C o r p o r a t i o n of N i g e r i a . The companies are n e g o t i a t i n g w i t h the Western Region Development Board and t h e C o l o n i a l Development C o r p o r a t i o n f o r the e s t a b l i s h m e n t o f a r u b b e r e s t a t e of some 8,500 a c r e s i n the I l l u s h i n p r o v i n c e . See (1) I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development, The Economic Development of N i g e r i a . B a l t i m o r e , John H o p k i n s , 1955, p. 2 4 ; (a) E . J . O l i v e r , Economic and Commercial Cond i t i o n s i n N i g e r i a , Overseas Economic S u r v e y s , London, H.M. S t a t i o n e r y O f f i c e , 1957, p. 20.  TABLE X X I I ANALYSIS OF THE ACREAGES OF SOME ESTATES 3 OLD  Name o f E s t a t e s  Total Acreage  Acreage Under Old Rubber  l.New Columbia Estate  2,782.5  1,224.5  44.1  2.Sg.Purun E s tate  1,414  838  59.3  389  28.1  114  3.Burseh E s t a t e  1,271  923  75.0  205  13.7  143  4.Sempah E s t a t e  2,125  1,158  59.2  773  31.7  194  5.Tepah E s t a t e *  2,430  1,505  62.0  457  18.8  256  10.5  6.Jimoh E s t a t e *  1,030  637  61.8  221  21.5  119  11.6  7.Changkat S e r dang E s t a t e  1,028  429  41.7  212  20.6  238  23.2  149  339  35.4  312  42.5  275  28.6  34  3,793  3,027  79.8  610  16.1  156  4.1  Average p e r E s 1,868 tate incorporated locally,  1,131  60.6  466  24.9  214  B.Hamilton E s tate* 9.F.M.S. Rubber Planters Estate  960  per cent  Under Mature budgraftRubber 1,018.75  per cent  Under Immature rubber  36.7  427  per cent  -Reserves etc.  per cent  16.2  112.25  4.0  8.1 11.3 9.1  11.5  63  212 53  69  iS o u r c e : ( l ) Zorn and L e i g h - H u n t , Manual o f Rubber P l a n t i n g , x Companies, 1956-1959. (2) r r a s e r and u o . ~ F a c t s and Figuree,1956-1959.  4.5  8.7 5.1  14.5  3.5  3.0  135  r u b b e r companies have not s o l d t h e i r Malayan e s t a t e s but t h e f a c t t h a t t h e y have t a k e n out s i z a b l e i n t e r e s t s elsewhere i s an i n d i c a t i o n o f a d i v e r s i f i c a t i o n o f t h e i r f i n a n c i a l r e sources. F o r t h e economic causes of e s t a t e s a l e s i t would  be  u s e f u l f o r us t o c o n s i d e r v a r i o u s c o s t s o f p r o d u c t i o n such as r e p l a n t i n g , l a b o u r c o s t s , t a x a t i o n and t h e e f f e c t s of t h e war and "Emergency". Owners o f e s t a t e s w i t h r u b b e r n e a r i n g t h e end of i t s economic l i f e a r e f a c e d w i t h t h e c h o i c e between f i n d i n g i t a l t o r e p l a n t , and s e l l i n g - o f f .  cap-  As Table X X I I i n d i c a t e s  some o f t h e e s t a t e s s o l d were under v e r y o l d r u b b e r . Of the n i n e examples c i t e d o n l y Changkat New  Serdang,  Columbia and H a m i l t o n e s t a t e s had l e s s t h a n h a l f o f t h e i r  acreages under o l d r u b b e r .  W i t h the e x c e p t i o n s o f F.M.S.  Rubber and Sempah, the acreages under r e s e r v e s and immature r u b b e r comprise more t h a n t e n per c e n t ; t o t a l l y unproductive.  t h i s area being  The a r e a s under r e s e r v e s , o l d and  immature rubber comprise more t h a n s i x t y p e r cent f o r a l l ; p r o d u c t i o n from t h i s a r e a i s n e g l i g i b l e .  Thus e s t a t e s w i t h  over s i x t y per cent o f t h e i r a r e a s u n p r o d u c t i v e would have h i g h c o s t s of p r o d u c t i o n . Cost o f r e p l a n t i n g i s e s t i m a t e d t o be about $800 per a c r e spread over a seven-year p e r i o d w i t h s i x t o seven y e a r s t o r e a c h t h e p r o d u c t i o n s t a g e , and a n o t h e r s i x t o seven y e a r s to reach m a t u r i t y .  The government p r o v i d e s f i n a n c i a l  assist-  I  136  ance f o r r e p l a n t i n g at the r a t e of $400 per aere."*"^  The  sub-  s i d y i s s a i d to be i n s u f f i c i e n t w i t h present t a x .rates, and 11 f l u c t u a t i n g rubber  prices.  Labour c o s t s ^  2  comprise s i x t y per cent of the  pro-  d u c t i o n and are geared t o s e l l i n g p r i c e s which f l u c t u a t e substantially.  During p e r i o d s of low rubber p r i c e s , c o s t s  other than l a b o u r , do not f a l l a u t o m a t i c a l l y , but show a t e n dency t o l a g . High and r i s i n g labour c o s t s are accompanied by 13  t a x a t i o n i n the form of export d u t i e s and  cesses.  These  taxes are regarded by the f i n a n c i a l press as being too h i g h and as a r e s u l t " c a p i t a l may  be d i v e r t e d to N i g e r i a where the  p r o s p e c t s f o r rubber are good and t a x a t i o n low."-^ 10 As a means t o t h i s end a t a x i s l e v i e d . The schedule IV cess i s l e v i e d at a f l a t r a t e of f o u r and h a l f cents per pound of rubber exported. For d e t a i l s of i t s use see Appendix I , R e p l a n t i n g Schemes i n the Rubber I n d u s t r y . S t r a i t s Times. 26 November, 1954, p. 8. • See a l s o I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development, The Economic Development of Malaya. Singapore, Government P r i n t e r , 1955, p. 38. H e r e a f t e r r e f e r r e d t o as the Bank M i s s i o n Report. i : L  12  •' Wages i n the rubber i n d u s t r y are geared t o the.. average p r i c e of rubber p r e v a i l i n g i n the preceding t h r e e months. The cost s t r u c t u r e of e s t a t e s i s d i s c u s s e d i n Chapter IV. See pp. 100-103. ^See  Chapter  I I I , pp. 73-76.  • ^ S t r a i t s Times, 9 January ^1956, p. 6. See a l s o " A s i a n Rubber," F a r E a s t e r n Economic Review, volume 22, No. 3 (16 J u l y 1959), p. 85. r  137  The war and t h e "Emergency"^ have a d v e r s e l y a f f e c t e d many rubber e s t a t e s .  One o f t h e r e a s o n s why t h e o l d e s t a b -  l i s h e d European e s t a t e s i n P r o v i n c e W e l l e s l e y were s o l d was the damage done t o them d u r i n g t h e Japanese o c c u p a t i o n .  In  t h a t a r e a a t l e a s t 10,000 a c r e s o f r u b b e r b e l o n g i n g t o seven 16 e s t a t e s were c u t down. Cost o f r e p a i r i n g t h e damage o f war was heavy even though a good p a r t o f i t was covered by war 17 damage compensation. L a w l e s s n e s s d u r i n g t h e "Emergency", d i d not o n l y undermine c o n f i d e n c e and hamper p r o d u c t i o n , but a l s o r a i s e d costs of production.  Because o f t h e i m p o s i t i o n o f a dusk t o  dawn curfew, l e s s rubber c o u l d be produced.  Labour s h o r t -  ages were e x p e r i e n c e d as a r e s u l t o f r e s e t t l e m e n t .  F o r ex-  ample, on t h e Changkat Serdang e s t a t e ! ^ managers were a l s o unable t o e x e r c i s e enough s u p e r v i s i o n because o f s e c u r i t y 15  See Bank M i s s i o n R e p o r t , pp.. 11-12. F e d e r a t i o n o f M a l a y a , Annual R e p o r t , 1952, K u a l a Lumpur, Government P r i n t e r , 1953, pp. 105-106. F e d e r a t i o n o f M a l a y a , Annual R e p o r t , 1953, K u a l a Lumpur, Government P r i n t e r , 1954, pp. 115-116. ^Singapore  S t a n d a r d , 4 January  195&*, p. 6.  L . A . M i l l s , M a l a y a , A P o l i t i c a l and Economic App r a i s a l . M i n n e a p o l i s , U n i v e r s i t y o f M i n n e s o t a P r e s s , 1958, p. 155. 1 7  1$ Singapore  I n f o r m a t i o n from t h e Company f i l e s o f F r a s e r and Co., ( s t o c k and share b r o k e r s ) , u n p u b l i s h e d .  1 3 8  reasons.  Considerable  amounts had  t o be  i n g c o o l i e l i n e s " on s e v e r a l e s t a t e s . a f f e c t e d by b a n d i t s  and  production  was  spent on  "regroup-  Crops were temporarily  severely suspended 19  during  1951  because of m i l i t a r y o p e r a t i o n s  on some e s t a t e s .  E s t a t e s were s o l d because c a p i t a l i n Malaya showed a lower y i e l d than investment i n B r i t a i n .  T h i s i s suggested  by the f o l l o w i n g statement: The s i t u a t i o n was a l s o a f f e c t e d by the i n c r e a s e i n the bank r a t e l a s t year, and a f u r t h e r t i g h t e n i n g of the c r e d i t squeeze made i t appear that f o r some cons i d e r a b l e time investments i n B r i t a i n could be made t o y i e l d more ...20 In the post  Independence p e r i o d t h e r e may  be  fewer  e s t a t e s s a l e s as the p o l i t i c a l t r a n s i t i o n has been c a r r i e d on smoothly.  On the economic s i d e , m a t e r i a l t a x  have been granted t o overseas trade  corporations  concessions i n the  21  B r i t i s h Finance Act  of 1957  and  t h i s may  prevent the rub- '  ber companies from winding up t h e i r a f f a i r s i n Malaya. We  w i l l now  t u r n to the  t a t e , the reasons f o r which are o u t l i n e d above.  sale o f p o r t i o n s o f an  es-  somewhat d i f f e r e n t from those  Such s a l e s r e f l e c t more normal market  con-  19 Zorn and Leigh-Hunt. Manual of Rubber P l a n t i n g Companies (Firm Brokers, London), mention numerous examples. See e s p e c i a l l y the Manuals from 1950 t o 1956. 20  S t r a i t s Times. 18 J u l y 1958, p. 8(quoting a company director). ^-As from A p r i l 1957, p r o f i t s t a x w i l l normally a r i s e only on investment income and B r i t i s h income t a x w i l l o n l y be p a i d on investment income and on d i v i d e n d s d i s t r i b u t e d . In a d d i t i o n a once and f o r a l l saving a c c r u e s i n the f i r s t year through f r e e i n g part of the f u t u r e tax p r o v i s i o n s set a s i d e i n previous accounts. See Zorn and Leigh-Hunt.Manual 1958. pp. 4-5. 2  139  siderations.  T a b l e X X I I I shows t h e s i z e s o f t h e p o r t i o n s  of e s t a t e s s o l d . TABLE  XXIII  NUMBER OF SALES CLASSIFIED BY SIZES OF PIECES SOLD Number o f S a l e s Year  0-499  500-999  1000-1499  1500  &  Total  1956 1957 1958  6 14 1  6 14 1  4 5 2  4 3 3  20 36 7  Total  21  21  11  10  63  Source: (1) Zorn and L e i g h - H u n t , Manual o f Rubber P l a n t i n g Companies, 1956-1959. (2) The S t r a i t s Times D i r e c t o r y o f Singapore M a l a y a , 195 5-1956. The s a l e s o f t h e s i x t y - t h r e e p i e c e s can be under r e a s o n s f o r s a l e .  classified  Table XXIV shows t h a t by f a r t h e  l a r g e s t number s o l d were o l d r u b b e r . t o reduce c o s t s o f p r o d u c t i o n .  T h i s was p r o b a b l y  done  On t h e o t h e r hand t h e compan-  i e s concerned might have been unable t o r e p l a n t these Tin  and  areas.  b e a r i n g l a n d s may have been s o l d because o f h i g h  t i n p r i c e s and t h e r e s u l t a n t demand f o r t i n b e a r i n g l a n d s , o r because t h e companies owning t h e l a n d were unable t o mine these l a n d s  themselves.  Sometimes m a r g i n a l l y p r o f i t a b l e a r e a s may be s o l d so as t o make t h e e s t a t e s more compact and e f f i c i e n t .  Thus from  140 the above we may conclude t h a t s a l e s o f p o r t i o n s o f est a t e s are motivated  l a r g e l y by e f f i c i e n c y  considerations.  TABLE XXIV NUMBER OF SALES CLASSIFIED BY REASONS FOR SALE  Old Rubber  14  Tin bearing land ,5  Reserves  Building  Investment  ^Others  2  38  1  3  Total 63  Source: Zorn and Leigh-Hunt, Manual o f Rubber P l a n t i n g Comp a n i e s . I956-I959. * F o r which r e a s o n s a r e n o t g i v e n Subdivision of Estates One a s p e c t of t h e d i m i n i s h i n g s i z e o f r u b b e r e s t a t e s i s t h e "break-up" o f e s t a t e s d i s c u s s e d i n t h e p r e c e d i n g the o t h e r i s " s u b d i v i s i o n " . occur,  page  Two t y p e s o f s u b d i v i s i o n can  (a) by an i n t e r m e d i a r y who buys up e s t a t e s f o r t h e  purpose o f s u b d i v i s i o n ;  (b) by t h e owner o f an e s t a t e who  a p p l i e s f o r s u b d i v i s i o n t o t h e Land O f f i c e which i s s u e s new t i t l e s i n place of the o r i g i n a l .  These t i t l e s may be h e l d  i n t h e names o f h i s f a m i l y o r r e l a t i v e s so t h a t w h i l e i n t h e o r y he i s no l o n g e r t h e owner, i n p r a c t i c e he i s . Techn i c a l l y each becomes a s e p a r a t e  holding.  In t h e case o f method ( a ) , t h e i n t e r m e d i a r y l a n d piecemeal t o s m a l l h o l d e r s .  sells th  I n many cases t h e l a t t e r  have purchased l a n d b e f o r e t h e n e c e s s a r y s u b d i v i s i o n a l p r o ceedings have taken p l a c e , and have t h e r e f o r e p a i d f o r and  141 occupied  land without holding a l e g a l t i t l e to i t .  The  l e g a l and t e c h n i c a l p r o c e s s  22  of s u b d i v i s i o n may  t a k e a n y t h i n g from one t o f i v e y e a r s depending on the t i o n and  condi-  s i z e of the e s t a t e , the S t a t e i n w h i c h t h i s i s  23 o c c u r r i n g and on the amount o f work t h e survey o f f i c e  has.  Costs o f S u b d i v i s i o n B e f o r e we  can d e c i d e whether s u b d i v i s i o n i s p r o f i t a b l e  we have t o c o n s i d e r the c o s t s of s u b d i v i s i o n .  These, comprise  the p r i c e s p a i d f o r e s t a t e s or p a r t s of e s t a t e s , t h e a c t u a l c o s t s of s u b d i v i s i o n , brokerage charges and a r e a s  surrend-  ered as r e s e r v e s . P r i c e s p a i d f o r e s t a t e s depend l a r g e l y on the age the r u b b e r .  G e n e r a l l y vacant l a n d has been s o l d from $50  $200 per a c r e ;  o l d r u b b e r l a n d from $200 t o $400 per  and mature b u d g r a f t e d  which the l a n d i s h e l d .  to  acre;  r u b b e r from $1,400 t o $2,000 per  Land p r i c e s a l s o depend on the t y p e of t i t l e  one  of  acre. ^" 2  under  F o r example, of two p l o t s o f l a n d ,  i s h e l d on a n i n e t y - n i n e y e a r l e a s e and the o t h e r on a  g r a n t i n p e r p e t u i t y , the l a t t e r would b r i n g a h i g h e r  price;  22  This.seemed t o be the case e s p e c i a l l y i n the P r o v i n c e Wellesley area. ^An average s u b d i v i s i o n t a k e s s i x months t o complete i f g i v e n p r i o r i t y , o t h e r w i s e t h r e e y e a r s . The p e r i o d t o complete s u b d i v i s i o n means date of r e c e i p t of the R e q u i s i t i o n f o r Survey and the d a t e of f o r w a r d i n g t h e s e t t l e m e n t t r a c i n g to t h e Land O f f i c e . T h i s was l e a r n t from the C h i e f S u r v e y o r , Perak. S t r a i t s Times. 23 J a n u a r y 1958, p. 7 2  k  142  the p r i c e paid f o r t h e former would depend on how much l o n g e r t h e l e a s e had t o r u n . Other f a c t o r s which a f f e c t t h e p r i c e s o f rubber l a n d are a c c e s s i b i l i t y , l o c a t i o n , the c o n d i t i o n of t h e e s t a t e , t h e y i e l d s o b t a i n a b l e , the, p r i c e o f rubber and the type  o f man-  agement. ^ 2  Where e s t a t e s have been subdivided f o r b u i l d i n g purposes, p r i c e s o f s u b d i v i d e d l o t s a r e g r e a t e r by f o u r or f i v e times.  Because of p o p u l a t i o n p r e s s u r e ,  near the environs housing  o f towns are being  estates i n or  subdivided  f o r urban  lots. ^ 2  P r i c e s a l s o v a r y w i t h the State i n which t h e e s t a t e i s l o c a t e d , as Table XXV i n d i c a t e s .  Land v a l u e s are h i g h e r  i n Penang and Perak when compared w i t h those Malacca.  i n Johore and  I n Penang e s p e c i a l l y the d e n s i t y of p o p u l a t i o n  i s the h i g h e s t i n M a l a y a  2 7  and a l s o a l l the a v a i l a b l e l a n d  i s a l r e a d y a l i e n a t e d so t h a t l a n d v a l u e s a r e h i g h e r State.  in this  I n c o n t r a s t , i n Johore, t h e r e are r e l a t i v e l y l a r g e areas  S e e F.C. Peck, The V a l u a t i o n of Rubber E s t a t e s . London, Effingham W i l s o n , 1914,and S t r a i t s Times. 27 J u l y 1957, p. 7. 2 5  26 For example Heintze e s t a t e , Penang, and a l s o e s t a t e s i n the Ipoh and Seremban d i s t r i c t s . See S t r a i t s Times. 20 March 1956, p. 8. P e n a n g has a d e n s i t y of p o p u l a t i o n of 1,430 per square m i l e . I n c o n t r a s t the d e n s i t i e s f o r Perak, Johore and Malacca are 155, 127 and 460 r e s p e c t i v e l y . See K.S. Sandhu, "The P o p u l a t i o n o f Malaya, Some Changes i n the P a t t e r n of D i s t r i b u t i o n ^between 19,4.7 and 1 9 5 7 , " J o u r n a l o f T r o p i c a l Geography, volume 15 (June 1 9 6 1 ) , p. 84. 27  143  TABLE XXV PRICE PER ACRE OF SOME ESTATES SOLD, 1956-1959  Acreage Sold  S t a t e ,•  Name o f E s t a t e  Penang (a)  1 Penang Rubber E s t a t e Group 12,420 2 V a l D'or Rubber 2,482 Estate 3 Choong Lye Hook 236 Estate 4 Golden Grove E s tate 2,136 5 C e n t r a l Perak Rub1,236 b e r Company. 6 Sempah Rubber 1,687  Perak  (b)  Malacca  (c)  Johore.(d) Pahang (e)  Sources:  Note:  Sold f o r ($)  P r i c e per a c r e ($)  4,500,000  362.3  1,491,961  601.1  46,500  154.7  560,000  262.2  461,000  372.2  1,329,690  788.2  7 Heintze Estate 8 Lunas Rubber E s tate  476  336,800  707.6  9 P r y e Rubber Syndicate  290  14,000  48.3  790  2,050,000 2,582.3  1 Raefirth Estate 2 Selene E s t a t e  556  347,580  625.2  403  262,275  650.8  3 United Winifred  213  202,468  950.6  1 M e r l i m a u Pegoh 2 Bukit Lintang  440  146,400  332.7  1,098"  517,500  471.3  1 B u k i t Kejang  2,031  73,505  36.2  2 Mengkibol E s t a t e  248  86,800  350.0  1 Overseas Kwangsi Industry  114  30,000  263.2  2 Amalgamated Rubber Estate  301  180,079  598.2  (a) (b) (c) (d) (e)  R e g i s t r y o f Deeds, Penang. Answers sent by Commissioner.' o f Lands and M i n e s . R e g i s t r y o f Deeds, M a l a c c a . R e g i s t r y o f T i t l e s , Johore Bahru. Answers sent by Commissioner o f Lands and M i n e s .  The f i g u r e s f o r Perak and Pahang a r e f o r two and one districts respectively.  144  of l a n d which are l a t i o n pressure  still  i s not  those i n Penang.  undeveloped. f e l t and  Consequently popu-  l a n d v a l u e s are lower than  Thus l a n d v a l u e s are r e l a t e d t o the amount  of S t a t e land a v a i l a b l e f o r a l i e n a t i o n , the degree of popu l a t i o n pressure cular  and  the  r e l a t i v e development of the  parti-  State. The  second item c o n s t i t u t i n g cost i s the  expense  i n v o l v e d i n the form of survey f e e s , boundary marks r e g i s t r a t i o n of new according On  titles.  Survey f e e s are  and  calculated  t o scheduled r a t e s and^vary between d i f f e r e n t s t a t e s . s u b d i v i s i o n a c e r t a i n amount of l a n d has t o 28  surrendered to the government f o r access r e s e r v e s .  be For  example i n the Penang Rubber e s t a t e s group ( t o t a l acreage 1 2 , 4 2 0 a c r e s ) 7 7 0 acres were i n v o l v e d . 9 2  l a n d and  The  t e r r a i n of  the  the e x i s t i n g access f a c i l i t i e s g e n e r a l l y determine  the acreage  involved.  I f an e s t a t e i s s o l d d i r e c t t o a buyer no brokerage would be cent.  30  involved. This;  Otherwise the r a t e payable i s two  per  i s p a i d e i t h e r to the lawyer, b r o k e r or agency  See I n s t r u c t i o n s t o Land O f f i c e r s Johore 1 9 3 6 , Singapore, C.H. K i a t , 1 9 3 8 , p a r t 9, s e c t i o n 3, and a l s o s e c t i o n 2 4 6 , Federated Malay S t a t e s Land Code (1930). paragraphs 3 2 - 3 6 . R e p o r t of a Conference t o d i s c u s s the s a l e and subd i v i s i o n of Penang Rubber e s t a t e s , h e l d at D i s t r i c t O f f i c e , Nibong T e b a l , on 30 May 1956 (unpublished). 2 9  • ^ L e g a l charges i n r e s p e c t of s a l e s are l a i d down i n the Advocates and S o l i c i t o r ' s Ordinance, No. 4 of 1947.  145  house, whoever happens t o be the i n t e r m e d i a r y .  I n Penang  and M a l a c c a , where deeds a r e r e g i s t e r e d , a l l l a n d t r a n s a c t i o n s have t o go t h r o u g h a  lawyer.  Thus the c o s t s of s u b d i v i s i o n i n c l u d e the p r i c e s p a i d f o r e s t a t e s , s u b d i v i s i o n a l charges p a i d t o the Land O f f i c e , land surrendered  as r e s e r v e s and  brokerage c h a r g e s .  Subdivision f o r Replanting The  e x p l a n a t i o n of the demand f o r e s t a t e s and  por-  t i o n s of e s t a t e s l i e s i n p a r t i n t h e o p p o r t u n i t i e s f o r subd i v i d i n g the l a n d .  One  such o p p o r t u n i t y i s p r o v i d e d  by  the d i f f e r e n t r e p l a n t i n g g r a n t s a v a i l a b l e f o r d i f f e r e n t s i z e s of l a n d . I t i s advantageous f o r owners o f e s t a t e s t o  subdivide  t h e i r l a n d f o r then they can o b t a i n l a r g e r r e p l a n t i n g g r a n t s . Here a s i g n i f i c a n t f a c t o r i s t h a t most of these a r e a s are under v e r y o l d r u b b e r . of  $400  An e s t a t e i s e l i g i b l e f o r a  grant  per a c r e over a seven y e a r p e r i o d f o r twenty-one  per cent o f i t s t o t a l a c r e a g e . 3 1  However, the a s s i s t a n c e f o r  32  smallholdings  i s a t the r a t e of | 6 0 0 per a c r e over a seven  y e a r p e r i o d and  f o r t h i r t y - t h r e e per cent o f the t o t a l  age. is  Not  acre-  o n l y a r e the g r a n t s l a r g e r but the a c r e a g e p o t e n t i a l  higher. Appendix I , R e p l a n t i n g  Schemes i n the Rubber  Industry. 32  ' A s m a l l h o l d i n g i s d e f i n e d as a h o l d i n g of l e s s t h a n 1 0 0 a c r e s . See Chapter IV p.- 9 3 , f o o t n o t e ' 7 f o r a detailed definition. 1  146  The  p r o f i t a b i l i t y o f such s u b d i v i s i o n can be i l -  l u s t r a t e d by a n u m e r i c a l example.  I f a man owns 1 , 0 0 0  a c r e s o f r u b b e r he i s e l i g i b l e f o r a r e p l a n t i n g g r a n t of 210  x  $400  = $84,000.  I f he s u b d i v i d e s  h i s land into ten  l o t s of e i g h t y a c r e s each and f o u r l o t s o f f i f t y a c r e s each he w i l l  obtain 1/3  of  800 x  600  1/3  of 2 0 0 x 6 0 0  =  =  Total  $160,000  $  40,000  $200,000  Thus by s u b d i v i s i o n h i s r e p l a n t i n g g r a n t i s r a i s e d by $116,000.  Moreover, he i s o b l i g e d t o r e p l a n t w i t h  high  y i e l d i n g s t r a i n s , so t h a t h i s e a r n i n g s w i l l be f o u r f o l d i n seven y e a r s t i m e . J u s t as t h e i n d i v i d u a l who buys an e s t a t e f o r subd i v i s i o n has t o i n c u r c o s t s o f s u b d i v i s i o n , s u r r e n d e r r e s e r v e s and w a i t f o r some t i m e b e f o r e he can o b t a i n new t i t l e s , 33  so does t h e person who s u b d i v i d e s  h i s own e s t a t e .  The  t i m e a s p e c t i s i m p o r t a n t i n two ways: as t h e owner o f a 1 , 0 0 0 a c r e e s t a t e , t h e Schedule I I cess i s r e f u n d e d t o him on t h e 34  basis of r e p l a n t i n g .  When he s u b d i v i d e s  33  h i s e s t a t e he has  i. •  -^As we p o i n t e d out on page, 140;, t h i s t y p e of subd i v i s i o n i s m e r e l y a l e g a l f o r m a l i t y . The s u b d i v i s i o n s a r e o f t e n r e g i s t e r e d i n t h e names o f f a m i l y members and r e l a t i v e s , so t h a t t h e person who s u b d i v i d e s h i s e s t a t e r e mains t h e owner. 3  ^ S e e Appendix I .  147  to  f o r e g o the c e s s .  On the o t h e r hand he cannot o b t a i n  a s s i s t a n c e from the s m a l l h o l d e r s ' fund u n l e s s he has t i t l e s to the l a n d .  As s u b d i v i s i o n has a l o w e r  legal  priority  than development p r o j e c t s , c o n s i d e r a b l e t i m e e l a p s e s  be-  f o r e t i t l e s are i s s u e d .  as a  T h i s f a c t o r can be regarded  c o s t , one o f w a i t i n g . On s u b d i v i s i o n q u i t r e n t s are known t o have been raised.35  The  c o n d i t i o n s a t t a c h e d t o t h e l a n d may  changed i n t h a t t h e new  owners may  a l s o be  not be a l l o w e d to p l a n t  c e r t a i n cash o r cover c r o p s o r they may  be o b l i g e d t o  allo-  cate a c e r t a i n acreage t o f o o d s t u f f s . A l l t h e s d are c o s t s t o t h e new  owners o r o p e r a t o r s and may  a f f e c t the d e l i v e r y  of produce and p r o d u c t i o n i n c e n t i v e s . An i m p o r t a n t  advantage o f s u b d i v i s i o n i s t h a t i f a  h o l d i n g f a l l s below t w e n t y - f i v e a c r e s , the owner i s no l o n g 36  er r e q u i r e d t o provide amenities f o r h i s workers. s e q u e n t l y c o s t s o f p r o d u c t i o n are g r e a t l y reduced.  ConIn Malacca  when any h o l d i n g f a l l s below 100 a c r e s , the owner no pays the a g r i c u l t u r a l m e d i c a l  cess.  longer  3 7  35  T h i s was found t o be p a r t i c u l a r l y widespread Province Wellesley. 36  Under the F e d e r a t i o n of Malaya.Employment of 1955 ( 3 8 of 1955) any h o l d i n g t w e n t y - f i v e a c r e s must p r o v i d e h o u s i n g , e d u c a t i o n , a creche ( i f more female w o r k e r s have c h i l d r e n ) and m e d i c a l c a r e f o r workers. 37  in  Ordinance and above than f i f t y their  The M a l a c c a A g r i c u l t u r a l M e d i c a l Board l e v i e s t h i s c e s s and uses i t t o p r o v i d e m e d i c a l s e r v i c e s f o r the e s t a t e workers.  148 Two  t y p e s of s u b d i v i s i o n have been d i s c u s s e d :  d i v i s i o n a f t e r the s a l e o f l a n d , and e x t e n t of t h e s e two  sub-  subdivision without  sale.  The  XXVI.  I t i s evident  volved  i n subdivision a f t e r sale i s s l i g h t l y greater  any  p r o c e s s e s i s shown i n T a b l e  from the t a b l e t h a t the acreage i n -  that i n subdivision without sale.  than  However t h e number of  es-  t a t e s i n v o l v e d i s l a r g e r i n the second type of s u b d i v i s i o n . As we  p o i n t out s u b s e q u e n t l y , n e i t h e r o f the  subdivisions  amount t o a s i g n i f i c a n t p r o p o r t i o n of the t o t a l r u b b e r acreage. There are no r e s t r i c t i o n s i n the t i t l e under w h i c h l a n d i s h e l d , so t h a t s u b d i v i s i o n i s p e r m i t t e d under t h e Land Code.  The  two main r e a s o n s f o r s u b d i v i s i o n have been  the a v a i l a b i l i t y of r e p l a n t i n g g r a n t s and t h e  possibility  o f making s p e c u l a t i v e p r o f i t s . Demand f o r Land The for land.  demand f o r s u b d i v i s i o n i s i n f a c t the demand This i s r e l a t e d to population pressure  w i t h the d i f f e r e n t  and  varies  States.  Comparing t h e d e n s i t y per square m i l e and t h e  total  a r e a s u b d i v i d e d , we note t h a t where the d e n s i t y i s h i g h e r , a l a r g e r area i s involved. Penang i s w o r t h n o t i n g .  I n t h i s r e s p e c t t h e case of  Province  W e l l e s l e y ^ has a popu3  P r o v i n c e W e l l e s l e y i s a p a r t of Penang S t a t e , and i t i s here t h a t the s u b d i v i s i o n has o c c u r r e d . The t o t a l p o p u l a t i o n of Penang S t a t e i s 5 7 2 , 1 3 2 and t h e t o t a l a r e a i s 400 square m i l e s .  TABLE XXVI EXTENT OF  SUBDIVISION  S u b d i v i s i o n a f t e r Sale State  Acreage Subdivided Acres  No. of Estates  S u b d i v i s i o n without  No.of SubDivisions  Acreage Subdivided Acres  No. of Estates  -  -  -  -  Sale No.of §ubDivisions  -  16,794  7  966  Perak  1,368  4  253  Malacca  1,335  8  190  6,692  32  713  Johore  4,582  5  368  9,430  44  880  2  52  -  -  -  -  -  3,643  16  221  24,495  26  Ij829  19,716  92  Penang  Pahang Negri  Total  414 Sembilan  -  1,814  Source: The r e s p e c t i v e R e g i s t r y of Deeds or T i t l e s i n the v a r i o u s s t a t e s . F o r Perak and Pahang the answers were r e c e i v e d from the Commissioners of Lands Mines.  and  150  l a t i o n o f 233,168, whereas the a r e a of t h e r e g i o n i s 295.-7 square m i l e s .  Of t h i s 3*7  are f o r e s t r e s e r v e and  square m i l e s and 3*1  crown l a n d r e s p e c t i v e l y .  vere population pressure  square m i l e s Fairly  se-  i s p r e s e n t , s i n c e the economy of  the a r e a i s p r e d o m i n a n t l y a g r i c u l t u r a l . available for alienation;  No new  land i s  s u b d i v i s i o n t h e r e f o r e f i l l s a need.; 39  The  i n v e s t i g a t i o n s of the Working P a r t y  development of new  areas f o r land settlement  TOTAL AREA SUBDIVIDED Al©  State  country.  XXVII DENSITY PER  T o t a l Area S u b d i v i d e d  Penang Johore Malacca N e g r i Sembilan Perak Pahang  the  indicate that  t h e r e i s a s h o r t a g e of l a n d i n some p a r t s of t h e TABLE  on  SQUARE MILE  *Density  16,794 13,485 7,977 3,643 1,368 414  per Sq.  Mile  1,430 127 460 143 155 23  Source:  D e n s i t y per square m i l e - K.S. Sandhu, "The Populat i o n of Malaya,"Some Changes i n the P a t t e r n o f D i s t r i b u t i o n between 1947 and 1957," J o u r n a l of T r o p i c a l Geography, volume 15 (June 1961), p. 84.  Note:  The f i g u r e s f o r Perak and Pahang are f o r 2 d i s t r i c t s and 1 d i s t r i c t r e s p e c t i v e l y .  *  As on 20 June 1957  (Latest  census).  F e d e r a t i o n o f M a l a y a , Report of the Working P a r t y Set Up t o C o n s i d e r the Development of New Areas f o r Land S e t t l e ment. K u a l a Lumpur, Government P r i n t e r , 1956, paragraph 13. »  151 However, i t i s observed t h a t i n t h e S t a t e s o f Trengganu and Pahang p a r t i c u l a r l y , and ample l a n d i s a v a i l a b l e .  Kelantan,  i n Kedah and  Johore  Here the o b s t a c l e t o l a n d d e v e l o p -  ment appears t o be inadequate s t a f f .  That t h e r e i s a demand  f o r l a n d i s i n d i c a t e d by 13,000 a p p l i c a t i o n s f o r l a n d i n T r e n g g a n u , ^ over 15,000 a p p l i c a t i o n s f o r rubber l a n d i n Kedah^ 42 and t h e a p p l i c a t i o n s f o r over 30,000 a c r e s of l a n d i n Pahang. The War,  Japanese o c c u p a t i o n  caused l a n d work t o be postponed.  and "Emergency" have Work a r i s i n g out of  the  "Emergency" has been g i v e n f i r s t p r i o r i t y . ^ A somewhat a r t i f i c i a l s h o r t a g e o f l a n d has been caused by the d e l a y i n d e a l 3  ing with land a p p l i c a t i o n s . ^ Malay R e s e r v a t i o n s  The  existence of  extensive  causes s h o r t a g e s of l a n d f o r non-Malays.^5  ^°Ibid., paragraph 15. I b i d . , paragraph  ^ I b i d . , paragraph 1?. 1  16.  Land work has been put a s i d e , f o r example, s i n c e the b e g i n n i n g of the "Emergency" i n 194$, t h e D i s t r i c t O f f i c e r ' s time has t o be a l l o c a t e d t o the e s t a b l i s h m e n t o f new v i l l a g e s , and t o c o - o r d i n a t i n g the o p e r a t i o n s of the p o l i c e and the army. 44 F e d e r a t i o n of M a l a y a , R e p o r t of the Land A d m i n i s t r a t i o n s Commission, K u a l a Lumpur, Government P r i n t e r , 1958, paragraph 84 mentions t h a t 116,000 a p p l i c a t i o n s f o r l a n d are a w a i t i n g d e c i s i o n ; more t h a n 37,000 are a w a i t i n g r e g i s t r a t i o n and about 50,000 r e g i s t e r e d t i t l e s have as y e t not been i s s u e d . ^ F e d e r a t i o n o f M a l a y a , R e p o r t on S u b d i v i s i o n and F r a g m e n t a t i o n of E s t a t e s , CLFM. 65/57. Mimeographed, p a r a g r a p h ^ 9~. Malay R e s e r v a t i o n s a r e d i s c u s s e d i n Chapter I I pp. •5^0-53, and Chapter I I I , p. .'57.  152 G i v e n t h e s o c i a l and c u l t u r a l framework o f an underdeveloped economy,, investment i n l a n d i s p r e f e r r e d f o r reasons o f p r e s t i g e and s e c u r i t y .  The g e n e r a l l y low l e v e l  of m a n a g e r i a l and t e c h n i c a l e x p e r i e n c e p r e c l u d e s i n v e s t m e n t in industry.  Comparative r e t u r n s from l a n d , e s p e c i a l l y rub-  ber land are higher, at l e a s t a t present p r i c e s . TABLE X X V I I I BUYERS AND SUBDIVIDERS BY RACE  State Johore Malacca N e g r i Sembilan Perak Penang Pahang Total Source:  Malay  Indian  Chinese  8  8 2 14 2 3  799 150 80 60 68 55  -  1  1  10  29  1 ,212  Total  Others  819 152 95 62 73 55  -—  1 —*  5  1,256  The R e g i s t r y o f T i t l e s and Deeds i n the r e s p e c t i v e States. The d a t a c o l l e c t e d  (Table X X V I I I ) shows t h a t buyers  o f s u b d i v i d e d e s t a t e s and t h e s u b d i v i d e r s t h e m s e l v e s a r e mainly Chinese.  T a k i n g t h e west c o a s t o n l y ( l e a v i n g out  Pahang) t h i s i s a normal tendency s i n c e t h e Chinese p o p u l a t i o n i s c o n c e n t r a t e d on t h e west c o a s t . ^  Only i n N e g r i Sembilan  ^ R e p o r t o f the Land A d m i n i s t r a t i o n Commission. P a r a g r a p h 4 1 . C f . V. P u r c e l l . The Chinese i n M a l a y a . London, Oxford U n i v e r s i t y P r e s s , 1948.  153  do t h e I n d i a n s form a s i z e a b l e p r o p o r t i o n .  However, i n  c o n t r a s t t o t h e land-owning t e n d e n c i e s o f Malays and C h i n e s e , the I n d i a n i s more o f t e n t h e worker t h a n t h e f a r m e r i n t h i s country. The buyers and t h e s u b d i v i d e r s come from d i v e r s e occ u p a t i o n a l g r o u p s , b u t g e n e r a l l y they a r e f a r m e r s , " S q u a t t e r s " , c l e r k s and e s t a t e l a b o u r .  F o r the l a t t e r s e v e r a l instances  47  have been c i t e d .  I t has been suggested t h a t o f t h e  3,000  new s m a l l h o l d e r s i n Penang some 3 0 0 a r e former employees o f t h e Penang Rubber E s t a t e s group.  I n Perak t h e s u b d i v i s i o n  of Jong Landor and Tapah e s t a t e s c r e a t e d a d e p a r t u r e when i t gave impetus t o t h e f o r m a t i o n o f Malaya's f i r s t labour-owned 48 company. O f t e n two o r t h r e e f a m i l i e s p o o l t h e i r r e s o u r c e s 49  or borrow money t o purchase l a n d . S i z e of the S u b d i v i s i o n s More s i g n i f i c a n t i s t h e s i z e o f t h e s u b d i v i s i o n s . By f a r t h e most i m p o r t a n t i n f l u e n c e on t h e s i z e s o f s u b d i v i sions i s the a v a i l a b i l i t y of d i f f e r e n t r e p l a n t i n g grants f o r  See F e d e r a t i o n o f M a l a y a , M o n t h l y R e p o r t o f Labour and Machinery Department.September 1 9 5 6 , p. 28; J u l y 1957, p. 2 4 ; F e b r u a r y 1957, p. 28; S t r a i t s Times. 2 3 J a n u a r y , 1958, p. 8. ^ S t r a i t s Times. 3 June, 1958, p. 6. ^ W. F i s h , " F r a g m e n t a t i o n , " The Malayan M o n t h l y . (November 1958), pp. 7-8. y  154  different  acreages of r u b b e r .  buyers and t o owners who  T h i s i s a p p l i c a b l e both t o  subdivide t h e i r  own  estates.  Those owning f i v e acres or l e s s can r e p l a n t the whole of t h e i r h o l d i n g s and f o r the purpose o b t a i n a grant  o f $600 per a c r e .  Such s m a l l h o l d e r s can, i n a d d i t i o n , apply to "new-plant" f i v e acres of rubber provided they  can o b t a i n j u n g l e or vacant  land.  Under the government Replanting-New P l a n t i n g Schemes f o r rubber s m a l l h o l d e r s  (1955-1961), as opposed to the s m a l l -  h o l d e r s own r e p l a n t i n g scheme mentioned above, a  smallholder  owning t h i r t y a c r e s or l e s s can r e p l a n t o r new p l a n t an add i t i o n a l f i v e a c r e s at the r a t e of $600 per a c r e .  Thus i f a  s u b d i v i d e d piece of l a n d i s f i v e a c r e s , i t s owner can r e p l a n t or new p l a n t an e x t r a t e n acres under the two schemes, case, h i s t o t a l h o l d i n g would be i n c r e a s e d t o f i f t e e n  i n which acres.  Whereas owners o f one t o t e n acres r e c e i v e a 100 per cent g r a n t ,  owners of ten t o f i f t e e n a c r e s q u a l i f y f o r r e -  planting assistance f o r ten acres.  I f t h e subdivided  areas  were over t h i r t y a c r e s the owner would o b t a i n a subsidy f o r o n e - t h i r d of h i s h o l d i n g , whereas i f i t were t e n t o f i f t e e n acres he i s a b l e to get one-half t o t w o - t h i r d s replanted.  of h i s h o l d i n g  F o r example, i f an e s t a t e o f 100 acres i s sub-  d i v i d e d i n t o three l o t s of t h i r t y - t h r e e . a c r e s each, the r e p l a n t i n g grant would amount t o 3Q/3 i t were subdivided  x 33)600 = $19,000.  If  i n s t e a d i n t o ten l o t s o f t e n a c r e s each,  the r e p l a n t i n g grant at the r a t e of 100 per cent would be  155  $60,000.  50  I n o r d e r t o a v o i d b e i n g c l a s s e d a s e s t a t e owners, t h e r e i s e v e r y i n c e n t i v e f o r p e r s o n s t o s u b d i v i d e t h e i r holdings i n t o l e s s than twenty-five acres.  Once o u t s i d e t h i s  g r o u p i n g , t h e y are no l o n g e r r e q u i r e d t o p r o v i d e services.  estate  51  TABLE XXIX AREA SUBDIVIDED AND SIZES OF SUBDIVISIONS Acreage Subdivided  State  No. o f Subdivisions  No. o f Owners  Acres  Acres Johore Malacca N e g r i Sembilan Perak Penang Pahang S o u r c e:  13,4^5 7,977 3,643 1,368 16,794 414  Average S i z e Subdivisions  1,248  906 221 253 890 52  819 152 95 62 73 55  10 8  16 5 18  7  The r e s p e c t i v e R e g i s t r i e s o f Deeds and T i t l e s . Answers f o r Perak and Pahang were r e c e i v e d from t h e Commissioners o f Lands and M i n e s . Sometimes s i z e s o f s u b d i v i s i o n s a r e determined by t h e  c o n f i g u r a t i o n o f t h e l a n d , t h e e x i s t e n c e o f r o a d s and d r a i n s , and whether f u r t h e r access r e s e r v e s a r e r e q u i r e d by t h e authorities. 50  T h i s has been d e s c r i b e d by some w r i t e r s as an abuse of t h e R e p l a n t i n g Scheme f o r S m a l l h o l d e r s (Fund B ) . See C.Y. L i m , "Rubber R e p l a n t i n g Taxes," Malayan Economic Review, v o l - * ume 6, No. 2 (October 1961), p. 50. T h i s i s d i scussed i n t h e l a t t e r p a r t o f t h i s C h a p t e r , 5 1  seer p.157.  156  Table XXIX shows t h e average s i z e s o f t h e s u b d i v i d e d pieces f o r the various states.  We n o t i c e t h a t t h e average  s i z e o f s u b d i v i s i o n s v a r i e s from f i v e t o e i g h t e e n a c r e s . S i z e s a r e l a r g e l y i n f l u e n c e d by demand f a c t o r s r a t h e r t h a n  0  supply f a c t o r s . TABLE  XXX  ESTATE ACREAGE UNDER RUBBER 1 9 5 9 , AND AREA SUBDIVIDED E s t a t e acreage Under Rubber  State Johore Malacca N e g r i Sembilan Selangor Perak Penang Kedah Perli s Kelantan Trengganu Pahang  540,663 116,829 269,212 330,989 270,059 28,514 213,163 40,985  17,438 114,052  Area Subdivided  per cent ( 2 ) as o f ( l )  13,485 7,977 3,643  2.5  1,368 16,794  .5 58.9  n.a.  n.a. * *  414  6.7  1.4  .4  Source; E s t a t e Acreage under r u b b e r , Rubber S t a t i s t i c s Handbook. I 9 6 0 , T a b l e 4, p. 1 1 . Notes:  n.a. - not a v a i l a b l e . * - t h e problem does not e x i s t . F i g u r e s f o r Perak and Pahang a r e a v a i l a b l e o n l y f o r 2 and 1 d i s t r i c t s r e s p e c t i v e l y . On t h e b a s i s o f t h e i n f o r m a t i o n a v a i l a b l e we can  compute i t s e x t e n t i n r e l a t i o n t o e s t a t e acreage under r u b b e r . I t i s noted from T a b l e XXX t h a t o n l y i n Penang, has subd i v i s i o n reached a s i g n i f i c a n t p r o p o r t i o n . under t e n p e r c e n t .  Elsewhere i t i s  B e f o r e we go on t o d i s c u s s t h e conse-  157  quences o f s u b d i v i s i o n we may  perhaps say t h a t the r e a l  e f f e c t s of s u b d i v i s i o n w i l l become e v i d e n t i n Penang s t a t e w i t h the passage o f t i m e . surmise the p r o b a b l e  F o r t h e p r e s e n t we may  merely  effects.  E f f e c t s of S u b d i v i s i o n on the Malayan Economy The break up of rubber e s t a t e s n a t u r a l l y has some e f f e c t s on the economy.  Labour, e s t a t e s e r v i c e s and  t i v i t y are d i r e c t l y a f f e c t e d by s u b d i v i s i o n .  Other  produceffects  are i n d i r e c t . Where l a b o u r i s concerned, t h e problem unemployment (though t h e r e i s some i n i t i a l r a t h e r a f a l l i n r e a l wages.  i s not one  of  unemployment), but  Once a h o l d i n g f a l l s below  t w e n t y - f i v e a c r e s t h e owner i s no l o n g e r compelled t o p r o vide c e r t a i n amenities.  Thus t h e s e workers  forego medical  a t t e n t i o n , h o u s i n g and e d u c a t i o n f o r t h e i r c h i l d r e n .  For  t h e s e s e r v i c e s they w i l l have t o go t o government m e d i c a l c e n t r e s and s c h o o l s . ernmental  These w i l l i n t u r n mean i n c r e a s e d gov-  e x p e n d i t u r e on t h e s o c i a l  services.  On former e s t a t e s , d r a i n s and a c c e s s roads were maint a i n e d by t h e owner.  On s u b d i v i s i o n the h i t h e r t o  d r a i n a g e system i s d e s t r o y e d and f l o o d i n g may  unified  result.  This  c o u l d l e a d t o the abandonment of much l a n d due t o w a t e r l o g g i n g and s o i l e r o s i o n .  T h i s problem  i s more acute i n P r o v i n c e  W e l l e s l e y where one o r two v e r y l a r g e e s t a t e s had  maintained  158  a l l the bunds and d r a i n s .  52  Poor d r a i n a g e measures w i l l mean an i n c r e a s e i n the incidence of m a l a r i a .  Poor s a n i t a t i o n and w a t e r supply w i l l  c o n t r i b u t e t o the d e t e r i o r a t i o n of h e a l t h standards. E s t a t e s m a i n t a i n an e x t e n s i v e system of roads f a c i l i t a t e movement.  to  However i f these are no l o n g e r m a i n t a i n -  ed s m a l l h o l d e r s w i l l f i n d i t d i f f i c u l t both t o take t h e i r produce t o market and t o b r i n g i n s u p p l i e s . S c h o o l s f o r m e r l y m a i n t a i n e d by e s t a t e s have been t a k e n over by t h e l o c a l a u t h o r i t i e s O f t e n e x i s t i n g cannot be used when t h e new  facilities  owners are m u l t i - r a c i a l .  A l l the  c h i l d r e n cannot be t a u g h t i n one room because of language problems. From the p o i n t of view of o u t l a y s , t h e new  owners  w i l l be a b l e t o o p e r a t e the e x - e s t a t e rubber more c h e a p l y because they w i l l tend t o i g n o r e e x p e n d i t u r e s on r o a d s , d r a i n s and s o i l c o n s e r v a t i o n , and w i l l no l o n g e r be o b l i g e d t o p r o vide amenities f o r t h e i r workers.  I f t h e y employ v i l l a g e  54  contract labour  Report paragraph 1 3 .  t h e y need not a b i d e by any of the agreements  on S u b d i v i s i o n and F r a g m e n t a t i o n * ^  Estates,  M i n u t e s o f the Conference h e l d a t D i s t r i c t O f f i c e , Nibong T e b a l , 3 0 May 1 9 5 6 . ( U n p u b l i s h e d ) . 5 3  <-Such w o r k e r s a r e l o o s e l y o r g a n i s e d by a c o n t r a c t o r who i s p a i d on the q u a n t i t y of r u b b e r produced. He pays the w o r k e r s on a p i e c e r a t e based on t h e i r d a i l y o u t p u t . 5/  159  between t h e r u b b e r w o r k e r s u n i o n s and t h e employers'  union.  Another advantage o f employing v i l l a g e l a b o u r i s ... t h a t t h e y can a v o i d r e s p o n s i b i l i t i e s under t h e workmen's compensation o r d i n a n c e and o t h e r l a b o u r p r o t e c t i o n laws because t h i s c a t e g o r y o f w o r k e r i s q u i t e u n f a m i l i a r w i t h t h e e x i s t e n c e and f u n c t i o n s of t h e Labour Department.55 W h i l e the new owners may be a b l e t o operate t h e e x - e s t a t e r u b b e r more c h e a p l y , a c t u a l l y t h e r e a r e " h i d d e n " costs involved.  These may n o t b e a charge  t o t h e new owners  but t h e y w i l l d e f i n i t e l y be a charge t o t h e government. A l s o t h e r e may be a f a l l i n output due t o t h e n e g l e c t o f exp e n d i t u r e s on t h e upkeep of d r a i n s and. s o i l  conservation.  Equipped w i t h l a r g e s c a l e and s u p e r i o r facilities,  processing  t h e e s t a t e s a r e a b l e t o produce a b e t t e r q u a l i t y  cf.  of r u b b e r . ^  The p r o d u c t i o n o f g r e a t e r q u a n t i t i e s o f l o w e r  grade r u b b e r c o u l d i m p a i r M a l a y a ' s c o m p e t i t i v e p o s i t i o n v i s - a - v i s b o t h o t h e r n a t u r a l r u b b e r p r o d u c e r s and s y n t h e t i c rubber producers.  There i s t h e p o s s i b i l i t y though t h a t s m a l l -  holders could process the l a t e x a t c e n t r a l i z e d processing centres. 57  The p r e s e n t  r u b b e r export duty i s an advalorem t a x .  ^^U.A. A z i z , op. c i t . , p. 26. 56  ^ We have a l r e a d y shown t h i s i n C h a p t e r I V .  See pp.117-119.  57 ^'Export d u t i e s and o t h e r t a x e s on r u b b e r are d i s c u s s e d i n Chapter I I I , . 7 3 . 7 6 . p p  160  H i g h e r grades o f r u b b e r c a r r y a premium over the l o w e r g r a d e s . Hence i f t h e p r o d u c t i o n of the l a t t e r i n c r e a s e s , t h i s means a r e d u c t i o n i n t h e government revenue a c c r u i n g from t h i s source. E s t a t e s as c o r p o r a t i o n s pay c o r p o r a t i o n t a x e s , and make a s u b s t a n t i a l c o n t r i b u t i o n t o government r e v e n u e .  There  i s some e v i d e n c e t h a t t h e m a j o r i t y of s m a l l h o l d e r s n o r m a l l y earn l e s s than $100  a month or $1,200 a y e a r .  They would  t h e r e f o r e be exempt from income t a x which i s l e v i e d on i n comes of $2,000 or more.  Thus i n t h i s c o n n e c t i o n t o o , t h e r e  i s l i k e l y t o be a f a l l i n government revenue. Where t h e s u b d i v i s i o n o c c u r r e d on former " s t e r l i n g " e s t a t e s , i t w i l l mean t h a t t h e proceeds from t h e p r o d u c t i o n of  r u b b e r w i l l remain i n t h e c o u n t r y .  F o r such companies r e -  m i t t e d a s u b s t a n t i a l p r o p o r t i o n of t h e i r e a r n i n g s a b r o a d , i n the form of d i v i d e n d s .  However, t h e proceeds now b e i n g  r e t a i n e d i n t h e c o u n t r y need not n e c e s s a r i l y be used f o r f u r t h e r development. tion.  They c o u l d be used t o i n c r e a s e consump-  I f t h i s c o n s i s t s of e x p e n d i t u r e on l o c a l l y  produced  goods, t h i s w i l l augment the incomes of such p r o d u c e r s .  Ifi t  i s i n c u r r e d qn i m p o r t s , t h e e f f e c t i s p r o b a b l y t h e same a s t h a t r e s u l t i n g from t h e r e m i t t a n c e of d i v i d e n d s .  C . Y . L i m , "The Malayan Rubber R e p l a n t i n g Taxes," Malayan Economic Review, volume 6, No. 2 (October 1 9 6 l ) , ~ p . po  52.  161  The  d e l a y i n the i s s u e of new  t i t l e s poses y e t  a n o t h e r problem, f o r r e p l a n t i n g g r a n t s can o n l y be w i t h a l e g a l t i t l e t o the l a n d . d u r i n g the c u r r e n c y  I f new  obtained  t i t l e s are not  issued  of the r e p l a n t i n g schemes, i t i s p o s s i b l e  t h a t l a n d w i l l be used f o r crops o t h e r t h a n rubber.  The  de-  gree of the f a l l i n r u b b e r p r o d u c t i o n w i l l depend on the  ex-  t e n t t o w h i c h o t h e r c r o p s are p l a n t e d .  This f a l l i n rubber  p r o d u c t i o n w i l l r e s u l t i n a d e c l i n e i n government revenue ohce a g a i n . The ion  Committee59 r e p o r t i n g on the problem of s u b d i v i s -  suggested t h a t the c r e a t i o n of s m a l l h o l d i n g s would add  the p o l i t i c a l suggestion  and  s o c i a l s t a b i l i t y of t h e c o u n t r y .  i s not d i s p u t e d but the t r u e content  s m a l l h o l d i n g c l a s s has t o be examined. d i v i d e d l a n d i s now social, political  of t h i s  I n s o f a r as t h e  economic s i g n i f i c a n c e w i l l be  than i f i t were owned by absentee l a n d l o r d s . ^ mer  This  sub-  owned by f o r m e r l y " l a n d l e s s p e o p l e " ,  and  to  the  different  I f the  are the owners, then i n s o f a r as e n t r e p r e n e u r s h i p ,  forsound  a g r i c u l t u r a l p r a c t i c e s , knowledge, and s a v i n g are promoted, such a development may  be growth promoting.  I f the l a t t e r  come the owners, t h e n the c o n c e n t r a t i o n of ownership may  be-  in-  59 paragraph  Report on S u b d i v i s i o n and F r a g m e n t a t i o n of E s t a t e s , 12.  60  C.Y.  Lim, op. c i t . , p.  52.  162  crease income i n e q u a l i t i e s . by t a x measures.  However t h i s can be c o r r e c t e d  What i s i m p o r t a n t i s t h a t t h e owners, who-  e v e r they a r e , promote economic  growth.  I n some c o u n t r i e s , whenever l a r g e e s t a t e s a r e  broken  up i n t o s m a l l e r u n i t s , l i m i t s as t o t h e s i z e , a r e s e t on the -  61  c r e a t i o n o f such h o l d i n g s . v i s i o n the h o l d i n g s may  Otherwise w i t h r e p e a t e d s u b d i -  become uneconomic.  i s no l e g i s l a t i o n r e g a r d i n g the s i z e of the To break up a l a r g e e s t a t e may  o r may  In Malaya, there subdivisions. not be  a g r i c u l t u r a l l y sound, depending on t h e f i n a n c i a l and  techni-  c a l s t a t u s of t h e new f a r m e r s . There i s no a g r i c u l t u r a l advantage i n b r e a k i n g up a w e l l formed e s t a t e to form a l a r g e number o f l e s s e f f i c i e n t peasant h o l d i n g s and even t h e expected s o c i a l or p o l i t i c a l advantages tend t o be i l l u s o r y ... u n l e s s the f a r m e r s a r e i n a p o s i t i o n t o make a good l i v e l i h o o d from t h e i r new. h o l d i n g and t o s e t a s i d e c a p i t a l f o r improvement Sometimes i t i s argued t h a t t h e d i v i s i o n of an e s t a t e i n t o s m a l l h o l d i n g s i n c r e a s e s t h e t o t a l output o f the a r e a of l a n d i n v o l v e d .  T h i s i s not a c r i t e r i o n f o r a s s e s s i n g  the n a t u r e o f such a p r o c e s s ;  i t i s not the p h y s i c a l volume  of output t h a t i s i m p o r t a n t t o t h e economy o f the c o u n t r y , but the v a l u e of the m a r g i n a l nets p r o d u c t .  I n C e y l o n , t h e l i m i t i s 100 a c r e s . See M. D i g b y , C o o p e r a t i v e s and Land Use, Rome, Food and A g r i c u l t u r a l O r g a n i z a t i o n , 1957, pp. 53-58. B.O. B i n n s , Land S e t t l e m e n t f o r A g r i c u l t u r e . Rome Food and .-.Agricultural O r g a n i z a t i o n , 1951, p. 25.  163  G e n e r a l l y , b o t h the d i r e c t and i n d i r e c t e f f e c t s o f s u b d i v i s i o n a r e l i k e l y to> i n v o l v e a d d i t i o n a l e x p e n d i t u r e by the government on s o c i a l o r overhead c a p i t a l .  Certain ser-  v i c e s w h i c h were a charge t o p r i v a t e e n t e r p r i s e w i l l become a charge t o s t a t e governments. revenues may  now  A l s o government  be expected t o be reduced somewhat t h r o u g h low-  er r e c e i p t s i n the form o f e x p o r t d u t i e s and income t a x a t i o n . We have a l r e a d y shown i n Chapter IV t h a t s m a l l h o l d e r s a r e l e s s e f f i c i e n t t h a n e s t a t e s as p r o d u c e r s o f r u b b e r . "break-up" of e s t a t e s i s tantamount smallholdings.  Because  The  to the c r e a t i o n of  of t h i s development  of s m a l l h o l d i n g s by the Land development  and the c r e a t i o n  Authority  {dis-  cussed i n the n e x t c h a p t e r ) , t h e whole s t r u c t u r e o f the r u b b e r i n d u s t r y i n Malaya i s l i k e l y t o change, not o n l y w i t h r e s p e c t t o u n i t s of p r o d u c t i o n , but a l s o w i t h r e s p e c t t o efficiency. Summary T h i s c h a p t e r has been concerned with'.the "break-up" of rubber e s t a t e s .  I t r e l a t e d t o the v a r i o u s a s p e c t s o f  e s t a t e s which have been d i m i n i s h i n g i n s i z e . The f i r s t p a r t was concerned w i t h t h e s a l e of e s t a t e s and p a r t s o f e s t a t e s . economic and p o l i t i c a l .  The reasons f o r the former were  F o r the most p a r t , economic  were more i m p o r t a n t f o r t h e l a t t e r .  reasons  I t was noted t h a t t h e  s e l l i n g - o f f o f rubber e s t a t e s has abated somewhat simce M a l a y a  164  became independent. I n the second p a r t we i n v e s t i g a t e d t h e available f o r subdivision.  opportunities  The c h i e f reason here was  the  a v a i l a b i l i t y of d i f f e r e n t r e p l a n t i n g g r a n t s f o r d i f f e r e n t sizes of holdings.  However n e i t h e r "break-up" nor sub-  d i v i s i o n has a f f e c t e d a s i g n i f i c a n t p r o p o r t i o n  of  estate  rubber a c r e a g e , except i n the s t a t e of Penang. The consequences third part. effects.  of "break-up" were examined i n the  These were d i v i d e d i n t o d i r e c t and i n d i r e c t  Labour, e s t a t e s e r v i c e s and p r o d u c t i v i t y a r e d i r -  e c t l y a f f e c t e d by s u b d i v i s i o n .  The r e s u l t o f t h e i n d i r e c t  e f f e c t s i s a l o s s i n government revenue.  In a n u t s h e l l , the  most i m p o r t a n t e f f e c t i s t h e c r e a t i o n o f s m a l l h o l d i n g s ,  which,  as we have shown, are l e s s e f f i c i e n t as p r o d u c e r s o f r u b b e r than e s t a t e s .  Hence t h e break-up o f rubber e s t a t e s  will  i n v o l v e changes i n b o t h the s t r u c t u r e and e f f i c i e n c y of the rubber i n d u s t r y , which w i l l i n t u r n have e f f e c t s on t h e economy as a whole, f o r Malaya i s g r e a t l y dependent on rubber as a source of  income.  CHAPTER VI THE LAND DEVELOPMENT AUTHORITY—AN ECONOMIC NECESSITY? I n t h i s c h a p t e r we w i l l a p p r a i s e the establishment  a p o l i c y measure--  o f the Land Development A u t h o r i t y .  w i l l be done i n two p a r t s .  I n t h e f i r s t p a r t we w i l l  This give  a b r i e f d e s c r i p t i o n of t h e scope and n a t u r e of t h e A u t h o r i t y ' s work and e v a l u a t e  the reasons given f o r i t s  establishment.  I n t h e second p a r t we w i l l examine the p r o p o s i t i o n — i s t h e Land Development A u t h o r i t y n e c e s s a r y f o r l a n d development. The Land Development  Authority  A Land Development A u t h o r i t y was i n c o r p o r a t e d by  ord-  i n a n c e i n 1 9 5 6 t o promote and a s s i s t t h e i n v e s t i g a t i o n , formu l a t i o n and i m p l e m e n t a t i o n o f p r o j e c t s f o r the development and s e t t l e m e n t  of l a n d .  1  By 1 9 6 5 t h e A u t h o r i t y p r o p o s e s t o  c l e a r , c u l t i v a t e and s e t t l e an a r e a o f about a cost of 24,000  $270  million.  families.  250,000  acres at  T h i s a r e a i s e x p e c t e d t o accommodate  A f t e r t h e i n i t i a l c l e a r i n g o f the j u n g l e  by government c o n t r a c t o r s , c a r e f u l l y s e l e c t e d s e t t l e r s become  F e d e r a t i o n o f M a l a y a , Annual R e p o r t . 1956, Lumpur, Government P r i n t e r , 1957, p. 141. 2  Kuala  F e d e r a t i o n o f M a l a y a , Second F i v e Year P l a n , 1961-1965. K u a l a Lumpur, Government P r i n t e r , 1961, p. 2 7 . H e r e a f t e r r e f e r r e d t o as Second F i v e Year P l a n , 1961-1965.  I  166  residents.  The s e t t l e r s p r o v i d e a l l t h e l a b o u r r e q u i r e d t o  develop t h e a r e a , b u i l d t h e i r own homes and p l a n t rubber on seven o f t h e t e n a c r e s a l l o c a t e d  t o each s e t t l e r .  Credit  and m a t e r i a l s a r e made a v a i l a b l e  f o r two y e a r s , a f t e r w h i c h  i t i s expected t h a t t h e s e t t l e r can make a l i v i n g by p r o d u c i n g r i c e and v e g e t a b l e s and by r a i s i n g l i v e s t o c k .  The  A u t h o r i t y e x p e c t s t o r e c o v e r l o a n s from s e t t l e r s s t a r t i n g w i t h the seventh year when t h e rubber i s ready f o r t a p p i n g .  It  i s e s t i m a t e d t h a t t h e s e t t l e r s s h o u l d be a b l e t o e a r n a t l e a s t $300 p e r month when t h e scheme i s i n f u l l operation.'^ All  a s p e c t s of c u l t i v a t i o n are t o be under s k i l l e d  direction.^  Thus the s a l i e n t f e a t u r e of t h e l a n d development scheme i s t h a t each s e t t l e r w i l l be g i v e n a t e n acre  farm  on w h i c h he i s r e q u i r e d t o p l a n t seven a c r e s of r u b b e r and t h r e e a c r e s of r i c e and o t h e r food c r o p s .  A p p l i c a n t s a r e c o n s i d e r e d on a p o i n t system which i n c l u d e s age, p h y s i c a l f i t n e s s , number of c h i l d r e n , a g r i c u l t u r a l background, s k i l l i n u s e f u l t r a d e s and t h e amount o f l a n d owned. See "Land f o r t h e l a n d l e s s , " S t r a i t s Budget. 23 November, I960, p. 10. Second F i v e Y e a r P l a n . 1961-1965. p. 9. See "Malaya m o b i l i s e s i t s l a n d , " New Commonwealth. volume 38 (January I 9 6 0 ) , p. 52.  167  Reasons f o r t h e E s t a b l i s h m e n t  o f t h e Land Development  Authority We s h a l l now t u r n t o t h e r e a s o n s u n d e r l y i n g tablishment  of the Authority.  the es-  These a r e t h e c o n c e r n f o r .the  movement o f t h e r u r a l people t o t h e towns and t h e r e s u l t a n t i n c r e a s e i n urban unemployment, and a .desire f o r d i v e r s i f i c a t i o n of a g r i c u l t u r a l  produce.  I t i s often pointed  out t h a t l a n d hunger i s c o n c e a l e d  by t h e d r i f t t o t h e towns, and t h a t t h e problems of a f a s t growing p o p u l a t i o n have been m i n i m i s e d by a r e l a t i v e l y s m a l l i n c r e a s e i n t h e number who a r e o f w o r k i n g age.  Since  1 9 5 0 , t h e r u r a l p o p u l a t i o n has i n c r e a s e d by t e n p e r c e n t , 7  whereas t h e urban p o p u l a t i o n has i n c r e a s e d by e i g h t y This c o n s t i t u t e s the b a s i s f o r r u r a l  per cent.  development.  However t h i s p o l i c y seems t o be i n c o n s i s t e n t w i t h the Government's i n d u s t r i a l p o l i c y .  The aim o f  the l a n d development schemes i s " t o make v i l l a g e ,  life  8  more a t t r a c t i v e " , out o f the r u r a l a r e a s . i s being  and t h u s t o p r e v e n t p e o p l e from moving • Industrialisation,  encouraged by t a x h o l i d a y s , needs cheap  which  labour.  C f . "More l a n d f o r Malaya's p e a s a n t s , " New Commonw e a l t h . volume 3 8 (December i 9 6 0 ) , p. 8 1 2 . 7  Loc. c i t .  8  See " B e n e f i t s f o r M a l a y a ' s v i l l a g e r s , " New Commonw e a l t h , volume 3 7 (December 1 9 5 9 ) > p. 8 1 4 .  /  168  The p r i c e o f l a b o u r i s p r e v e n t e d from f a l l i n g s i n c e a t t e m p t s are b e i n g made t o d i s c o u r a g e t h e movement of t h e r u r a l p o p u l a t i o n t o t h e urban a r e a s .  As i t i s , Malayan l a b o u r ,  u n l i k e t h a t o f Hong-Kong, i s n e i t h e r cheap n o r v e r y p r o ductive. ing  Thus t h e government seems t o be p u r s u i n g c o n f l i c t -  policies. The aim o f d i v e r s i f i c a t i o n i s r e f l e c t e d  s i o n o f t h e t e n a c r e farm i n t o t h r e e a c r e s o f food c r o p s . self-sufficiency  seven a c r e s of r u b b e r and  As we have seen i n Chapter I I I  i n r i c e i s not e c o n o m i c a l l y f e a s i b l e . ,.  t h e support p r i c e o f $15 a p i c u l ^ , cheap.  i n the d i v i -  10  9  With  Malayan r i c e i s n o t  T h a i l a n d can s u p p l y t h e same f o r $9 a p i c u l .  1 1  About 75,000 a c r e s o f r i c e w i l l have been p l a n t e d by 1965.  I f t h e d e c i s i o n t o p l a n t t h e s e 75,000 a c r e s had been  12  l e f t w i t h p r i v a t e e n t e r p r i s e , t h e a r e a would p r o b a b l y have been p l a n t e d w i t h e x p o r t c r o p s , w h i c h would y i e l d a l a r g e r ret u r n , b o t h t o p r i v a t e e n t e r p r i s e and t o t h e government.  9  S e e Chapter I I I , pp. 79-88.  "^One  P i c u l = 133 pounds.  ^''Self-sufficiency,"  S t r a i t s Budget. 4 A p r i l 1962,  p. 3. 12  3/10 x 250,000  z  75,000  169  I n the enthusiasm f o r r u r a l development, a l t e r n a t i v e u s e s o f l a n d appear t o be n e g l e c t e d .  Up t o t h i s p o i n t i n  t h i s s t u d y , we have made no mention o f t i n m i n i n g .  It is  t r u e t h a t our concern i s m a i n l y w i t h a g r i c u l t u r a l l a n d But the j u s t i f i c a t i o n f o r i n t r o d u c i n g t i n m i n i n g  use.  i s that  t h i s a c t i v i t y competes w i t h a g r i c u l t u r e f o r t h e use o f l a n d . F o r over t w e n t y - f i v e y e a r s , p r o s p e c t i n g f o r t i n has been s e v e r e l y l i m i t e d by c o n t r o l s a s s o c i a t e d w i t h t i o n schemes, t h e war,  restric-  the o c c u p a t i o n and the "Emergency". -^ 1  I n a d d i t i o n i t has been d e l a y e d by t h e c o m p a r a t i v e weakness of the S t a t e a d m i n i s t r a t i o n s , w h i c h c o n t r o l l a n d p o l i c y ,  and  by some h o s t i l i t y among the M a l a y s towards expending t h e area f o r t i n mining.14 C u r r e n t l y , t i n y i e l d s (on the b a s i s of an output 25,070  pounds) a g r o s s v a l u e of  the government d e r i v e s p a r i s o n rubber acre) y i e l d s  $10,800  $91,600  of  an a c r e from w h i c h  i n e x p o r t revenue.  By com-  ( w i t h p r o d u c t i o n a t about 1 , 0 0 0 pounds per  $1,000  an a c r e and  $123  i n export revenue.  a c r e of r i c e merely y i e l d s a g r o s s v a l u e o f  $340.15  An  It i s  ^ I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and D e v e l o p ment, The Economic Development of M a l a y a , S i n g a p o r e , Government P r i n t e r , 1955, pp. 9 8 - 9 9 . H e r e a f t e r c i t e d as t h e Bank M i s s i o n Report. l ^ T . H . S i l c o c k , The Commonwealth Economy o f S o u t h - e a s t A s i a , London, Cambridge U n i v e r s i t y P r e s s , 1959, p. 13. 15i»Tin P r o s p e c t s , " S t r a i t s Budget, 9 November I 9 6 0 , p . 3 .  170  q u i t e c l e a r from the f i g u r e s c i t e d t h a t i t would be  irrat-  i o n a l t o l e t the t i n m i n i n g i n d u s t r y d e c l i n e f o r want of land.  Those not i n f a v o u r  of a l i e n a t i n g l a n d f o r t h e  prospec-  t i n g of t i n would argue t h a t t i n i s a w a s t i n g a s s e t and resources  s h o u l d not be a l l o c a t e d t o i t .  I t should be  hence point-  ed out t h a t t h e revenue d e r i v e d from t i n can be i n v e s t e d i n those p r o j e c t s w h i c h r e s u l t i n almost permanent a s s e t s , f o r example, e d u c a t i o n ,  s o c i a l s e r v i c e s , t r a n s p o r t and  communica-  tions. From the r e a s o n s examined above, i t appears t h a t t h e s e are m o t i v a t e d by non-economic c o n s i d e r a t i o n s , w h i c h f o r our purposes are i r r e l e v a n t . D i v e r s i f i c a t i o n i s not an economic p r o p o s i t i o n .  The whole scheme r e p r e s e n t s  a deliberate  attempt t o c r e a t e r u b b e r s m a l l h o l d i n g s w h i c h , as we  have  shown i n Chapter IV, are l e s s e f f i c i e n t t h a n rubber e s t a t e s . I s an A u t h o r i t y n e c e s s a r y f o r Land Development? We w i l l now chapter,  i n v e s t i g a t e the  second a s p e c t of t h i s  i s an a u t h o r i t y n e c e s s a r y f o r l a n d development.  q u e s t i o n a r i s e s because i t r e p r e s e n t s two  respects.  Up t o now  The  a p o l i c y departure i n  economic development has been l e f t  t o p r i v a t e e n t e r p r i s e , and t h e government has s e l f t o the c r e a t i o n of a f a v o u r a b l e  confined i t -  investment c l i m a t e .  The  I n f a c t the branch l i n e s of the p r e s e n t r a i l w a y were t h e f i r s t b y - p r o d u c t s of t i n revenue.  line  .171  l a n d development schemes amount t o planned i n t e r n a l m i g r a tion.  This implies that private i n i t i a t i v e i s l a c k i n g .  We  w i l l i n v e s t i g a t e t h i s i m p l i c a t i o n by c o n s i d e r i n g t h e f o l l o w ing  f a c t o r s — r i s k , i g n o r a n c e , and i n s t i t u t i o n a l  rigidities—  i n o r d e r t o a s c e r t a i n whether an a u t h o r i t y i s needed f o r l a n d development. B e f o r e p r o c e e d i n g w i t h the i n v e s t i g a t i o n i t s h o u l d be emphasised  t h a t v e r y l i t t l e new l a n d ( e s p e c i a l l y r u b b e r l a n d )  has been a l i e n a t e d s i n c e 1934, t h e y e a r of t h e f i r s t n a t i o n a l Rubber R e g u l a t i o n Scheme.  Inter-  F o r t h e purposes o f t h i s  a n a l y s i s , we w i l l assume t h a t l a n d has been a v a i l a b l e , t h e n examine whether the above mentioned  and  factors tradition-  a l l y making f o r i m m o b i l i t y a r e such as t o n e c e s s i t a t e a l a n d development a u t h o r i t y . Risk P r i v a t e i n v e s t m e n t , whether f o r e i g n or domestic i s a q u e s t i o n of i n c e n t i v e s . ate  investment may  With r e s p e c t t o export crops p r i v -  t a k e one of t h r e e f o r m s - - f o r e i g n o p e r a t e d  e s t a t e s , l o c a l l y o p e r a t e d e s t a t e s and s m a l l h o l d i n g s . we w i l l c o n s i d e r why ed t o r u b b e r . the?  First  f o r e i g n investment i s no l o n g e r a t t r a c t -  F o r t h i s purpose we w i l l b r i e f l y  recapitulate  c o n c l u s i o n s a r r i v e d a t i n t h i s c o n n e c t i o n i n Chapter  17  III.  The r i s k s i n v o l v e d are economic and p o l i t i c a l .  The  economic reason f o r t h i s i s t h a t t h e l o n g term p r o s p e c t s f o r n a t u r a l r u b b e r are not v e r y a t t r a c t i v e when c o n s i d e r e d i n r e 17see C h a p t e r HI, pp.  60-79.  172  l a t i o n t o s y n t h e t i c rubber.  The q u e s t i o n o f t h e p o l i t i c a l  s e c u r i t y o f i n v e s t m e n t s i s a l s o an i m p o r t a n t f a c t o r . The p o l i t i c a l f a c t o r i s n o t a p p l i c a b l e t o l o c a l e s t a t e investment.  The c o m p e t i t i o n from s y n t h e t i c r u b b e r i s  t h e more i m p o r t a n t f o r t h i s  group.  I f expected p r o f i t s from a g r i c u l t u r e a r e such as t o d i s c o u r a g e p r i v a t e i n v e s t m e n t , i t does n o t n e c e s s a r i l y f o l l o w t h a t government i n t e r v e n t i o n i s necessary,, u n l e s s t h e f a c t o r s were such as t o cause mass s t a r v a t i o n and p o v e r t y . What o f t h e s m a l l h o l d e r s ?  I n the past n e i t h e r p e r -  s u a s i o n n o r c o e r c i o n was needed t o make t h e peasants p l a n t export crops.  There a r e a number o f f a c t o r s which might  p r e v e n t and d i s c o u r a g e peasant i n v e s t m e n t .  These a r e i g -  norance and i n s t i t u t i o n a l r i g i d i t i e s , each o f w h i c h w i l l be discussed i n turn. Ignorance Under the heading o f i g n o r a n c e we w i l l c o n s i d e r underemployment, i n e r t i a and c o n s e r v a t i s m , and i m p e r f e c t knowledge of r e s o u r c e s . Ignorance  i s a u b i q u i t o u s f a c t o r and i t can r e s u l t i n  immobility of the f a c t o r s of production. t o t h e problem  of. underemployment.  This i s related  Underemployment i n t h e  r u r a l a r e a s may be due t o i g n o r a n c e o f a l t e r n a t i v e i t i e s o r i t may be due t o i n e r t i a .  opportun-  Whatever t h e cause,  employment r e s u l t s i n a lower s t a n d a r d o f l i v i n g .  under-  /  1  173  I n o t h e r p a r t s o f the w o r l d , when p o p u l a t i o n p r e s sure has become a c u t e , i n d i v i d u a l s have moved out t h e i r own  on  a c c o r d e i t h e r t o undeveloped p a r t s w i t h i n t h e i r  own  c o u n t r i e s or to other c o u n t r i e s .  was  needed.  We  No government a c t i o n  cannot j u s t i f y such a c t i o n i n M a l a y a on the  grounds of i g n o r a n c e , s i n c e some of the i n t r a - and  inter-  n a t i o n a l m i g r a t i o n s o c c u r r e d i n p e r i o d s of time when n e i t h e r the l e v e l o f e d u c a t i o n nor of t e c h n o l o g y were advanced. southward movement of the Shan p e o p l e s of South C h i n a the p l a i n s of the Mekong and the Menam may  The  into  be c i t e d as an  example. A r e l a t e d aspect of i g n o r a n c e i s i n e r t i a and vatism.  conser-  I t i s t r u e t h a t the a g r i c u l t u r a l l a b o u r f o r c e i s  c h a r a c t e r i s e d by a l a c k of m o b i l i t y due m a i n l y t o the r e l u c t a n c e t o s e v e r f a m i l i e s t i e s , c o n s e r v a t i s m and the t y t o a d j u s t t o new  surroundings.  inabili-  But i t seems t h a t t h i s  c h a r a c t e r i s t i c i s not as predominant as i t i s made out t o be. The numerous a p p l i c a t i o n s f o r l a n d mentioned i n t h e ' p r e v i o u s 18 chapter new  i n d i c a t e t h a t people must be w i l l i n g t o move out t o  l a n d s , even though i t may  not be a c r o s s S t a t e  IB  See Chapter V, pp. 150-151.  boundaries,  I  174  I m p e r f e c t knowledge o f r e s o u r c e s i s a n o t h e r cause of i m m o b i l i t y .  Up t o t h e b e g i n n i n g o f t h i s y e a r , a s e r i o u s  h a n d i c a p was t h e inadequacy o f d a t a on t h e u n r e a l i s e d pot e n t i a l i t i e s of a g r i c u l t u r e .  I f t h e f i n d i n g s of t h e S o i l  Research Commission''" a r e w i d e l y p u b l i c i s e d , i t i s p r o b a b l e 9  t h a t s m a l l h o l d e r s w i l l now be encouraged t o b r a n c h out i n t o new l i n e s i n a g r i c u l t u r e . Thus t h e presence o f i g n o r a n c e and i t s r e l a t e d a s p e c t s does not seem t o i n d i c a t e t h e need f o r government i n t e r v e n t i o n i n l a n d development.  Rather, the r o l e of the  government appears t o l i e i n t h e e d u c a t i o n a l f i e l d .  It i s  o f t e n argued t h a t s i n c e t h e p e a s a n t s a r e i g n o r a n t and l a c k i n g i n i n i t i a t i v e , i t i s n e c e s s a r y t h a t t h e government make good this deficiency.  I t i s however not c l e a r why t h e government  s h o u l d be a b l e t o "muster t h e t a l e n t s which by h y p o t h e s i s are l a c k i n g i n t h e p o p u l a t i o n " .  -  19 See " S o i l R e s e a r c h F i n d i n g s , " F a r E a s t e r n Economic Review, volume 3 5 , - No. 6 ( 8 F e b r u a r y 1 9 6 2 ) , p. 3 2 1 . 20  The f i n d i n g s - r e v e a l many i n t e r e s t i n g p o s s i b i l i t i e s , f o r example, a t p r e s e n t p r i c e s t h e c u l t i v a t i o n o f e i t h e r M a n i l l a hemp, o i l palm o r t e a have c e r t a i n advantages o v e r rubber w i t h r e s p e c t t o demand, s y n t h e t i c s u b s t i t u t e s and ease of c u l t i v a t i o n . 21  P.T. Bauer and B.S. Yamey, The Economics o f Underdeveloped C o u n t r i e s , Cambridge, At t h e U n i v e r s i t y P r e s s , 1 9 5 7 , p. 161.  175  Institutional  Rigidities  We w i l l now t u r n t o the second f a c t o r which may t r i b u t e to i m m o b i l i t y — i n s t i t u t i o n a l r i g i d i t i e s .  con-  These  i n c l u d e tenancy arrangements, Malay R e s e r v a t i o n s , and i n adequate t r a n s p o r t f a c i l i t i e s . How may tenancy arrangements reduce m o b i l i t y ?  A  s u f f i c i e n t l y l o n g t e n u r e of l a n d i s n e c e s s a r y so t h a t t h e farmer can be a s s u r e d a r e t u r n f o r h i s i n v e s t m e n t s i n the land.  I n the event where l a n d i s becoming a v a i l a b l e from a  p r i v a t e s o u r c e , t h e e x i s t i n g c o n d i t i o n s o f tenancy may d e t e r a p o t e n t i a l farmer.  F o r , i n Malaya t e n a n c i e s a r e g e n e r a l l y  g r a n t e d f o r one y e a r and a r e n o t r e g i s t e r e d .  S i n c e the  War,  l a n d l o r d s have renewed tenancy o n l y upon an i n c r e a s e i n t h e tenant's o b l i g a t i o n s .  I n t h e absence of any  legislation  e s t a b l i s h i n g minimum s e c u r i t y f o r t e n a n t s , i n c e n t i v e s t o l a n d development  can be q u i t e weak.  Or, f a r m e r s may be w i l l i n g t o  c u l t i v a t e l a n d s under i n s e c u r e t e n u r e , but they w i l l proba b l y adopt a p r o d u c t i o n p l a n which w i l l d e p l e t e the s o i l r e sources.  From t h e v i e w p o i n t of s o c i e t y t h i s t y p e o f d e p l e -  tion i s wasteful. Thus i n a d e q u a t e t e n a n c y arrangements may  indicate  a need f o r l e g i s l a t i o n , but n o t f o r a r e s e t t l e m e n t scheme.  The Bank M i s s i o n R e p o r t , p.  318.  176  J u s t as t h e e x i s t e n c e o f unemployment i n s u r a n c e may reduce t h e m o b i l i t y o f l a b o u r somewhat, so t h e p r e s e n c e of Malay R e s e r v a t i o n s  2 3  reduces t h e m o b i l i t y of the Malays.  A l s o , the extensive nature  of such r e s e r v a t i o n s l i m i t s t h e  o p p o r t u n i t i e s o f movement f o r non-Malays. The  f i n a l i n s t i t u t i o n a l o b s t a c l e i s t h e absence o f a  co-ordinated  p l a n f o r t h e development of feeder r o a d s .  This  i s an o b s t a c l e t o development, b o t h by e s t a t e s and s m a l l h o l d ings.  Malaya i s f a i r l y w e l l endowed w i t h t r a n s p o r t  facili-  t i e s , f o r example t h e state-owned r a i l w a y r u n s a l o n g t h e whole l e n g t h o f t h e c o u n t r y on both s i d e s o f t h e main r a n g e . There i s a good network o f roads on t h e west coast and a rudimentary  one even on t h e e a s t c o a s t .  Land on e i t h e r s i d e  of t h e main l i n e s o f communication has a l r e a d y been developed. Movement t o undeveloped l a n d a w a i t s t h e c o n s t r u c t i o n o f feeder roads.  Hence t h e l a c k o f complementary r e s o u r c e s i n -  h i b i t s development. From t h e i n s t i t u t i o n a l r i g i d i t i e s examined . a b o v e j i t |? i s q u i t e c l e a r that these  o b s t a c l e s need t o be removed.  The  development o f new l a n d under an A u t h o r i t y i s n o t g o i n g t o remove these d i f f i c u l t i e s . c u r on t h e new s e t t l e m e n t  I n f a c t t h e same problems may r e schemes.  Malay R e s e r v a t i o n s a r e d i s c u s s e d i n Chapter I I , pp. 50-53.  0  177  Some O b j e c t i o n s t o Government P a r t i c i p a t i o n B e f o r e c o n c l u d i n g t h i s c h a p t e r we may  dwell briefly  on some o b j e c t i o n s t o government p a r t i c i p a t i o n i n l a n d development. I f we t a k e i n d i v i d u a l p r e f e r e n c e s t o be u l t i m a t e t h e n government i n t e r v e n t i o n can be j u s t i f i e d o n l y when t h e i n d i v i d u a l i s i n c a p a b l e of a c t i n g i n h i s own t h e n a t u r e of the problem  i n t e r e s t , where  c a l l s f o r t h e s a t i s f a c t i o n of group  wants, or where t h e r e o c c u r s a d i v e r g e n c e between p r i v a t e and s o c i a l c o s t s .  Such diseconomies  do not appear t o a r i s e  i n the case o f the s o i l r e s o u r c e s o f t h e l a n d .  Hence i t may  be concluded t h a t government i n t e r v e n t i o n i s u n c a l l e d f o r . Government p r o j e c t s c a r r y w i t h them the t r a d i t i o n a l d e f e c t s of b u r e a u c r a c y . 5 2  T h i s i s not t o say t h a t p r i v a t e  a g e n c i e s are i n t r i n s i c a l l y more e f f i c i e n t t h a n p u b l i c  agencies,  but a t l e a s t they can be d e s t r o y e d by t h e i r c o m p e t i t o r s . C o m p e t i t i o n t e n d s t o cure the d e f e c t s o f t h e market mechanism. I t may  be argued  t i v e i n underdeveloped  t h a t the market mechanism i s d e f e c c o u n t r i e s because economic h o r i z o n s  are l i m i t e d by i n e x p e r i e n c e .  But l a t e n i n e t e e n t h and  early  ^ C f . A.D. S c o t t , N a t u r a l R e s o u r c e s : The Economics o f C o n s e r v a t i o n , T o r o n t o , U n i v e r s i t y of Toronto P r e s s , 1955, p. 61, and H.C. Bunce, The Economics o f S o i l C o n s e r v a t i o n , Ames, Iowa, Iowa S t a t e C o l l e g e P r e s s , 1942, p. 77. ^ F o r an i n t e r e s t i n g d i s c u s s i o n of the p o l i t i c a l a l l o c a t i o n p r o c e s s see, J.W. H i r s l e r f e r , and J.C. DeHaven, and J.W. M i l l i m a n , Water S u p p l y , Economics, Technology and P o l i c y , C h i c a g o , U n i v e r s i t y of Chicago P r e s s , I960, pp. 74-$5. 2  /  178 .  twentieth century experience  i n Malaya i n d i c a t e s t h a t both  i n d i v i d u a l s and f i r m s a r e w e l l a b l e t o t a k e advantage of. f a v o u r a b l e market s i t u a t i o n s .  The rubber s m a l l h o l d e r s may  be c i t e d as an example o f an i l l i t e r a t e people who a r e a b l e t o respond t o changing market s i t u a t i o n s and o p p o r t u n i t i e s . There i s a d i f f e r e n c e between o r d e r i n g p e a s a n t s to  p l a n t seven a c r e s o f rubber and t h r e e a c r e s o f r i c e and 26  i n s t r u c t i n g them w i t h a d e m o n s t r a t i o n .  As Bauer and Yamey •  p o i n t o u t , t h e former method i s l i k e l y t o i n v o l v e a compulsory o v e r r i d i n g of time preferences of the farmers. ter  The l a t -  method on t h e o t h e r hand, widens t h e range o f a l t e r n a -  t i v e s open t o them and enables them t o choose t h e i r a c t i v i t i e s w i t h i n t h e framework o f r e s o u r c e s , p r e f e r e n c e s and opportunities. Summary This chapter s t a r t e d with a b r i e f d e s c r i p t i o n of t h e Land Development A u t h o r i t y , t h e work of which w i l l n o t o n l y i n c r e a s e t h e t o t a l c u l t i v a t e d a r e a , but w i l l a l s o c r e a t e some 2 5 , 0 0 0 new s m a l l h o l d i n g s ( l a r g e l y seven a c r e smallholdings).  rubber  T h i s p o l i c y measure was a p p r a i s e d on two  p o i n t s , from t h e s t a n d p o i n t o f t h e c r e a t i o n o f new s m a l l h o l d -  B a u e r and Yamey i op. c i t . . p. 1 5 8 . t  179  ings as  and  we  the  have  diversification  shown r e p r e s e n t  of  agricultural  a waste  of  produce,  resources  both  i n one  way  or  another. The lishment tion  second  of  that  could  an  new  hinder  examined.  conclusion tate  a  land land  was  land  the  of  a matter  of  levant.  On  son  the  basis  for this  i s the  e a c h , we such  as  of so  may  political  industry.  The  and  and  the  necessi-  role  as  in-  came t o  to  conclude by  of  the and  the  create  that  a  the  political'and  farmers As  f o r our  we  are  not  being  pointed  purposes,  out irre-  appears to  be  no  Authority.  i n Chapter I I I the foreign  were  education  f a c t o r s examined, there  little  assump-  land.  small  factors are,  the  which  to  Rather the  national policy,  out  that  of  in  estab-  ignorance,  i s motivated  we  very  factors  bottlenecks,  development  pointed  On  the  enterprise  direction  for a land  attracting  setting  case  I t appears that  such p o l i t i c a l  is  risk,  climate  Authority  earlier,  As  private  a g e n e r a l i s a t i o n we  factors. as  l i e i n the  investment  development  necessity  In the  institutional  more f a v o u r a b l e  preferred  by  development' a u t h o r i t y .  way  land.  t h e s e f a c t o r s were not  removal  economic  new  available, several  factors included  seems t o  land  chapter questioned  open up  development  government  By  to  rigidities. that  of  of t h i s  Authority  These  stitutional  part  rubber  investment. economic  government  too  The  industry chief  uncertainty has  not  rea-  be-  alienated  180  any s i g n i f i c a n t amount of r u b b e r l a n d s i n c e 1934.  Perhaps  i t i s t r y i n g t o make good b o t h the above d e f i c i e n c i e s s t e p by way o f the l a n d development schemes.  i n one  /  CHAPTER  VII  SUMMARY AND CONCLUSIONS . Two f i n a l t a s k s remain t o be performed:  t o gather  t o g e t h e r the main p o i n t s of our study so that t h e i r  import-  ance stands out i n c l e a r r e l i e f a g a i n s t the m u l t i t u d e o f d e t a i l and t o i n d i c a t e p o s s i b l e f u t u r e changes i n land use emanating  from past and present  developments.  We s h a l l f i r s t g i v e a synopsis of the f o r e g o i n g chapters.  I t was shown i n Chapter I t h a t land u t i l i s a t i o n i n  Malaya  i s c h a r a c t e r i s e d by^the p r o d u c t i o n o f two main c r o p s ,  rubber f o r export and r i c e f o r s u b s i s t e n c e . In  the e a r l y h i s t o r y of the rubber i n d u s t r y , two  stages were n o t i c e d .  The f i r s t was c h a r a c t e r i s e d by booming  markets and the second by r e s t r i c t i o n schemes and the depress i o n of the 1930s.  Whereas the e f f e c t of the f i r s t  stage was  a l a r g e expansion o f the area under rubber, not o n l y i n Malaya  but a l s o elsewhere  i n South-east A s i a , t h e e f f e c t o f  the second was t o r e s t r i c t p r o d u c t i o n and hence t h e area under rubber.  Although these schemes were no l o n g e r i n e f f e c t  d u r i n g t h e post war p e r i o d the o f f i c i a l a t t i t u d e towards l a n d a l i e n a t i o n f o r rubber appears t o have i n h e r i t e d the p l a n t i n g p r o v i s i o n s of the r e s t r i c t i o n schemes. In  c o n n e c t i o n with r i c e i t was noted t h a t the aim o f  o f f i c i a l p o l i c y then as now i s t o achieve s e l f - s u f f i c i e n c y i n  182  essential foodstuffs, namely rice. The development of this rubber-rice land use pattern reveals in Malaya a dualistic characteristic of economic growth, giving the country a predominant export sector and a subsistence sector of somewhat lesser importance. The interpretation of this "dual" feature of some underdeveloped countries has led to a large number of theories.  We reviewed the theories of sociological dualism,  technological dualism and colonialism and the "backwash" effects of International Trade.  The general conclusion of  these theories i s that underdeveloped countries are caught in a "vicious c i r c l e " of poverty.  Since there are alleged  to be no dynamic gains from international trade, the duali s t i c theorists, argue that i t might be in the interests of the underdeveloped countries to concentrate their resources on subsistence production and domestic manufacturing. However our inquiry on the effects of international trade on Malaya reveals a different conclusion. Specialisation for the international market has given Malaya the highest standard of living i n the Far East.  The stimulating  effects of this contact with the West have been both direct and indirect.  The direct effects have been the extension of  the cultivated area and the consequent increase in exports. The indirect effects have been the establishment  of secondary  and tertiary industries to serve the needs of the rubber i n -  183  dustry.  A l s o one o f t h e most o b v i o u s forms o f economic  development i s t h e p u b l i c investment made p o s s i b l e by t h e revenue from r u b b e r . There have been u n f a v o u r a b l e e f f e c t s t o o , b u t t h e s e have not been such as t o make f o r s t a g n a t i o n . D u a l i s m i s p r e s e n t b u t i t does not appear t o be l e a d i n g i n t h e d i r e c t i o n t o be expected from t h e d u a l i s t i c  theories.  As we p o i n t e d out i n Chapter I I I , t h e r e have been no s i g n i f i c a n t changes i n t h e c u l t i v a t e d a r e a i n t h e post war period.  There have been t h r e e broad s e t s o f o b s t a c l e s t o  new l a n d development.  F i r s t there are the o f f i c i a l  policies  on l a n d a l i e n a t i o n and t h e "Emergency" w h i c h have d i s c o u r a g e d land  development. Second, t h e u n c e r t a i n t i e s b e s e t t i n g t h e r u b b e r i n d u s -  try  have been r e s p o n s i b l e f o r t h e n o n - e x t e n s i o n o f l a n d under  rubber.  These u n c e r t a i n t i e s a r e both p o l i t i c a l  and economic.  The economic a s p e c t concerns l a r g e l y t h e g r o w t h o f t h e synt h e t i c r u b b e r i n d u s t r y and t h e p o s s i b i l i t y t h a t t h e s u b s t i t u t i o n o f s y n t h e t i c f o r n a t u r a l r u b b e r w i l l s h o r t l y become i n finitely  elastic.  Thus t h e p r o s p e c t s o f new f o r e i g n investment i n e s t a t e rubber are q u i t e u n a t t r a c t i v e .  Consequently t h e r e has  been no s i g n i f i c a n t e x t e n s i o n o f t h e acreage under r u b b e r . In f a c t e s t a t e acreage has d e c l i n e d by t h e amount o f "breakup". The t h i r d o b s t a c l e , t h e p o l i c y o f s e l f - s u f f i c i e n c y i n  184 r i c e , has p r e v e n t e d the e x t e n s i o n of t h e c u l t i v a t e d area under o t h e r c r o p s .  Such a p o l i c y measure r e f l e c t s t h e f a c t  t h a t the o p p o r t u n i t y c o s t s of p r o d u c i n g are b e i n g  a l t e r n a t i v e crops  neglected.  Thus the o f f i c i a l p o l i c i e s towards l a n d a l i e n a t i o n and the "Emergency", the l a c k of new  investment i n e s t a t e  r u b b e r and the p o l i c y of s e l f - s u f f i c i e n c y i n r i c e have i n way  or a n o t h e r p r e v e n t e d t h e e x t e n s i o n  a r e a i n t h e post war Next we  of the  one  agricultural  period.  undertook a comparison of the two  u n i t s of  production  i n t h e rubber i n d u s t r y , t h e e s t a t e s and the  small-  holdings.  T h i s was  since  our purpose was  considered  t o e v a l u a t e two  n e c e s s a r y at t h i s p o i n t  r e c e n t developments, the  "break-up" of rubber e s t a t e s and the l a n d development schemes, both of which r e s u l t i n the c r e a t i o n o f  smallhold-  ings. The main p o i n t s of i n v e s t i g a t i o n were o r g a n i s a t i o n , p r o d u c t i o n and  replanting.  I n the case of each we  came t o  t h e r e c u r r i n g c o n c l u s i o n t h a t the e s t a t e s appear t o be more e f f i c i e n t p r o d u c e r s of r u b b e r .  the  On e s t a t e s t h e economic  management of l a n d , the development of improved v a r i e t i e s and p r o c e s s i n g t e c h n i q u e s , h o u s i n g and  t o g e t h e r w i t h the  recruiting,  s u p e r v i s i n g o f l a b o u r are handled i n a manner com-  p a r a b l e w i t h the methods employed by l a r g e s c a l e i n d u s t r i a l enterprises. s p e c i a l i s e and  L i k e t h e s e e n t e r p r i s e s e s t a t e s are a b l e to s p e c i a l i s a t i o n r e s u l t s i n higher p r o d u c t i v i t y .  185  S i n c e t h e growth o f t h e s y n t h e t i c r u b b e r i n d u s t r y t h e question  of research  has become v e r y i m p o r t a n t , because  research  i s n e c e s s a r y t o reduce c o s t s o f p r o d u c t i o n and  hence make n a t u r a l r u b b e r c o m p e t i t i v e substitute. and  with i t s synthetic  Since the estates are b e t t e r able to i n i t i a t e  t a k e advantage o f r e s e a r c h , t h e y may be a b l e t o compete  b e t t e r with synthetic rubber. I n Chapter V we i n v e s t i g a t e d t h e problem o f t h e "break-up" o f r u b b e r e s t a t e s .  This r e l a t e d to the various  a s p e c t s o f e s t a t e s w h i c h have been d i m i n i s h i n g  i n size.  The  i n q u i r y was d i v i d e d i n t o t h r e e p a r t s : t h e s a l e o f rubber e s t a t e s and p o r t i o n s o f e s t a t e s , t h e s u b d i v i s i o n o f t h e s e e s t a t e s and t h e e f f e c t s o f such s u b d i v i s i o n on t h e Malayan economy. A l a r g e number o f rubber e s t a t e s were s o l d i n t h e immediate pre- and post-Malayan independence p e r i o d s . reasons f o r t h i s were economic and p o l i t i c a l .  The  Economic r e a -  sons were more i m p o r t a n t i n t h e s a l e o f p o r t i o n s o f e s t a t e s . However we noted t h a t t h i s s e l l i n g - o f f o f e s t a t e s has abated somewhat s i n c e Malaya became independent. S u b d i v i s i o n was prompted by t h e o p p o r t u n i t y  o f mak-  i n g s p e c u l a t i v e p r o f i t s and t h e a v a i l a b i l i t y o f d i f f e r e n t replanting grants f o r d i f f e r e n t sizes o f holdings.  Here  a g a i n we noted t h a t n e i t h e r "break-up" n o r s u b d i v i s i o n has affected a s i g n i f i c a n t proportion  o f the estate acreage except  /  186  i n the S t a t e of Penang. The  consequences of "break-up" and. s u b d i v i s i o n  b o t h d i r e c t and  i n d i r e c t . Labour, estate  d u c t i v i t y are a f f e c t e d d i r e c t l y .  The  are  s e r v i c e s and  pro-  r e s u l t of the i n d i r e c t  e f f e c t s i s a l o s s i n government revenue as w e l l as the need for  increased  e x p e n d i t u r e on the p a r t o f the-government i n  o r d e r t o make up f o r the s e r v i c e s f o r m e r l y  provided  estates.  creation of  The  most i m p o r t a n t e f f e c t i s t h e  h o l d i n g s w h i c h as we  pointed  by.the small-  out are l e s s , e f f i c i e n t as p r o -  d u c e r s of r u b b e r t h a n the e s t a t e s .  Hence the "break-up" of  r u b b e r e s t a t e s w i l l i n v o l v e changes i n both the s t r u c t u r e  and  e f f i c i e n c y of the r u b b e r i n d u s t r y . The  most r e c e n t  development i n l a n d use  development schemes w h i c h w i l l not  i s the  o n l y i n v o l v e an  extension  of the c u l t i v a t e d a r e a by some 250,000 a c r e s but a l s o 25,000 new The  rubber  land  create  smallholdings.  reasons f o r the e s t a b l i s h m e n t of the Land Develop-  ment A u t h o r i t y appear t o be the concern f o r r u r a l d e p o p u l a t i o n and a d e s i r e f o r s e l f - s u f f i c i e n c y and  diversification  of a g r i c u l t u r a l produce, a l l o f which upon e x a m i n a t i o n appear t o be m o t i v a t e d by non-economic c o n s i d e r a t i o n s . t i o n i s not an economic p r o p o s i t i o n and represents  the whole scheme  a d e l i b e r a t e attempt t o c r e a t e r u b b e r  ings which according  t o our c o n c l u s i o n s  Diversifica-  smallhold-  appear t o be  e f f i c i e n t t h a n the e s t a t e s as p r o d u c e r s of r u b b e r .  less  187  The  l a n d development schemes amount t o p l a n n e d  internal migration. is lacking. a b l e we  This implies that private i n i t i a t i v e  On the assumption t h a t l a n d was  considered  freely  avail-  t h r e e f a c t o r s — r i s k , i g n o r a n c e and i n -  s t i t u t i o n a l r i g i d i t i e s — i n o r d e r t o a s c e r t a i n whether t h e s e f a c t o r s were such as t o r e q u i r e planned l a n d development. Our  c o n c l u s i o n was  t h a t t h e r o l e of government seems to  i n the d i r e c t i o n o f e d u c a t i o n  be  and the removal of t h e i n -  s t i t u t i o n a l r i g i d i t i e s r a t h e r than i n planned i n t e r n a l  mi-  gration. I n f a c t no new  l a n d has been a l i e n a t e d f o r rubber  f o r the past t h i r t y y e a r s .  Hence the l a c k of p r i v a t e i n -  vestment cannot be blamed on r i s k or i n e r t i a .  I f new  land  had been a v a i l a b l e and p r i v a t e investment had not been f o r t h coming, t h e n t h e r e may  have been some j u s t i f i c a t i o n f o r  government i n t e r v e n t i o n . Thus i n the c o u r s e o f t h i s study we  have seen t h a t  l a n d use i n Malaya i s c h a r a c t e r i s e d by the p r o d u c t i o n of c r o p s , r u b b e r and r i c e .  T h i s p a t t e r n of l a n d use may  t o be the d i r e c t r e s u l t o f the c o n t a c t w i t h the West. t e r n a t e l y i t may  two  be s a i d Al-  be i n t e r p r e t e d as a d u a l p a t t e r n o f economic  growth. We l a n d use.  have a l s o seen t h a t t h e r e are two The  one  conflicts in  i s whether t o produce r u b b e r f o r export  or r i c e f o r s u b s i s t e n c e .  The  o t h e r i s between e s t a t e s  and  188  smallholdings.  The  l a t t e r as we have p o i n t e d out are  being  p r e f e r r e d as a m a t t e r of n a t i o n a l p o l i c y . The inherited  o f f i c i a l p o l i c i e s r e l a t i n g t o r u b b e r and from the days o f c o l o n i a l r u l e , w h i c h was  rice  are  i n some  r e s p e c t s r e s p o n s i b l e f o r t h e emergence of d u a l i s m .  Perhaps  the o f f i c i a l p o l i c i e s of t o d a y are an attempt t o e l i m i n a t e the phenomena of d u a l i s m  by p u r s u i n g  p o l i c i e s of  self-suf-  f i c i e n c y and d i v e r s i f i c a t i o n o f a g r i c u l t u r a l produce.  Al-  though t h i s d u a l i s m has^not l e d t o s t a g n a t i o n as i t i s a l l e g e d by - i t s t h e o r i s t s , yet a t t e m p t s t o e r a s e i t by means o f t h e p o l i c i e s mentioned above seem t o i m p l y t h a t  efficiency  c o n s i d e r a t i o n s are b e i n g pushed i n t o the background. Having summarised the more important  p o i n t s brought  out i n t h i s study, i t now  remains f o r us t o b r i e f l y  the f u t u r e trends i n land  use.  indicate  Malaya s t i l l has a g r e a t d e a l of l a n d i n r e l a t i o n t o i t s population. swamp and  jungle.  I t i s t r u e t h a t much o f i t i s under h i g h l a n d , But as the Bank M i s s i o n Report  indicates,!  t h e a r e a of unused, but p o t e n t i a l l y p r o d u c t i v e , l a n d i s a l most a t f i f t y per c e n t o f t h e p r e s e n t  cultivated  land.  However the a c c e l e r a t i o n of such development  presents  I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development, The Economic Development o f M a l a y a . S i n g a p o r e , Government P r i n t e r , 1955, p. 33. H e r e a f t e r r e f e r r e d t o as the Bank M i s s i o n R e p o r t .  189  " d i f f i c u l t problems".  The  Bank M i s s i o n Report l i s t s  a l f a c t o r s which p r e s e n t d i f f i c u l t problems. the inadequacy of knowledge and  sever-  These i n c l u d e  e v a l u a t i o n of u n u t i l i s e d  a g r i c u l t u r a l p o t e n t i a l i t i e s , b a r r i e r s t o the improvement of c u l t i v a t i o n p r a c t i c e s imposed by t r a d i t i o n , h a b i t and and  inertia,  the a d v e r s e e f f e c t ' s on i n c e n t i v e s c r e a t e d by u n s a t i s -  f a c t o r y c r e d i t and m a r k e t i n g arrangements and the u n f a v o u r -  2 a b l e developments i n l a n d t e n u r e r e l a t i o n s h i p s . A major o b s t a c l e t o b o t h p r i v a t e l a n d development and the a b i l i t y for  of the government to d e a l w i t h a p p l i c a t i o n s  l a n d has been the "Emergency".  a t i o n of the "Emergency" i n  I 9 6 0  However w i t h t h e  we would expect t h a t  a r r e a r s i n l a n d work w i l l be c l e a r e d up and t h a t new on l a n d a l i e n a t i o n may r i s k s are removed.  termin-  be f o r m u l a t e d  now  the policies  t h a t the s e c u r i t y  Furthermore p r i v a t e development t o o  may  be f o r t h c o m i n g f o r the same r e a s o n . What o f the main c r o p s , r u b b e r and  rice?  Will  d u a l i s m w h i c h c h a r a c t e r i s e s t h e Malayan economy be a c c e n t u a t e d or e r a s e d i n the f u t u r e ?  the  further  Present p o l i c i e s  and  f u t u r e t r e n d s i n d i c a t e t h a t t h i s d u a l f e a t u r e of the M a l a y a n economy i s not l i k e l y t o be changed v e r y much, .at l e a s t not i n the s h o r t r u n .  2  F o r , under the development schemes, the  I b i d . , p. 2 1 .  190 areas under rubber and r i c e are b e i n g i n c r e a s e d , although the p r o p o r t i o n of the l a n d a l l o c a t e d seven-tenths of the t o t a l .  I t i s true that o f f i c i a l  i c i e s are v e e r i n g i n the d i r e c t i o n diversification.  t o rubber i s about pol-  of s e l f - s u f f i c i e n c y  and  However, s i g n i f i c a n t changes i n the l a n d  use p a t t e r n do not seem l i k e l y ,  so that f o r some time t o come  rubber w i l l remain the mainstay of the Malayan economy a l though attempts at s e l f - s u f f i c i e n c y may  prove to be s u c c e s s -  ful. We w i l l now  c o n s i d e r the two main crops  In the case of rubber, the next f i v e years w i l l  individually. see an i n -  crease i n s m a l l h o l d i n g acreage r e s u l t i n g from the l a n d  de-  velopment schemes.  struc-  There w i l l a l s o be a change i n the  t u r e of the rubber I n d u s t r y . With rubber we may new  f o r e i g n investment  l y because dustry.  note a p a r a d o x i c a l development.  No  i s forthcoming i n e s t a t e rubber l a r g e -  of the u n c e r t a i n prospects of the n a t u r a l rubber i n -  On the other hand the government i s d e v e l o p i n g rub-  ber s m a l l h o l d i n g s .  T h i s i s probably due  t h a t i n the absence  of complete  to the r e a l i s a t i o n  knowledge about  Malaya's  a g r i c u l t u r a l p o t e n t i a l i t i e s , rubber o f f e r s the h i g h e s t economic r e t u r n s i n the short Sun. being made t o a t t r a c t  Furthermore  no attempts are  the f o r e i g n i n v e s t o r s i n t o rubber as  they are being made to a t t r a c t them i n t o i n d u s t r y .  This i s  probably due t o the f a c t that the government f e a r s what i s sometimes known as the " c o l o n i a l " type of investment.  At the  1 1  191  present  time l a r g e  s a t i s f y the  scale capitalised  politicians  that  the  of the  country.  sant  can  evolved with  nical  be  to  system c o n t r i b u t e s to  general welfare production  a g r i c u l t u r e has  I f improved the  forms of  financial  the pea-  and  tech-  a s s i s t a n c e o f g o v e r n m e n t , i t seems t h a t t h i s w i l l  be  favoured. But  f o r reasons  of product,  and  other  earning  d u c t i o n i s p r e f e r r e d as than  economics are  efficiency,  better  quality  t o t h e economy, p e a s a n t  a matter of n a t i o n a l p o l i c y .  involved:  a t i o n s loom l a r g e and thing  value  than  are  political  and  social  sometimes more i m p o r t a n t  proMore  considerthan  any-  else. 3  What a b o u t r i c e ? the  t a r g e t date  may  expect  rice ces  on  for self-sufficiency  a fairly  i n the rice  the  s u b s t a n t i a l expansion  i s not,  have p o i n t e d  the  professed  as we  principle aim  system of p r i o r i t i e s  of the  concentration out  policy  area  Thus  we  under resour-  frequently, i n advantage. to d i v e r s i f y  i t s d e p e n d e n c e on o f the  information^  of s c a r c e  of comparative  of o f f i c i a l  to reduce  latest  i s s e t .for 1965.  The  M a l a y a n economy and lies  to the  near f u t u r e .  accordance with The  According  rubber  Second F i v e * Y e a r  the  underPlan,  "'Cf. " S e l f - s u f f i c i e n c y T a r g e t , " News B u l l e t i n No. 88, J u l y 2, 1962, Embassy o f t h e F e d e r a t i o n o f M a l a y a , W a s h i n g t o n , D.C., p. 6 and "Muda r i v e r p r o j e c t , " e d i t o r i a l , S t r a i t s B u d g e t , J u n e 27, 1962, p. 3. }  192  and i s a l s o l i k e l y t o u n d e r l i e f u t u r e p o l i c i e s on l a n d development. What i s t h e r e l a t i v e " c o s t " o f t h e s e l f - s u f f i c i e n c y policy?  On t h e b a s i s o f a v a i l a b l e i n f o r m a t i o n t h e " c o s t "  i s a p p r o x i m a t e l y 3 . 6 p e r cent o f t h e Gross N a t i o n a l P r o d u c t . Thus Malaya i s g i v i n g up 3 . 6 p e r cent o f h e r s t a n d a r d o f living for-this self-sufficiency policy.  Perhaps t h e s o c i a l  and p o l i t i c a l o b j e c t i v e s a r e worth t h e " c o s t " i n v o l v e d .  The b a s i s o f t h i s e s t i m a t e i s as f o l l o w s : Net proceeds from one a c r e o f r u b b e r Net proceeds from one a c r e o f r i c e D i f f e r e n c e i n f a v o u r o f rubber (For t h e d e r i v a t i o n o f t h e n e t proceeds see Chapter I I I , p . 8 2 .  $520 $97 $423  Thus $ 4 2 3 i s t h e " c o s t " o f p r o d u c i n g 2 1 0 2 pounds o f r i c e from one a c r e o f l a n d , where t h i s l a n d i s s u i t a b l e f o r the p r o d u c t i o n of rubber. At p r e s e n t Malaya i m p o r t s 4 6 2 , 0 0 0 t o n s o f r i c e ( 3 5 p e r cent o f h e r r e q u i r e m e n t s ) . I n o r d e r t o a c h i e v e s e l f - s u f f i c i e n c y by 1 9 6 5 , she has t o a l l o c a t e about 4 9 2 , 0 0 0 a c r e s o f l a n d to r i c e . The " c o s t " o f t h i s i n terms o f $ 4 2 3 per- a c r e , t h e d i f f e r e n c e i n f a v o u r o f r u b b e r , amounts t o about $ 2 0 8 m i l l i o n . T h i s i s t h e e q u i v a l e n t o f about 3 . 6 p e r cent o f t h e Gross N a t i o n a l P o d u c t o f $ 5 , 7 8 0 m i l l i o n ( t h e 1 9 5 3 e s t i m a t e made by the I n t e r n a t i o n a l Bank M i s s i o n t o Malaya. See The Bank M i s s i o n Report, p. 1 4 . ) The range o f t h i s e s t i m a t e i s about t h r e e t o s i x p e r cent when both h i g h and l o w p r i c e s o f r u b b e r and r i c e a r e c o n s i d e r e d . I n a d d i t i o n i t may be assumed t h a t o f t h e 9 0 8 , 5 7 0 a c r e s o f l a n d c u r r e n t l y under r i c e , about o n e - h a l f o f t h i s a r e a i s s u i t a b l e f o r rubber p r o d u c t i o n . Hence t h e " c o s t " i n terms o f t h e Gross N a t i o n a l P r o d u c t i s a g a i n about 3 . 3 p e r c e n t . Thus these two e s t i m a t e s t o g e t h e r comprise about 6 . 9 per c e n t . The v a l i d i t y o f t h e s e e s t i m a t e s i s l i m i t e d by t h e f a c t t h a t n o t a l l t h e f i g u r e s used r e l a t e t o one d a t e . T h i s i s e s p e c i a l l y true f o r the r i c e f i g u r e s . r  APPENDIX  I  REPLANTING SCHEMES IN THE RUBBER INDUSTRY The r e p l a n t i n g o r d i n a n c e (Number 8 of 1952) p r o v i d e s f o r t h e c o l l e c t i o n o f a c e s s on a l l r u b b e r e x p o r t e d t o p r o v i d e funds f o r replanting.- 1  The cess c o l l e c t e d i s d i v i d e d  i n t o two f u n d s ; fund A f o r e s t a t e s and fund B f o r s m a l l h o l d ings. The cess ( s c h e d u l e I V t a x ) l e v i e d a t t h e f l a t  rate  o f 4-s c e n t s p e r pound i s c r e d i t e d i n d i v i d u a l l y t o t h e p a r t i c i p a n t s o f Fund A t o t h e e x t e n t o f r e p l a n t i n g e x p e n d i t u r e i n c u r r e d s i n c e 1946.  I n a d d i t i o n , t h e r e i s t h e government  r e p l a n t i n g scheme f o r e s t a t e s (1955-1961), w i t h funds amounti n g t o $168 m i l l i o n .  Replanting grants f o r estates are  g i v e n a t a r a t e o f $400 p e r a c r e up t o twenty-one p e r cent of t h e i r t o t a l r e g i s t e r e d acreage on 31 December 1954.  This  amount i s p a i d i n t h e f o l l o w i n g way: 1st 2nd 3rd 4th 5th  year year year year year  Total  $150 100 50 50 50 $400  S m a l l h o l d e r s ' share o f t h e c e s s i s c a l c u l a t e d on t h e  F o r a background o f t h i s , see F e d e r a l L e g i s l a t i v e C o u n c i l M i n u t e s and C o u n c i l P a p e r s . (3rd S e s s i o n ) F e b r u a r y 1950 t o January 1951.  194  basis of smallholder-estate i s t h e n p a i d i n t o Fund B.  production  r a t i o each month and  Each s m a l l h o l d e r  i s allowed t o  r e p l a n t o n e - t h i r d o f h i s p l a n t e d acreage o r f i v e whichever i s the g r e a t e r , during t h e currency (1952-1959 i n c l u s i v e ) . are a l l o w e d  acres,  o f t h e scheme  Those owning l e s s t h a n f i v e  t o r e p l a n t t h e i r t o t a l planted acreage.  a l l y t h e t o t a l g r a n t was l a t e r r a i s e d t o $500.  $400  per acre r e p l a n t e d .  acres OriginT h i s was  When t h e government r e p l a n t i n g scheme  came i n t o f o r c e i n 1955, a f u r t h e r g r a n t o f $100 p e r a c r e was  made p a y a b l e . These g r a n t s a r e p a i d i n cash and k i n d .  The  Fund B a d m i n i s t r a t o r s :  supply h i g h y i e l d i n g m a t e r i a l and 1  other s e r v i c e s .  The v a l u e  o f each i n s t a l l m e n t i s a s f o l l o w s :  Fund B. 1 s t Installment 2nd 3rd 4th 5th  » » " »  Government A i d  200  0  100 60 55 85  $500  0 50 50 0  Total 200 100 110 105 85  $100 -  $600  Each g r a n t i s p a i d o n l y on r e c e i p t o f s a t i s f a c t o r y r e p o r t s on  The f i g u r e $ 6 0 0 p e r a c r e i s based on t h e r e p l a n t i n g c o s t s c a l c u l a t e d by t h e Mudie M i s s i o n . These a r e reproduced below. Average r e p l a n t i n g c o s t p e r acre D e s t r u c t i o n o f o l d t r e e s by f e l l i n g 200 28 Planting material Manure |V72 Labour a t 100 man days $300 $600  195  c o n d i t i o n s i n t h e r e p l a n t e d h o l d i n g s made by f i e l d o f f i c e r s . , The f i r s t g r a n t i s p a i d when t h e s m a l l h o l d e r has  prepared  his  a r e a f o r p l a n t i n g w i t h c l o n a l seed, b u d g r a f t s , o r t r a n s -  fer  o f budded stumps.  after this.  The second i s n o r m a l l y p a i d s i x months  The r e m a i n i n g  i n s t a l l m e n t s are paid at twelve  monthly i n t e r v a l s . A d d i t i o n a l a s s i s t a n c e i s g i v e n t o those owning f i v e a c r e s o r l e s s o f p l a n t e d r u b b e r , because i t i s r e c o g n i z e d t h a t these s m a l l h o l d e r s depend i n t h e main, on rubber f o r t h e i r income. Consequently a r e a l h a r d s h i p l a s t i n g s i x o r seven y e a r s would ensue i f t h e y had t o c u t out t h e i r  entire  acreage i n o r d e r t o g e t t h e maximum r e p l a n t i n g b e n e f i t s . To overcome t h i s , s m a l l h o l d e r s can a p p l y t o "new p l a n t " r u b b e r , p r o v i d e d t h e y have o r can o b t a i n vacant  jungle land.  They can a p p l y t o "new p l a n t " o n l y i f t h e i r e x i s t i n g  rubber  a r e a s have a stand o f a t l e a s t s i x t y t r e e s p e r a c r e .  They  must a l s o g i v e an u n d e r t a k i n g t o the a d m i n i s t r a t o r s o f Fund B t h a t they w i l l c u t out t h e i r o l d t r e e s and r e p l a n t them w i t h h i g h y i e l d i n g rubber w i t h i n seven y e a r s o f the commencement of t h e i r new p l a n t i n g .  For t h i s , the smallholder i s e n t i t l e d  to $600 p e r a c r e . To supplement t h e above i s t h e Government  Replanting—  New P l a n t i n g Scheme f o r o t h e r rubber s m a l l h o l d e r s . m i l l i o n has been a l l o c a t e d f o r t h i s purpose.  $112  Participation  i s open t o s m a l l h o l d e r s owning t h i r t y a c r e s o r l e s s o f p l a n t e d  196  rubber.  To q u a l i f y , t h e y must a l s o be p a r t i c i p a n t s of  Fund B. A s m a l l h o l d e r can r e p l a n t — n e w p l a n t an a d d i t i o n a l acreage  (up t o a l i m i t o f f i v e a c r e s ) e q u a l t o the  he i s r e p l a n t i n g - - n e w p l a n t i n g under Fund B. government g r a n t of  $600  per acre i s p a i d .  An The  acreage  outright payments  are as f o l l o w s : 1st 2nd 3rd 4th 5th  $200 100 110 105 $5 $600  installment  Total  « " " "  -  i n cash and k i n d " " " " "  " " " " "  « " " " "  " " " " "  I f a s m a l l h o l d e r owning f i v e a c r e s o r l e s s w i s h e s t o r e p l a n t t h a t a d d i t i o n a l acreage t h a t he i s e n t i t l e d t o und e r the government scheme, he can do so i f he can get vacant o r j u n g l e l a n d .  I n t h i s c a s e , he need not cut out  the e q u i v a l e n t o l d rubber area.  Some income can s t i l l  be  o b t a i n e d from h i s o l d r u b b e r a r e a w h i l e h i s new- p l a n t i n g s are maturing. However, i f t h e s m a l l h o l d e r w i s h e s t o r e p l a n t h i s r u b b e r a r e a w i t h o t h e r approved  c r o p s , he has t o cut out t h e  rubber area. S m a l l h o l d e r s who t o c a r r y on " b l o c k " new  new  p l a n t w i t h r u b b e r are encouraged  p l a n t i n g , t h a t i s , t h e y are  encour-  aged to>combine t o g e t h e r and p l a n t i n b l o c k s o f 2 5 0 a c r e s o r more. A $ 5 m i l l i o n r e v o l v i n g fund has a l s o been set up t o  197  e s t a b l i s h n u r s e r i e s which w i l l s u p p l y h i g h y i e l d i n g r u b b e r p l a n t i n g m a t e r i a l t o the p a r t i c i p a n t s o f Fund B and t h e government scheme.  New p l a n t e r s who do n o t b e l o n g t o any  scheme can a l s o o b t a i n t h e i r p l a n t i n g m a t e r i a l from t h i s source.  Revenues from t h e s e s a l e s a r e c r e d i t e d t o t h e f u n d . Thus, i n one way o r a n o t h e r , attempts a r e b e i n g made  by way o f a s u b s i d y , t o overcome the economic and t e c h n i c a l d i f f i c u l t i e s of r e p l a n t i n g  smallholdings.  APPENDIX  II  SCOPE AND METHOD OF DATA COLLECTED ON THE "BREAK-UP" OF RUBBER ESTATES The d a t a c o v e r s m a i n l y t h e s t a t e s o f Penang, J o h o r e , M a l a c c a , and N e g r i Sembilan.  The i n f o r m a t i o n was o b t a i n e d  by p e r s o n a l i n v e s t i g a t i o n i n t h e above mentioned s t a t e s and by post f o r t h e remainder.  I n f o r m a t i o n from t h e l a t t e r was  o b t a i n e d by means o f two q u e s t i o n n a i r e s w h i c h were sent t o the r e s p e c t i v e Commissioners o f Lands and M i n e s . response  Some o f t h e  from t h i s source was f a i r l y s a t i s f a c t o r y b u t t h e r e  was no way o f c h e c k i n g t h e i n f o r m a t i o n t h u s r e c e i v e d . Most o f t h e m a t e r i a l c o l l e c t e d was o b t a i n e d p r i m a r i l y from Land and D i s t r i c t O f f i c e s , and from t h e R e g i s t r i e s o f Deeds o r T i t l e s .  However, t h e d a t a c o l l e c t e d was not o f a  u n i f o r m n a t u r e , as.methods o f l a n d a d m i n i s t r a t i o n v a r y i n t h e d i f f e r e n t s t a t e s due t o h i s t o r i c a l r e a s o n s . ^  Most o f t h e  m a t e r i a l t h u s o b t a i n e d was checked a g a i n s t g r a n t s and c e r t i f i c a t e s of t i t l e .  I n some o f t h e Land and D i s t r i c t  Offic-  e s , " s u b d i v i s i o n a l " f i l e s were not a v a i l a b l e and t h e r e f o r e  See I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development, The Economic Development o f M a l a y a . S i n g a p o r e ,  Government P r i n t e r , 1955, pp. 223-224.  2  Grants are i s s u e d i n respect of f i r s t a l i e n a t i o n s of l a n d . A l l subsequent t r a n s f e r s a r e r e c o r d e d i n t h e form o f c e r t i f i c a t e s o f T i t l e . T h i s a p p l i e s t o t h e whole o f M a l a y a w i t h the exception of Malacca.  199  m a t e r i a l had t o be c o l l e c t e d from t h e R e g i s t r y o f T i t l e s ( i n t h e former Federated  and Unfederated  States) or the  R e g i s t r y o f Deeds ( i n t h e former s e t t l e m e n t s o f P e n a n g and 2  M a l a c c a ) and i n t h e form o f " T r a n s f e r s o f B r i t i s h r e g i s t e r e d Companies t o A s i a n s " .  Such r e t u r n s a r e s u b m i t t e d q u a r t e r l y  t o t h e F e d e r a l government. Some d a t a was a l s o o b t a i n e d from t h e Departments o f Labour.  T h i s was s l i g h t l y d i f f e r e n t from t h a t c o l l e c t e d i n  the Land O f f i c e s . s u b d i v i s i o n without  As a r e s u l t o f t h e s e d i f f e r e n c e s d a t a on s a l e ^ was a v a i l a b l e o n l y f o r Penang,  J o h o r e , M a l a c c a and I^egri Sembilan. Heads o f Land and Labour O f f i c e s , O f f i c e r s o f t h e Rubber I n d u s t r y R e p l a n t i n g Board and s e v e r a l l a n d and share b r o k e r s were a l s o i n t e r v i e w e d . Some l i m i t a t i o n s o f t h e d a t a a r e t h e l a c k o f u n i f o r m i t y i n t h e Land A d m i n i s t r a t i o n and t h e inadequate ponse from c e r t a i n q u a r t e r s .  res-  B e s i d e s , t h e r e a r e no pub-  l i s h e d s t a t i s t i c s on t h e s u b j e c t .  Hence t h e r e was no way o f  c r o s s c h e c k i n g t h e d a t a o r o f making a comparison on t h e method o f c o l l e c t i o n .  Unless o t h e r w i s e and P r o v i n c e W e l l e s l e y .  s t a t e d , Penang means Penang I s l a n d  ^ F o r a d e f i n i t i o n o f t h i s See Chapter V, pp. 130-131.  BIBLIOGRAPHY I  GOVERNMENT DOCUMENTS, OFFICIAL PUBLICATIONS AND PUBLICATIONS OF INTERNATIONAL ORGANISATIONS A.  (a)  GOVERNMENT DOCUMENTS  F e d e r a t i o n of Malaya  F e d e r a t i o n o f M a l a y a . Annual R e p o r t s , 1950-1956. Lumpur, Government P r i n t e r , 1951-195~7.  Kuala  F e d e r a t i o n o f M a l a y a . Annual R e p o r t o f t h e Department o f A g r i c u l t u r e . 1958. K u a l a Lumpur, Government P r i n t e r , 1958. F e d e r a t i o n o f M a l a y a . R e p o r t of t h e Land A d m i n i s t r a t i o n Commission. K u a l a Lumpur, Government P r i n t e r , 1958. F e d e r a t i o n o f M a l a y a . Report o f t h e R i c e P r o d u c t i o n Committee, volume I . K u a l a Lumpur, Government P r i n t e r , 1953. F e d e r a t i o n o f M a l a y a . Report on S u b d i v i s i o n and Fragmentat i o n o f E s t a t e s . CLFM 65/57. Mimeographed. F e d e r a t i o n o f M a l a y a . R e p o r t o f t h e Working P a r t y s e t up t o C o n s i d e r t h e Development o f New A r e a s f o r Land S e t t l e ment i n t h e F e d e r a t i o n o f Malaya. K u a l a Lumpur, Government P r i n t e r , 1956". F e d e r a t i o n o f Malaya. Second F i v e Year P l a n , 1961-1965. Lumpur, Government P r i n t e r . 1961.  Kuala  F e d e r a t i o n o f M a l a y a , M i n i s t r y o f Labour and S o c i a l W e l f a r e . M o n t h l y R e p o r t s o f t h e Labour and M a c h i n e r y Departments 1956-1957.  (b)  Great B r i t a i n  Great B r i t a i n . C e n t r a l O f f i c e o f Information. Malaya, t h e Making o f a N a t i o n . London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1957.  Great B r i t a i n , C o l o n i a l O f f i c e . B r i t i s h Dependencies i n t h e F a r E a s t . 1945-1949. London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1950. Cmd. 7709.  201  Great B r i t a i n , C o l o n i a l O f f i c e . C o l o n i a l Annual R e p o r t s , The Malayan U n i o n , 1947. London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1949. G r e a t B r i t a i n , C o l o n i a l O f f i c e . An Economic Survey of t h e C o l o n i a l Empire, 1935. London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1937. C o l . No. 126. Great B r i t a i n , C o l o n i a l O f f i c e . An Economic Survey o f t h e C o l o n i a l T e r r i t o r i e s , volume 5. The F a r E a s t e r n T e r r i t o r i e s . London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1955. Great B r i t a i n , C o l o n i a l O f f i c e , An Economic Survey o f t h e C o l o n i a l T e r r i t o r i e s , volume 7, The P r o d u c t s of t h e C o l o n i a l T e r r i t o r i e s . London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1952. Ormsby-Gore, H a r o l d . Report on H i s V i s i t t o M a l a y a , C e y l o n and Java d u r i n g the Year 1928. London, Her M a j e s t y ' s S t a t i o n e r y O f f i c e , 1928. Cmd. 3235. (c)  U n i t e d S t a t e s o f America  U n i t e d S t a t e s , Bureau of F o r e i g n I n f o r m a t i o n , World Trade Information S e r v i c e . E s t a b l i s h i n g a Business i n Malaya. Economic R e p o r t s , No. 60-36. H o l t , E.G. Report on the Malayan and B r i t i s h Borneo Rubber I n d u s t r y . U n i t e d S t a t e s Department of Commerce, December 21, 1946. B. (a)  OFFICIAL PUBLICATIONS  F e d e r a t i o n o f Malaya  D e l T u f o , M.V. M a l a y a , a R e p o r t on t h e 1947 Census of Popu l a t i o n . London, Crown Agents f o r t h e C o l o n i e s , 1949. Embassy of the F e d e r a t i o n of M a l a y a , Washington, D.C. monthly B u l l e t i n s , 1960-1962.  Bi-  Mudie, R.F. chairman. R e p o r t of the M i s s i o n o f E n q u i r y i n t o t h e Rubber I n d u s t r y o f M a l a y a , 1954. K u a l a Lumpur, Government P r i n t e r , 1954. Rubber I n d u s t r y R e p l a n t i n g Board, Scheme f o r E s t a t e s . Report f o r 1958. Mimeographed.  Annual  202  Rubber I n d u s t r y R e p l a n t i n g B o a r d , Scheme No. 2. R e p o r t of the C h i e f O f f i c e r f o r 1955 and 1956. K u a l a Lumpur, Caxton P r e s s , 195 6 "and 1957. Rubber S t a t i s t i c s Handbook, I960. of S t a t i s t i c s , 1961.  K u a l a Lumpur, Department  W i l s o n , T.B. The Economics of P a d i P r o d u c t i o n i n N o r t h M a l a y a . P a r t I . K u a l a Lumpur, Department o f A g r i c u l t u r e ,  I958T"  (b)  Great  Britain  Malayan I n f o r m a t i o n Agency, London. M a l a y a . 1935. (c)  Handbook t o B r i t i s h  United S t a t e s of America  P r e s i d e n t ' s Materials.Policy^Commission. Resources f o r Freedom ( P a l e y R e p o r t ) . Washington, D.C., Government P r i n t i n g O f f i c e , 1952. C.  PUBLICATIONS OF INTERNATIONAL ORGANISATIONS  (a)  United Nations  (i)  U n i t e d N a t i o n s , Department o f Economic  Affairs  Commission on I n t e r n a t i o n a l Commodity T r a d e , 1955. S u r v e y of P r i m a r y Commodity M a r k e t s . New Y o r k , Department o f Economic A f f a i r s , 1955. (E/CN 13/11. ST/ECA/35.) Commodity S u r v e y , 1959. New Y o r k , Department o f Economic A f f a i r s , I960. (E/CN 13/36.) Commodity Trade and Economic Development. New Y o r k , Department o f Economic A f f a i r s , 1953(172519.) Impact o f S e l e c t e d S y n t h e t i c s on t h e Demand f o r N a t u r a l P r o d u c t s i n I n t e r n a t i o n a l Trade. New Y o r k , Department of Economic A f f a i r s , 19537 (E/2&38.) I n s t a b i l i t y i n t h e E x p o r t M a r k e t s o f Underdeveloped C o u n t r i e s . New Y o r k , Department o f Economic A f f a i r s , (E/2047/Rev.l. ST/ECA/l5.)  1952.  2 0 3  Land Reform. D e f e c t s i n t h e A g r a r i a n S t r u c t u r e as O b s t a c l e s t o Economic Development. New l o r k , Department of Economic A f f a i r s , 1 9 5 1 . (ST/ECA/ll.) Measures f o r t h e Economic Development of Under-developed C o u n t r i e s . New Y o r k , Department o f Economic A f f a i r s , 195T.  T S T / E C A / 1 0 . )  R e l a t i v e P r i c e s of E x p o r t s and Imports o f ' U n d e r - d e v e l o p e d C o u n t r i e s . New Y o r k , Department o f Economic A f f a i r s , 1 9 4 9 . ( P u b l i c a t i o n number not g i v e n . ) Review o f I n t e r n a t i o n a l Commodity P r o b l e m s . New Y o r k , Department o f Economic A f f a i r s , 195k~. TE/2672.) World Economic Survey. 1 9 5 5 . New Y o r k , Department o f Economic A f f a i r s , 1 9 5 6 . (E/2864.) World Economic S u r v e y , 1 9 5 6 . Economic A f f a i r s , 1 9 5 7 . (E World Economic S u r v e y , 1 9 5 7 . omic A f f a i r s , 1 9 5 ~ S \ ( E / 3 1 1 0  New Y o r k , Department o f T  2982,ST/ECA/44.)  New Y o r k , Department of EconST/ECA/53.)  World Economic S u r v e y . 1 9 5 8 . New Y o r k , Department o f Economic A f f a i r s , 1 9 5 9 . (E/CN 1 3 / 3 3 . ) . World Economic S u r v e y . 1 9 5 9 . New Y o r k , Department o f E c o n , omic A f f a i r s , I 9 6 0 . (E/CN 1 3 / 3 6 . ) . World Economic S u r v e y , I 9 6 0 . New Y o r k , Department o f Economic A f f a i r s , 1 9 6 1 . ( E / 3 5 0 / R e v . l . .ST/ECA/68). (ii) U n i t e d N a t i o n s , Economic Commission f o r A s i a and the F a r E a s t (ECAfET. C r e d i t Problems o f S m a l l Farmers i n A s i a and the F a r E a s t . Bangkok, ECAFE, 1 9 5 7 . (E/6N 1 1 / 4 5 5 . ) 191.)  Economic S u r v e y , 1 9 4 9 . number not g i v e n ,. ) Economic Survey,  Bangkok, ECAFE,  1 9 5 0 .  Bangkok , ECAFE ,  1 9 5 1 .  Bangkok , ECAFE ,  (Publication  1 9 5 0 .  1 9 5 1 .  (E/CN/ll/  3 7 . )  Economic Survey,  1  9  5  2  .  (E/CN.  11/  204  Economic S u r v e y , 1952 _. Bangkok, ECAFE, 1953. P u b l i s h e d as Volume I I I No. 3., o f t h e Economic B u l l e t i n f o r A s i a and t h e F a r E a s t . ( P u b l i c a t i o n number not g i v e n ) . Economic S u r v e y , 1953. Bangkok, ECAFE, 1954. P u b l i s h e d as Volume I V , No. 4. of t h e Economic B u l l e t i n f o r A s i a and t h e F a r E a s t . ( P u b l i c a t i o n number not, given.) Economic S u r v e y , 1954. Bangkok, ECAFE, 1955. P u b l i s h e d as Volume V, No. 4, o f the Economic B u l l e t i n f o r A s i a and t h e F a r E a s t . ( P u b l i c a t i o n number not g i v e n . ) Economic S u r v e y , 1955. Bangkok, ECAFE, 1956. P u b l i s h e d as Volume V I , No. 4, o f t h e Economic B u l l e t i n f o r A s i a and t h e F a r E a s t . ( P u b l i c a t i o n number not g i v e n . ) M o b i l i s a t i o n o f Domestic C a p i t a l . R e p o r t and Documents of t h e Second Working P a r t y o f E x p e r t s . Bangkok, ECAFE, 1953. T P u b l i c a t i o n number not g i v e n . ) (iii) U n i t e d N a t i o n s , Economic Commission f o r L a t i n America (ECLA). The Economic Development o f L a t i n America and i t s P r i n c i p l e P r o b l e m s . New Y o r k , ECLA, 1950.' (E/CN. 12jB97Res J) . (iv)  U n i t e d N a t i o n s , Food and A g r i c u l t u r a l Organisation.jFAOji^ B i n n s , B.0. C o n s o l i d a t i o n o f Fragmented H o l d i n g s . Washington, D.C., FAO, 1950. A g r i c u l t u r a l Study No. 11. B i n n s , B.O. Development  Land S e t t l e m e n t f o r A g r i c u l t u r e . Rome, FAO, 1 Paper No. 9.  B i n n s , B.O. P l a n t a t i o n and o t h e r C e n t r a l l y Operated E s t a t e s . Rome, FAO, 1957. A g r i c u l t u r a l Study"No. 28. 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" S o c i a l R e s e a r c h , volume 16, No. 1 (March 1 9 4 9 ) , pp. 1 - 1 1 . S o l o , R o b e r t . "The New Threat o f S y n t h e t i c t o N a t u r a l Rubber." Southern Economic J o u r n a l volume 2 2 , No. 1 ( J u l y 1 9 5 5 ) , pp.  f  55-64.  S t e w a r t , N e i l . " M a l a y a — F u t u r e o f Rubber." Labour M o n t h l y , volume 2 9 (September 1 9 4 7 ) , pp. 2 7 9 - 2 8 3 . B. (a)  ARTICLES FROM PERIODICALS  The E c o n o m i s t , London.  " P r i v a t e L i f e f o r S y n t h e t i c Rubber." ( 1 January 1 9 5 5 ) , p. 3 7 0 . "What P r i c e S y n t h e t i c Rubber." u a r y 1 9 5 5 ) , p. 370.  E c o n o m i s t , volume 1 7 4  Economist.volume 1 7 4 ( 2 9 J a n -  "New E x p o r t Duty on Rubber," Economist.volume 175 pp.  795-796.  "Reassessment f o r Rubber." ber  1955),  pp.  959-961.  (28  May  1955),  E c o n o m i s t , volume 1 7 7 ( 1 0 Decem-  "Rubber's B u l g i n g Money Bags." 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F a r E a s t e r n Economic Review, Hong-Kong.  "Malaya's Rubber." F a r E a s t e r n Economic Review, volume 2 1 , No. 1 5 ( 1 1 October 1 9 5 6 ) , pp. 3 6 9 - 4 7 0 . " N a t u r a l Rubber's C o n f i d e n c e i n t h e F u t u r e . " F a r E a s t e r n Economic R e v i e w volume 2 1 , No. 2 ( 2 2 January 1 9 5 9 ) , pp. 102-103.  T  S u c c e s s f u l R e p l a n t i n g . " F a r E a s t e r n Economic Review, volume 1, No. 1 5 ( 9 A p r i l ) , p. 491.  217  " F r a g m e n t a t i o n o f E s t a t e s . " F a r E a s t e r n Economic Review, volume 21, No. 16 (16 A p r i l 1 9 5 9 ) , pp. 5 2 5 - 5 2 6 . " A s i a n Rubber." F a r E a s t e r n Economic Review, volume 22, 3 (16 J u l y 1959), pp. 8 3 - 8 9 .  No.  "Singapore Records H i g h e s t P r i c e . " F a r E a s t e r n Economic Rev i e w , volume 2 7 , No. 12 ( 1 7 September 1959), p. 473. "New  Government's Emphasis on R u r a l Development." F a r E a s t e r n Economic Review, volume 2 7 , No. 17 (22 October 1959), p.  666.  "Take o v e r B i d s . " F a r E a s t e r n Economic Review, volume 2 7 , No. 17 (22 October 1959), pp. 6 6 6 - 6 6 7 . "Malayan L a t e x E x p o r t s Up." F a r E a s t e r n Economic Review, volume 2 7 , No. 1$ ( 2 9 O c t o b e r 1 9 5 9 T 7 P- 715. " R u s s i a , t h e B e s t Customer f o r Malaya's Rubber." F a r E a s t e r n Economic Review, volume 27, No. 26 ( 2 4 December 1959), p. 1 0 2 3 .  " B r i g h t e r F u t u r e f o r N a t u r a l Rubber." F a r E a s t e r n Economic Review, volume 28, No. 6 (11 F e b r u a r y I960), pp. 337338\  '•  "A Push f o r t h e M a l a y s . " F a r E a s t e r n Economic Review, volume 2 8 , No. 8 ( 2 5 F e b r u a r y I960), p. 4 0 4 . "Rush i n R e p l a n t i n g . " F a r E a s t e r n Economic Review, volume 2$, No. 26 (30 June I960), p. 1370. "Rainguard f o r T a p p i n g . " F a r E a s t e r n Economic Review, volume 29, No. 7 (18 August I960), p. 413. ^ C o m p e t i t i o n w i t h S y n t h e t i c . " F a r E a s t e r n Economic Review, volume 2 9 , No. 8 ( 2 5 August I960), -p. 449. "M$350 m i l l i o n R u r a l P r o j e c t . " F a r E a s t e r n Economic Review, volume 2 9 , No. 1 2 (15 September I960), p. 779. "Rubber Q u a l i t y C o n f e r e n c e . " F a r E a s t e r n Economic Review, volume 2 9 , No. 15 (6 O c t o b e r I960), p. 879. "A Plan;- f o r Malayan Rubber." F a r E a s t e r n Economic Review, volume 31, No. 10 ( 2 3 F e b r u a r y 1961), p. 320. "Ther:Second P l a n . " F a r E a s t e r n Economic Review, volume 31, No. 14 (23 March 1961), pp. 5 4 4 - 5 4 7 .  218  " R e p l a n t i n g i n M a l a y a . " F a r E a s t e r n Economic Review, v o l ume 3 1 , No. 2 5 (June 1 9 6 1 ) , p.V 7 5 . " R u s s i a Buys More." Far- E a s t e r n E c o n o m i c R e v i e w , volume 3 1 , No. 2 6 ( 8 June 1 9 6 1 ) , p. 482. " S o i l R e s e a r c h F i n d i n g s " F a r E a s t e r n Economic Review^ v o l ume 3 5 , No. 6 ( 2 F e b r u a r y 1 9 6 2 ) , pp. 3 2 1 - 3 2 2 . (c)  Fortune  Bauer, P.T. "Economic Growth and t h e New Orthodoxy." volume 57, No. 5 (May 1958), p.$H (d)  Fortune,  N a t u r a l Rubber News. Washington D.C.  "Good C l e a n Rubber t h e M a i n Aim." N a t u r a l Rubber News, Febr u a r y 1961, p. S - 8 . M e l l e n , S.L.W. " I n t e r n a t i o n a l C o n s u l t a t i o n s on Rubber." N a t u r a l Rubber News. F e b r u a r y 1961, pp. 3 - 8 . "Notes on I t a l i a n S y n t h e t i c Rubber I n d u s t r y . " ber News, F e b r u a r y 1961, p. 9.  N a t u r a l Rub-  "S12.7 M i l l i o n W i l l be Spent i n 1961 on R e s e a r c h , D e v e l o p ment." N a t u r a l Rubber News. F e b r u a r y 1961, pp. S-4-S-5. "Malayan Rubber P r o d u c t i o n , 1960-1970." News. March 1961, pp. 6-:9. "Rubber P r o d u c e r s ' C o u n c i l I960 R e p o r t . " A p r i l 1961. pp. 1-2. "TheiFacts on N a t u r a l Rubber." pp. 1-5. "The Rubber O u t l o o k . " 1-6. (e)  N a t u r a l Rubber N a t u r a l Rubber News,  N a t u r a l Rubber News, June 1961,  N a t u r a l Rubber News, J u l y 1961, pp.  The New Commonwealth, London  " B e n e f i t s f o r Malaya's V i l l a g e r s . " New Commonwealth, volume 3 7 (December 1959), p. 8 1 4 . "Malaya M o b i l i s e s i t s Land." New Commonwealth, volume 3 8 (January I960), p. 52.  219 ft  "More Land f o r M a l a y a ' s P e a s a n t s . " New Commonwealth, volume 38 (December I960), p.-812. (f)  Rubber Developments, London.  B l o o m f i e l d , G.G. "Recent Developments i n C o n n e c t i o n w i t h N a t u r a l Rubber." Rubber Developments, volume 9, No. 2 (Summer 1956),'pp. 34-43. M a r t i n , G e r a l d . "Improving N a t u r a l Rubber." Rubber Developments, volume 9, No. 4 ( W i n t e r 1956), pp. 98-102. Bugbee, H.C. "Commercial Developments i n N a t u r a l Rubber." Rubber Developments, volume 11, No. 2 (Summer 1958), p. 39. "More Help f o r S m a l l h o l d e r s . " Rubber Developments, volume 13, No. 2 (Summer I960), p. 46. "Improving S m a l l h o l d e r s ' Rubber." Rubber Developments, volume 13, No. 3 (Autumn I960), p. 78. (g)  The:Times Review o f B r i t i s h Colonie.s. London  " S m a l l h o l d i n g Rubber." Times Review o f B r i t i s h No. 2 (June 1951), pp. 5-6.  Colonies,  " S m a l l h o l d e r s C r i s i s i n M a l a y a . " Times Review o f B r i t i s h C o l o n i e s . No. 4 ( W i n t e r 1951), pp. 11-15. (h)  The Times Review o f Indxistry,London  "Malayan Rubber C o n f e r e n c e s . " F e b r u a r y 1961, p. 69. "Commodity Survey--Rubber." June 1961, p. 59. C. (a)  Times Review o f I n d u s t r y . Times Review o f I n d u s t r y ,  ARTICLES FROM NEWSPAPERS  The S t r a i t s Budget, K u a l a Lumpur  " S c i e n c e and Rubber." e d i t o r i a l . I960, pp. 3-4.  " P o l i c y f o r Land." e d i t o r i a l . I960, pp. 3-4.  Straits  Budget, 5 October  -  Straits  Budget, 12 O c t o b e r ,  220  "Land f o r t h e L a n d l e s s . " p. 1 0 . "More T i n Land." I960,  p.  3.  "Tin Prospects." I960,  p.  3.  S t r a i t s Budget. 2 November I 9 6 0 ,  editorial.  S t r a i t s Budget. 9 November  editorial.  S t r a i t s Budget, 9 November  "The L a s t Chance f o r N a t u r a l Rubber." 29 March 1 9 6 1 , p. 17.  S t r a i t s Budget,  "Land Must be Worked." e d i t o r i a l . S t r a i t s Budget, 13 September 1 9 6 1 , p. 3 . "Competing f o r C a p i t a l . " e d i t o r i a l . 20 September 1961, p. 4 . "Self-sufficiency." 1962, p. 3 .  editorial.  S t r a i t s Budget,  S t r a i t s Budget, 4 A p r i l  " S e l f - s u f f i c i e n c y i n Rice i s the Target." 4 A p r i l 1962, p. 8 .  S t r a i t s Budget,  "Dunlop P r o d u c t i o n e a r l y i n 1 9 6 3 . " S t r a i t s Budget, May 1 9 6 2 , p. 6. (b)  The S t r a i t s Times,  Singapore  S t r a i t s Times, 1956-1959. v a r i o u s (c)  TheSingapore S t a n d a r d ,  Singapore  Singapore  S t a n d a r d , 1956-1959. v a r i o u s  30  

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