Early morning collection of latex in a Malayan rubber plantation
Source: National Archives Malaysia - 2001/0050193
Natural rubber was a critical pillar of Malaysia’s export oriented economy throughout much of the 20th century. Early in that century rubber overtook tin as Malaya’s main export earner and was the dominant component in accounting for variations in export growth. And variations in export growth accounted for much of the volatility in annual GDP growth. 
The British colonialists began to promote the potential of commercial rubber production in the Malay Peninsula around the early 1900s. Generous assistance to plantation companies included long-term security of land tenure and freedom to recruit low-cost foreign labour. Incentives were provided to encourage an industry that was dependent on substantial capital investment and where the period for returns on investment was long and ­it took between 5-7 years after land clearing and seeding before trees could be tapped.
The rubber plantation industry was highly labour intensive and its development could not be sustained with local labour supply. At the turn of the 20th century the total population in all of the Peninsula’s states was just 1.7 million. Large inflows of foreign labour migrants were recruited from India to meet the needs of the industry with the result that the Indian population share increased markedly from just 6 per cent in 1901 to 15 per cent in 1921, subsequently falling back as a result of return migration.

The massive boom in rubber trade came in the first decade of the 20th century, as prices rose as a result of the spectacular upsurge in demand from the US automobile industry and the related demand for rubber tyres. As global demand for natural rubber increased and rubber prices rose sharply towards the end of the first decade of the 20th century, rubber planting became highly profitable and rubber plantations spread across the Malay Peninsula. Initially, most rubber planting took place in Perak, Selangor, Negri Sembilan, and Johore—states where infrastructure (transportation and communications) already existed and was expanding.

Production of rubber sheets from latex for export, predominantly for US industries
Source: National Archives Malaysia - 2001/0053349
High prices also encouraged smallholders to plant rubber instead of rice cultivation and other subsistence farming. For example by 1921 smallholders accounted for 48 per cent of the total rubber cultivated area in Perak. Compared with rice cultivation which is highly seasonal, rubber tapping provides a regular flow of income and is less arduous. 

By the 1930s Malaya became the world’s largest natural rubber producer. The use of an improved method of tapping to extract the maximum flow of latex with the minimum damage to trees helped increase supply.

In 1905 Malaya’s rubber exports amounted to only 130 tons, about 5 per cent of all cultivated rubber produced worldwide and just 0.2 per cent of all world rubber exports. By 1919 Malaya’s exports of rubber exceeded that of the rest of the world combined (see chart below). Apart from the period under Japanese rule, Malaya’s share of world supply of rubber  did not fall below 30 per cent until the late 1980s. In 1990, Malaysia still accounted for 25 per cent of world natural rubber output, but by then rubber’s contribution to the country’s export earnings was less than 4 per cent, compared with 55 per cent 30 years earlier. At the end of the 20th century rubber accounted for less than 1 per cent of Malaysia’s total export earnings.

Throughout the 20th century growth rates of rubber exports were positively correlated with growth rates in US rubber consumption—its largest market. This made the country’s rubber industry, and the economy as a whole, extremely vulnerable to the fortunes of the US economy.

Malaysia's Share of Global Rubber Production and Rubber as a Share of Total Exports
Note:  Data for years before 1963 relate to Malaya.
Sources of data:
Malayan rubber figure for 1905 refers to exports and is obtained from Tate (1996). p. 210.
Figures for 1942-1944 were obtained from Kratoska (1998), Table 8.3, p. 227.
Rubber Statistical Bulletin, various issues.
Figures for rubber export were obtained from United Nation Statistics Division, UN Comtrade website http//comtrade.un.org/data

Further reading:
Azrai Abdullah, Izdihar Baharin and Rizal Yaakop. 2012. ‘The Transformation of Perak’s Political and Economic Structure in the Colonial Period, 1874–1957.’ Malaysian Journal of History, Politics, and Strategy, Vol. 39/2 (December), pp. 63–72.
Barlow, C. 1978. The Natural Rubber Industry: Its Development, Technology, and Economy in Malaysia. Kuala Lumpur: Oxford University Press.
Drabble, J. H. 1973. Rubber in Malaya, 1876–1922: The Genesis of the Industry. Kuala Lumpur: Oxford University Press.
Kinney, W. P. 1975. Aspects of Malayan Economic Development, 1900-1940. Ph.D thesis. London: The University of London.
Lim, T. G. 1977. Peasants and Their Agricultural Economy in Colonial Malaya 1974–1941. Kuala Lumpur: Oxford University Press.
Sultan Nazrin Shah. 2017.  Charting the Economy: Early 20th Century Malaya and Contemporary Malaysian Contrasts. Kuala Lumpur: Oxford University Press.
Tate, D. J. M. 1996. The RGA History of the Plantation Industry in the Malay Peninsula. Kuala Lumpur: Oxford University Press.

c/o Asia-Europe Institute
University of Malaya,
50603 Kuala Lumpur

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