Experts on rural development in India and in Southeast Asia tie rapid economic growth to specific urban functions. For a region to flourish, its towns must have markets for, and supply products and transport to, a commercializing hinterland. Natural resources, goods, and services have to be moved from points of supply to areas of demand. Capital and labour must be available for expansion. Local support for economic development, however, is not static, and it deepens along with the growth of local institutions and networks. The ‘quality and diversity’ of small settlements develops in tandem with that of their hinterlands (Hinderink and Titus, 1988, pp. 411–12; Wandschneider, 2004).
Public and private institutions both helped to build a town’s capacity to deliver networks and services. In the Straits Settlements and the Federated Malay States, the colonial state played an atypically large role in creating such resources. Anne Booth has shown that in 1931, the government of the Federated Malay States spent higher percentages of its budgets on public works (20 per cent) and public health (15 per cent) than did other colonies in Southeast Asia (Booth, 2017). By 1900, state-built roads stretched from the Kedah border south into Negeri Sembilan. Bridges spanned the larger rivers, and in 1909 a railway ran from Penang to Singapore with multiple branch lines connecting to port towns and mining settlements. By the 1930s, there were 23 station stops in the towns and villages of Negeri Sembilan, 32 in Selangor, and 43 in Perak, for people and goods. The overland transport network, which tied together the towns, was dense and well maintained in the western half of the peninsula.
State-run funding improved human as well as physical capital in the Federated Malay States. Sanitary boards managed public spaces and planned Malayan towns; their mandate stressed urban public health. Boards supplied clean water, removed night soil, and vaccinated local people against smallpox. In the early 20th century, improvements in urban sanitation and public health campaigns helped to lower adult, maternal, and infant mortality rates. Medical services spread from the cities and had reached small towns by the 1920s and 1930s, where clinics operated and police stations offered first aid. Traveling medical teams visited nearby plantations and rural kampongs (Manderson, 1996).
Private capital also increased the capacity of urban communities to support economic development. Chinese families funded urban primary and, later, secondary schools, and missionaries expanded bilingual and English-language education (Shih, 2004). Islamic schools also expanded in Malayan towns. By the time that the colonial state funded vernacular education for Malays, towns on the peninsula had become training centres for an increasingly literate population. Moreover, urban residents in British Malaya lived in a ‘print’ culture. Trains sped newspapers from major cities to town bookstores and local stores. Advertisements and shop signs beckoned customers and showed the usefulness of literacy—about half of the males over 15 in the Straits Settlements and the Federated Malay States towns and cities were literate, giving them access to a global flow of information and ideas (Lees, 2017, pp. 148–9).
Gradually, the supply of financial capital deepened in small Malayan towns, increasing resources for local economic activity. Town residents had a variety of ways to borrow money or to finance a purchase. Would-be borrowers could go to the many infamous chettiar firms in the Federated Malay States or they could turn to local money lenders for cash. Individuals could deposit small sums in Post Office Savings Banks; credit societies pooled contributions and lent to members. Some turned to pawnbrokers.
Iyem Perumal, who around 1890 made and sold toddy in Tapah, Perak, served as a banker for dozens of Tamils in the town and the surrounding estates. He held their savings and made small loans to local workers2. Court records show that credit was widely available to all ethnic groups in the Federated Malay States and that towns served as points of contact for transactions and for enforcement of repayment.
For example, in 1888, Mahomed Idris borrowed Straits$90 from Cheah Sui Tek, a pawnshop owner in Chendariang. When he refused to acknowledge the debt, the Magistrate of Lower Perak, one Mr. Wray, ordered him to repay the sum with interest, because ‘Money is given every day both by Chinese and Malay traders, and Malays to be repaid in tin; in the great majority of cases there is no written agreement.’3 A web of credit and debt linked urban and rural residents in active loan markets. Moreover, law courts, land title offices, and licensing bureaus enforced contracts and other legal agreements. State legal services helped to increase the security of investments.
The impact of these circles of credit and investment can be seen at the grassroots level in the growing small towns of British Malaya. Sanitary boards regularly approved licences for new businesses, enabling rice and flour mills, brickworks, and soy sauce factories to multiply. These boards also approved the building of dairies, petrol stations, and garages by Sikh and Malay men (not women). Slowly, a middle class of entrepreneurs and property owners, which included Malays as well as Chinese and Indians, grew. Haji Mohamed Ali, the former Pengulu of Sitiawan and a grower of rubber, decided to build shophouses in Simpang Ampat village and rent them out, perhaps as boarding houses for the growing number of immigrant workers. Malay men constituted 16 per cent of the rubber dealers in Sitiawan in 1935.4
The combination of state and private investment fuelled this sort of economic development, even during the depression of the 1920s and 1930s. In 1932, nine young men who had been rubber tappers applied to rent spaces in a Sitiawan market. Most were recent immigrants to Perak from the Foochow region of China.5 Wong Ah Lang and several others also owned vegetable gardens in the area, and they decided to invest cash savings into new businesses, rather than return to China. The rental of a market stall and the licence fee were affordable, and demand for food was growing. They took advantage of an urban opportunity and moved into town. Thousands of others followed a similar path, expanding Sitiawan’s population and commercial sector.