Capacity building and economic development in the small towns of British Malaya

Professor Lynn Hollen Lees, Professor of History Emerita, University of Pennsylvania, USA

Cities in colonized regions have a complex relationship with economic growth. Paul Bairoch, who stressed the positive links between cities and industrialization in Western Europe, also pointed out the negative effects of urbanization in Asian and African territories under foreign rule. In those regions ‘cities tended more to amplify the deleterious impact of colonization than to help improve matters’ (Bairoch, 1988 pp. 477–79). The roles of large cities as generators of knowledge and suppliers of financial capital, consumer goods, and new technologies are well known and normally generative of growth, but where most manufactured goods come from abroad and profits are exported, the results can be deindustrialization and impoverishment. These impacts vary with the size of settlement, however, with the biggest cities the most affected by large-scale flows of capital, imports, and technologies.

This article explores the economic development of British Malaya in the early 20th century from the bottom level of the urban hierarchy in small towns, such as Nibong Tebal in Penang, Sitiawan in Perak, and Sungei Petani in Kedah. Small towns play important, if often unrecognized, parts in local economic development, especially when they have effective institutions as well as tight links to hinterlands.1

Areas rich in natural resources and foodstuffs need town markets and transfer points for commodities. Having local suppliers of services and goods is efficient, and towns introduce local people to non-agricultural jobs and ways of living. Low costs of production and easy access to raw materials make such towns attractive sites for small businesses. Moreover, their merchants and property owners invest savings locally, providing jobs and capital to expand businesses and trade. Even if they lack the glamour of big cities, small towns are normal and necessary parts of a territory’s economic organization. In short, they can serve as ‘key engines of local growth’ (Satterthwaite and Tacoli, 2003; Wandschneider, 2004).

For example, Sungei Petani, where about 4,500 people lived in 1921, developed in tandem with the rubber plantations in southern Kedah. It was connected by ferries, railway, roads, and bridges to other west-coast settlements, as well as to Penang. The state built and staffed courts, police stations, telegraph office, and hospital, while several schools opened. A branch of the Hong Kong and Shanghai Banking Corporation (built in 1922) operated alongside chettiar firms, informal lenders, and a pawnshop to offer loans in return for moveable property.
A small Malayan town showing its rectilinear form
Dobby, 1942.

Local merchants supplied estates with equipment and food, and dealers bought smoked rubber to export to Penang. As the town grew, so did the numbers and types of businesses (Nadaraja, 2016). Some of its development hinged on international networks of exchange, but a significant share rested on local resources and a growing service sector. Towns expanded the opportunity structures of agricultural areas and increased their efficiency. Dynamic small towns can increase the capacity of populations and regions to produce and perform.

Urbanization of British Malaya

During the period of British colonial rule, as the tin and rubber industries grew, urban settlement along the peninsula's west coast expanded inland from the seacoasts and riverbanks to encompass lowland plains and valleys. The result was an atypically dense urban network throughout the west coast where central settlements, roads, and overland transport linked rural areas. In 1921, when under 10 per cent of the population in other Southeast Asian countries could be counted as urban, 60 per cent of people in the Straits Settlements of Singapore, Penang, and Malacca and 22 per cent of those in the Federated Malay States lived in towns of more than 1,000 inhabitants (Nathan, 1922, p. 38). The Straits Settlements dominated, but by the early 20th century, Perak and Selangor had developed urban hierarchies that included medium-sized settlements, as well as small market towns. Overall, urban Malaya consisted primarily of tiny settlements with fewer than 10,000 people, which on the west coast of the peninsula grew steadily by attracting foreign migrant workers (Table 1).

Table 1: Urbanization in British Malaya, 1921
Source of data: Nathan (1922), Table VII, p. 159 and Table IX, pp. 165–167.

Quiet market towns dominated Malaya’s urban landscape. Such settlements, however, had surprisingly complex occupational and cultural structures. Nibong Tebal, where census takers counted 2,902 inhabitants in 1921, offered employment to people in over 60 non-agricultural occupations. Local businesses offered customers a wide array of services and products. Inhabitants could hire masons and carpenters. They could visit a nurse or medical practitioner. Actors, book binders, and rice dealers worked in the town, as did photographers, gold merchants, and accountants. In Bukit Mertajam in Penang, just a few miles to the north, at around the same time small factories making bricks, tiles, and lime operated, while pawnbrokers, money lenders, and bank clerks plied their trades. Just outside both settlements lived growers of rice and rubber, pig breeders, and market gardeners, as well as thousands of agricultural labourers who worked on local plantations. The growing rural economy supported the diversification of local market towns, which had moved from offering simple services and products to processing various raw materials and supplying capital to the local community (Marriott, 1911, pp. 85–113).

Sketch map of Tronoh, Perak, a tin mining town in colonial Malaya
Dobby, 1942.

LE. G. H. Dobby from Raffles College in Singapore described west-coast Malayan towns as nucleated settlements taking their ‘shape about compact lines of Chinese shops strung along one or two main roads’ (Dobby, 1942, p. 221). His maps show relatively dense urban cores, dominated by warehouses and brick or cement buildings. Further afield, wooden and thatch structures were scattered along land routes or local waterways. Dobby put transport at the center of his urban analysis, distinguishing ferry towns from settlements at the junctions of roads or rivers. Relatively new towns grew along with the commerce and agriculture in their hinterlands in a relationship of mutual dependence. These towns were spaces easily traversed in a few minutes, settlements whose inhabitants shared public spaces, services, and markets. Malayan towns were places of movement and vibrancy, where people, goods, and information flowed in and out through networks of exchange.

The towns of British Malaya were ethnically diverse. In 1921—whatever their absolute size—they had significant representation from each of the peninsula’s three main cultural groups and small percentages of other ethnicities. Chinese made up a heavy majority of urban populations in all the Straits Settlements and the peninsula’s west-coast states, their proportions highest in cities of over 50,000 inhabitants and in the tin-mining towns (Table 2). The percentage of Indians, in contrast, was more likely to be higher in smaller towns, such as Papan, in Perak, rather than in Penang. Malays had also moved in considerable numbers into the peninsula’s towns and accounted for broadly the same shares as Indians. However, they dominated urban settlements in the less-developed east-coast states of Kelantan (70 per cent) and Terengganu (over 86 per cent), and they made up more than 25 per cent of urbanites in the small towns of Johore and Kedah.

Procession in central Papan, circa early 20th century
Source: Papan collection.

The numbers of the main ethnic communities dwarfed those of Europeans and Eurasians (Table 2). Even the smallest market towns constituted multilingual, multicultural spaces. Towns of all sizes were cosmopolitan places where Malays, as well as Chinese and Indians, were exposed to urban institutions, technologies, markets, and consumer culture. Such cultural diversity, however, coexisted with hugely unequal distributions of wealth and political power.

Table 2: Ethnic Distribution of the Urban Population in West-Coast Malayan States (per cent)
Note: Cities and towns of the Straits Settlements, Kedah, Perak, Selangor, Negeri Sembilan, and Johore. N refers to the number of cities or towns.
Source of data: Nathan (1922), Table 11, pp. 170–174.

Capacity Building in Small Towns

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.


It is a mistake to ignore the dense web of economic activity based in the small towns of the Malay peninsula, especially those in the Federated Malay States, where barriers to entry to most jobs and economic opportunity were low. Roads and railways eased mobility, and urban schools and medical clinics reshaped individuals’ life chances. As west-coast states urbanized, more and more people were drawn into an expanding web of market transactions and credit dealings, financing new businesses with local capital. The number of entrepreneurs multiplied, along with towns’ shops and services. Step by step, a multi-ethnic middle class of small property owners grew. Nibong Tebal and Sitiawan facilitated economic and social development in ways complementary to, but different from, the international commercial networks based at the centres of the more urbanized Kuala Lumpur and Singapore. For their grassroots contributions to local growth, Malaysian small towns deserve recognition.

Further reading: 
Bairoch, P. 1988. Cities and Economic Development: From the Dawn of History to the Present. Chicago: University of Chicago Press.
Booth, A. 2016. Economic Change in Modern Indonesia: Colonial and Post-colonial Comparisons. Cambridge: Cambridge University Press.
Dobby, E. H. G. 1942. ‘Settlement Patterns in Malaya.’ The Geographical Review. V. 32, pp. 211–232.
Hinderink, J. and Titus, M. J. 1988. ‘Paradigms of Rural Development and the Role of Small Centres.’ Development and Change, International Institute of Social Studies, V. 19(3), pp. 401–423.
Khoo, S. N. and Abdur-Razzaq Lubis. 2005. Kinta Valley: Pioneering Malaysia’s Modern Development. Ipoh: Perak Academy.
Lees, L. H. 2017. Planting Empire, Cultivating Subjects: British Malaya, 1786–1941. Cambridge: Cambridge University Press.
Manderson, L. 1996. Sickness and the State: Health and Illness in Colonial Malaya, 1870–1940. Cambridge: Cambridge University Press.
Marriot, H. 1911. Report on the Census of the Colony of the Straits Settlements. Singapore: Government Printing Office.
Nadaraja, K. 2016. The Kuala Muda District: History of the Administrative Centres of Kota Kuala Muda and Sungei Petani, 1905–1957. Kedah: Penerbit Universiti Utara Malaysia.
Nathan, J. E. 1922. The Census of British Malaya, 1921. London: Waterlow and Sons, Ltd.
Shih, T. S. 2004. The Foochows of Sitiawan: A Historical Perspective. Sitiawan: Persatuan Kutien Daerah Manjung.
Satterthwaite, D. and Tacoli, C. 2003. The Urban Part of Rural Development: The Role of Small and Intermediate Urban Centers in Rural and Regional Development and Poverty Reduction. London: International Institute for Environment and Development.
Wandschneider, T. 2004. ‘Small Rural Towns and Local Economic Development: Evidence from Two Poor States in India,’ International Conference on Local Development. Washington, 16–18 June, 2004.

1 I wish to thank Law Siak Hong for his expert comments on the small towns of Perak and their economies.
2 National Archive, Kuala Lumpur, District Office Files, Perak, Batang Padang: Inspector of Police, Tapah, ‘Estate of Iyem Perumal, a Convicted Prisoner at Tapah, 1 March, 1891,’ BP 149/91.
3 District Office Files, Perak, Batang Padang, ‘Petition against the Decision of the Magistrate of Batang Padang in a case which a Chinaman sued him for Straits$90,’ BP 192B/88.
4 District Office Files, Sitiawan: Assistant District Officer, Sitiawan, ‘Haji Mohamed Ali, ex-Pengulu Sitiawan, applies for a loan of Straits$9,000 for the Purpose of Building three shop houses at Simpang Ampat Village,’ Sitiawan 132/18; Assistant District Officer, Sitiawan, ‘Inspection of Rubber Dealers’ Shops in the Sub-District of Sitiawan, 7 November, 1935,’ Sitiawan, 357/1935.
5 District Office Files, Sitiawan: Chairman, Sanitary Board, Sitiawan, ‘Application for Vegetable Stalls in the Kampong Koh Market,’ SB Sitiawan 10/1932.

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