Canberra, 2 May 1963
1534. Confidential
Your 2004.1
I do not like Narasimhan’s proposal for a plebiscite after Malaysia is formed. We had ourselves considered at an earlier stage the desirability of a plebiscite. This would in effect mean that at a stated period after the creation of a federation members would be given the right to secede. We rejected this since in our view nothing is more calculated to destroy a federation than by assuring its constituent members in advance that they can leave it in five years time if they wish. You should put this strongly to the British and urge them to speak to Narasimhan in this sense. From his personal knowledge of Indian problems where separatist tendencies arise from time to time in the South, he should appreciate the danger of such an approach.
[NAA: A1838, 3027/2/1 part 10]
Final Agreements on Malaysia
The final phase in the agreements on Malaysia consisted of protracted negotiations in Malaya and the United Kingdom on the financial and defence implications of the proposed federation. By May 1963, a deadlock had been reached in Kuala Lumpur over a number of financial matters between Malaya, and Singapore and Brunei. Represented by Tun Abdul Razak and Tan Siew Sin, the Malayans then met with British ministers in London on 13–15 May. The conference, chaired by Duncan Sandys, reviewed the financial problems likely to confront Malaysia during the first years of its existence, giving particular attention to defence expenditure. Other British participants were the Defence Minister, Peter Thorneycroft, and Chief Secretary to the Treasury, John Boyd-Carpenter. The talks resulted in confirmation that the existing UK-Malayan Defence Agreement would be extended to cover all Malaysia on its establishment.
Talks on the terms of Singapore’s and Brunei’s entry into the federation continued in Kuala Lumpur. Major differences of opinion that persisted between Malaya and Singapore were over the percentage of the national income to be paid by Singapore for federal services; the amount of Singapore’s contribution to the development of the Borneo territories; and the terms of a proposed common market with Malaysia. After several weeks of abortive negotiations, Lee Kuan Yew and Razak, together with their delegations, met with Sandys and Lord Lansdowne in London in an attempt to resolve the deadlock. Two-weeks’ intensive discussions began on 26 June with Sandys and Lord Lansdowne holding numerous meetings, separately and collectively, with Razak and Lee. The Malayan and Singaporean delegations also met a number of times during this period. On 7 July it was announced that the principal dispute over financial arrangements between the two states had been resolved, and that no further obstacles existed to Singapore’s entry into the federation.
In the meantime, negotiations on the conditions of Brunei’s entry broke down during talks held in Kuala Lumpur 10–21 June. The principal stumbling block for Brunei was the question of the future disposal of its considerable oil revenues. The sultanate wished to retain these revenues indefinitely for internal development, whereas Malaya was insisting that they should be paid into Central Government funds ten years after the formation of Malaysia. In a bid to resolve the impasse, a Brunei delegation headed by the Sultan, Sir Omar AH Saifuddin, attended the final discussions on Malaysia in London that began on 26 June. However, the issue was not resolved during the London talks and the Sultan did not initial the final agreements. His reluctance to do so was not unexpected at the time and it was thought likely that negotiations would continue in private with reasonable prospects that Brunei would eventually join Malaysia.
The London Agreements, providing for the creation of the Federation of Malaysia, consisting of the Malayan Federation, Singapore, Sarawak, and North Borneo (officially taking the name of Sabah), were initialled in London on 9 July by the governments of the United Kingdom, Malaya, Singapore, Sarawak, and Sabah. The Agreements consisted mainly of undertakings by the signatories to take the legislative and other steps necessary to establish Malaysia on 31 August. These steps included making the appropriate amendments to the existing Constitution of Malaya, and an Act of the British Parliament providing for the relinquishment of sovereignty over North Borneo and Sarawak. The Agreements also gave formal effect to the extension of the existing UK-Malayan Defence Agreement to the new Federation, thereby giving the United Kingdom the right to continue to maintain bases in Singapore for the defence of Malaysia, the Commonwealth and the Southeast Asian region. In addition, financial arrangements affecting Malaya and Singapore were to be given constitutional force. These provided for the progressive establishment of a common market between Singapore and the rest of Malaysia while guaranteeing Singapore’s existing entrepot trade.
1 I May. It reported that the Foreign Office saw Britain as being in a difficult position over Narasimhan’s suggestion that a plebiscite be held in the Borneo territories post-Malaysia Day. Although not agreeing with the suggestion, Britain could not comment as it would no longer be sovereign in the territories at the time such a plebiscite was conducted.