My telegram 390.
While attempts to kill Europeans and K.M.T.  Chinese continue, violence here is now taking on form of organized attacks on villages and railway stations. A gang of Chinese captured the township of Serantut in Pahang on June 28th, burned the police station and retired to jungle with prisoners and arms. At Sedenak in Johore a similar attack was beaten off on June 29th.
2. There is no doubt that insurgents have had much success to date and the Federation Government has made poor showing. In some areas morale has been shaken among the European and Chinese and is reflected in the British and Chinese press criticism of Gent. You will see from the Press this morning that Gent has now been recalled; he left Malaya on June 29th. His Commissioner of Police who is now in hospital is also alleged to have advised him badly.
Responsibility for meeting the present emergency has hitherto been divided and it is clear that the set-up at Kuala Lumpur has been generally unsatisfactory. MacDonald has intervened and more determined active check to  Extremists be shown.
3. My appreciation of the position is as follows:
(a) Economic condition of rural labour areas still bad in parts and inadequate basic wage of 40 cents paid during the liberation period left resentment which subsequent rises have not dispelled and which it has been easy to exploit. This and their susceptibility to intimidation has made the rural proletariat increasingly responsive to Communist propaganda.
(b) Whether or not a directive was issued to the Malayan Communist party in the recent Calcutta talks , similar to the so called Ghosal  plan in Burma, there is now in operation a Communist scheme to explore the situation here to the full in order to disrupt economy and paralyse trade of Malaya. Long term objective of this campaign may or may not be that suggested in paragraph 4 of my telegram 390. But, although it seems facile to explain the present events by the existence of Communist conspiracy, evidence is too conclusive for any objective appreciation to reach a different conclusion.
(c) Defensive action will be hampered more by poor communications than by any other factor. Most estates and villages have no telephone and where this exists wires are now being cut. In addition, there is insufficient police force. In the circumstances the Government's first objective must be to establish a network of W.T.  communications and a system of mobile defence units. When this is completed a very long mopping up campaign seems unavoidable.
(d) Although at present it takes the form of a struggle between the Communists and the Colonial Government this campaign must end in hastening a conflict on communal lines between the Chinese and Malays. It is expected that guerilla bands will attack Malay's Kampongs, partly to obtain food and supplies and partly to stir up Sino-Malayan enmity which will provoke Malayan violence against innocent Chinese and add to the general state of unrest. This is realized by many Malayans who are volunteering for enrolment as special constables and guards and whose secular leaders (not rather useless Sultans) have taken the initiative in a sort of political warfare against Malayan communism. Malayan Press have also begun a campaign calling for closer solidarity with Indonesia for Indonesian immigration.
(e) An unfortunate but perhaps inevitable political consequence of this crisis which has already made itself felt is the squeezing out of moderate social and nationalist elements which were working solely for a non-communal Malaya with Dominion status. Malayan democratic Union, for instance, has now dissolved, partly in self- defence and partly because of the internal number of Communists who were trying to ruin it but represented, all the same, one of the most promising movements here.
Conclusion is that the position is serious and potentially dangerous. It can be redressed so far as public security is concerned by energetic action and military leaders believe that the situation is in hand. But the political consequences of all this are likely to make the future very difficult.