My telegram 390.

While attempts to kill Europeans and K.M.T. [1] 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 [2] 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 [3], similar to the so called
Ghosal [4] 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. [5] 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.