The ancestors of the Malays came down from South China and settled in the Malay Peninsula about 2000 BC . Sri Vijaya, a strong Indo-Malay empire with headquarters at Palembang in southern Sumatra, rose about AD 600 and came to dominate both sides of the Strait of Malacca, levying tribute and tolls on the ships faring between China and India. In the 14th century, however, Sri Vijaya fell, and Malaysia became part of the Majapahit Empire centered in Java. About 1400, a fugitive ruler from Temasik (now Singapore) founded a principality at Malacca (now Melaka) and embraced Islam. It was at Malacca that the West obtained its first foothold on the peninsula. At the height of glory and power, the Malacca principality fell to Portugal in 1511. In their turn, the Portuguese were driven out by the Dutch in 1641. The British East India Company laid the groundwork for British control of Malaya in 1786 by leasing from the sultan of Kedah the island of Pinang, off the west coast of Malaya, about 800 km (500 mi) north of Singapore. Fourteen years later, it obtained from him a small area on the mainland opposite Pinang. In 1819, Sir Thomas Stamford Raffles obtained permission to establish a settlement at Singapore; in 1824, by agreement and financial settlement, the island was ceded to the British East India Company. In the following year, the Dutch settlement at Malacca was ceded to Great Britain. Pinang, Singapore, and Malacca were combined under British rule in 1829 to form the Straits Settlements. The states of Perak and Selangor in 1874 secured treaties of protection from the British. Similar treaties were subsequently made with the sultans of Negri Sembilan (1874–89) and Pahang (1888). In 1895, these four states became a federation (the Federated Malay States), with a British resident-general and a system of centralized government. In 1909, under the Bangkok Treaty, Siam (now Thailand) ceded to British control the four northern states of Kelantan, Trengganu, Perlis, and Kedah. These four, together with Johor, which in 1914 was made a British protectorate, became known as the Unfederated Malay States. Separate British control was extended to Sabah, then known as North Borneo, in 1882. Six years later, North Borneo and Sarawak each became separate British protectorates. Tin mining and rubber grew rapidly under British rule, and large numbers of Chinese and Indian laborers were imported, respectively, for these industries.
Japanese forces invaded Malaya and the Borneo territories in December 1941 and occupied them throughout World War II. Within a year after the Japanese surrender in September 1945, the British formed the Malayan Union, consisting of the nine peninsular states, together with Pinang and Malacca; also in 1946, Singapore and the two Borneo protectorates became separate British crown colonies. The Malayan Union was succeeded by the Federation of Malaya on 1 February 1948. Over the next decade, the British weathered a Communist insurgency, as Malaya progressed toward self-government. On 31 August 1957, the Federation of Malaya became an independent member of the Commonwealth of Nations. On 1 August 1962, Great Britain and Malaya agreed in principle on the formation of the new state of Malaysia—a political merger of Singapore and the British Borneo territories (Sarawak, Brunei, and North Borneo) with the Federation. On 1 September 1962, by a 70% plurality, Singapore voted in a referendum for incorporation in the proposed Malaysia, but an abortive revolt staged by Brunei's ultranationalist Brunei People's Party in December 1962 eliminated the sultanate from the proposed merger. On 16 September 1963, the Federation of Malaya, the State of Singapore, and the newly independent British colonies of Sarawak and Sabah merged to form the Federation of Malaysia ("Federation" was subsequently dropped from the official name). On 7 August 1965, Singapore seceded from the Federation and established an independent republic. From the outset, Indonesia's President Sukarno attempted by economic and military means to take over the young nation as part of Indonesia; cordial relations between the two countries were not established until after Sukarno's ouster in 1966. Internal disorders stemming from hostilities between Chinese and Malay communities in Kuala Lumpur disrupted the 1969 national elections and prompted the declaration of a state of emergency lasting from mid-1969 to February 1971. Successive governments managed to sustain political stability until 1987, when racial tensions between Chinese and Malay increased over a government plan to assign non-Mandarin-speaking administrators to Chinese-language schools.
In October 1987 the Malaysian government, under provisions of the Internal Security Act (ISA) which allows detention without trial on grounds of national security, arrested 79 political and civil leaders and closed four newspapers in an effort to stifle dissent. The government called its actions necessary to prevent racial violence, but many prominent Malaysians, including Tunku Abdul Rahman, the country's first prime minister, condemned the actions. At the same time the government clamped down on all news sources disseminating what the government considered false news, and new legislation denied licensing to news sources not conforming to Malaysian values. In 1981 Dato' Hussein bin Onn was succeeded as prime minister by Sato' Sei Dr. Mahathir Mohamad, whose leadership came under criticism from within the United Malays National Organization (UMNO) and other political parties as racial tensions increased. Part of the challenge to Dr. Mahathir's party leadership came in the form of a legal suit claiming that some of the delegates to the UMNO elections of 1987 had not been legally registered, therefore, the election should be declared null and void. The High Court ruled that due to the irregularities UMNO was an unlawful society and that in effect the election was invalid. Dr. Mahathir held that the ruling did not affect the legal status of the government; he was supported by the ruling Head of State, Tunku Mahmood Iskandar. In 1988 Dr. Mahathir formed a New UMNO, Umno Baru, and declared that party members would have to reregister to join. (Umno Baru was thereafter referred to as UMNO.) Under provisions of the ISA four people linked to the Parti Bersatu Sabah (PBS) were detained over alleged involvement in a secessionist plot in Sabah in June 1990. In July 1990 elections the PBS won 36 of 48 seats in the Sabah State Legislative Assembly. Prior to the general election of 1990 the PBS aligned itself with the opposition, which had formed an informal electoral alliance, Gagasan Rakyat (People's Might). The National Front (BN) won 127 of the 180 seats, thus maintaining control of the House of Representatives with the two-thirds majority necessary to amend the Constitution. The opposition increased its seats from 37 to 53. In 1992 the People's Might registered as a political organization and Tengku Razaleigh was elected chairman.
In 1990 the restructuring of the portfolio of the Ministry of Trade and Industry was rationalized into two new Ministries, the Ministry of International Trade and Industry (MITI) and the Ministry of Domestic Trade and Consumer Affairs (MDTCA). In an action that was widely regarded as politically motivated, Datuk Seri Joseph Pairin Kitingan, chief minister of Sabah and president of the PBS, was arrested in January 1991 and charged with corruption, then released on bail. After subsequent meetings with Dr. Mahathir it was announced that the PBS state government had proposed power sharing with United Sabah National Organization (USNO). The head of USNO, Tun Mustapha Harun, resigned from USNO and joined UMNO. This switch necessitated a by-election and in May 1991 UMNO took its first seat in Sabah. The rise of Dayak nationalism in Sarawak was considered as less of a threat after the 1991 state elections. The Sarawak Native People's Party (PBDS, Parti Bansa Dayak Sarawak) retained only 7 of the 15 seats it had won in the 1987 election. A High Court ruling in 1991 upheld a ruling by the Ministry of Home Affairs banning the public sale of party newspapers. Speculation was that by targeting limited media outlets the government was muzzling the opposition press.
In 1991 UMNO raised the issue of the alleged abuse of privilege by Malaysia's nine hereditary rulers. A resolution tabled in 1990 had demanded the rulers be restrained from interfering in politics. In November 1992 the issue of the constitutional status of the sultans again arose when it was proposed that the rulers' immunity from prosecution be removed. The cases in point were the recent alleged assault on a hockey coach by the sultan of Johore, and the 1981 incident in which the sultan of Johore (before he became sultan) was convicted of homicide but pardoned by his father the previous sultan. In January 1993 these proposed amendments to the constitution were passed. Immediately after passage of the bill royal privileges other than those sanctioned and allocations not expressly provided in the constitution were withdrawn. The nine hereditary rulers first rejected the constitutional changes; however, they agreed to a compromise formula on the bill that effectively removed the blanket legal immunity granted to them. The compromise upheld the constitutional stipulation of royal assent for laws affecting the monarchy. Criticism arose over Dr. Mahathir's handling of this situation as it emphasized the antipathy between his authoritarian style and the "Malay way." These constitutional changes also highlighted Dr. Mahathir's previous moves to strengthen executive power at cost of the judiciary, to consolidate UMNO's control of the legislature, and to control the press. On 17 January 1994 Sabah's chief minister, Datuk Joseph Pairin Kitingan, was found guilty of corruption. The fine imposed on him fell short of the minimum required to disqualify him from office. Although PBS won the Sabah polls in February 1994, Pairin resigned as the PBS's leading members joined the National Front, and the Sabah wing of UMNO (with 18 of 48 seats) was about to be installed. In August 1994 the government moved to ban the radical Islamic sect, Al-Arqam.
Between 1978 and 1989 Malaysia provided asylum to about 230,000 Vietnamese refugees as they awaited resettlement in the West. In March 1989 Malaysia responded to the continuing influx of refugees and the Western nations' slow efforts to place them with a plan to screen refugees in order to separate economic migrants from political refugees. This policy was confirmed by the United Nations. In its biggest victory ever, the ruling National Front captured 162 parliamentary seats out of a possible 192 in the general election held 25 April 1995. The coalition won 64% of the popular vote and easily retained its two-thirds parliamentary majority.
The Asian economic crisis of 1997 affected both the economy and the political landscape in Malaysia. By the beginning of 1998, the Malaysian economy had undergone its first downturn in 13 years, and tensions over the handling of the crisis erupted between Prime Minister Mahathir, an economic isolationist, and his deputy, Anwar Ibrahim, who favored open-market policies. In September 1998, Mahathir removed Anwar from his cabinet and party posts and imposed currency controls. When Anwar publicly protested these moves and attempted to rally opposition to his former mentor's policies, he was arrested and later tried for corruption and sexual misconduct. In 1999 Anwar was sentenced to six years in prison, and his wife launched a new political party to contest the upcoming national elections.
The economy began to recover by the end of 1998, and the government officially announced that the recession into which it had been plunged was over by August 1999. Responding to an April 2000 deadline for national elections, Mahathir called a snap election in November 1999. Although the arrest of Anwar and his treatment while in custody ignited widespread criticism of Mahathir and his government, the UMNO-led coalition maintained its two-thirds majority in parliament and Mahathir remained in power. However, electoral gains by the Islamic Party of Malaysia (Parti Se-Islam Malaysia or PAS) suggested a significant challenge to the popularity of the government and made PAS the country's largest opposition party.
On 9 March 2001, a wave of intercommunal violence between Malays and ethnic Indians began on the outskirts of Kuala Lumpur, the worst in more than 30 years. Six people, including five of Indian origin, were killed, and over 50 were injured. Most of the wounded were ethnic Indians. Opposition leaders claimed the casualty figures were higher; the government threatened to charge them with sedition (no charges were brought).
In early April 2001, days before public protests were scheduled for the second anniversary of the sentencing of Anwar, 10 opposition leaders were detained under Malaysia's Internal Security Act (ISA). The ISA allows the detention of suspects for up to two years without trial. Most of the detainees were members of the opposition party Keadilan (Justice), founded by Anwar's wife, Wan Aziziah. The government used a variety of laws to restrict freedom of expression, and peaceful rallies were broken up by the police. An Anti-ISA Movement (AIM) was formed to work for the repeal of the ISA.
In September 2001, Malaysia and Singapore came to a series of agreements over issues that had strained relations between them for years. Largely prodded by concern over the growing influence of Islam in Malaysian politics, Singapore agreed to a Malaysian proposal that the causeway linking the two countries be demolished and replaced by a bridge and undersea tunnel after 2007. Malaysia agreed to supply water to Singapore after two water agreements expire in 2011 and 2061. Also discussed were disputes over the use of Malaysian-owned railway land in Singapore, and requests by Singapore to use Malaysian air space.
With the rise in popularity of the Islamic Party of Malaysia, Malaysia's image as a moderate Islamic state began to be questioned. In the aftermath of the 11 September 2001 terrorist attacks on the United States, countries in Southeast Asia were asked by the United States to increase their security plans and efforts to combat terrorism. However, many nations have been cautious of a broad sweeping link between Islam and terrorist activities. In May 2002, members of ASEAN met in Kuala Lumpur to form a united anti-terror front (including strengthening laws to govern the arrest, investigation, prosecution, and extradition of suspects), and pledged to set up a strong regional security framework. Alleged militants with suspected ties to Osama bin Laden's al-Qaeda organization have been arrested in Malaysia.
After the UN Security Council passed Resolution 1441 on 8 November 2002, calling on Iraq to disarm itself of weapons of mass destruction (chemical, biological, and nuclear weapons), adhere to all previous UN resolutions, and allow UN weapons inspectors to return to the country, Malaysia supported the authority of the UN in resolving the crisis in Iraq, as opposed to following a possible course of war indicated by the United States. Mahathir stated that any war with Iraq "will lengthen the anti-terrorist campaign." "It will undermine the world economy. It will create a climate of uncertainty and fear throughout the world," he said.
In June 2002, Mahathir announced that he would resign in October 2003, news that shocked the country. It will be the first transfer of the prime ministerial office in over 20 years. His successor is predicted to be Abdullah Ahmad Badawi, one of three UMNO vice presidents.