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2.0 INTRODUCTION
The local government system in Malaysia was a legacy of British colonisation, with many of
its laws derived from and modeled on English laws. However, with the passing of time, many
local unique social and cultural characteristics have influenced the working of local
government in Malaysia. Development of local government in Malaysia varied among the
various states. The original purpose of setting up local government in the states that were
under direct British rule such as Penang and Malacca were for town planning whereas in the
Federated and Unfederated Malay states, the main purpose was for health and sanitary
purposes.

2.1 EVOLUTION OF LOCAL GOVERNMENT IN MALAYSIA

Like most institutions of government in many countries that were former colonies, the
present system of local government in Malaysia could be traced back to Britain, which
colonized Malaysia for nearly two centuries. As noted by Norris (1980: 4): "Malaysia
inherited a British legacy in terms of local government objectives and style and has been
deeply influenced by British precedents. In Malaysia (at that time Malaya), Penang and
Malacca - which were part of the Straits Settlement - were the first two states to form local
governments. It was in Penang that the British formed a Committee of Assessors in 1801
and gave it the responsibility for planning and implementing urban development. This laid
the foundation for the establishment of local government in this country. Local councils were
later set up in Malacca and other Federated and Unfederated Malay States including those
in Sabah and Sarawak. Local councils elections were also held for the first time in Kuala
Lumpur in 1955.

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 2.1.1 Early development
Development in the Straits Settlements
1800 – Committee of Assessors was established. Its initial purpose was to
undertake planning and development of Georgetown. Members of
committee were elected from the settlers. Chairman appointed.
1827 – Committee of Assessors was formalised.
1848 – Municipal Committees established in Penang, (replacing Committee of
Assessors) Malacca and Singapore
1856 – Municipal Council replaced Municipal committee. Consisted of 5
commissioners. 3 elected and 2 appointed. The Municipal Council
became a body corporate and had legal status. Elections held to
council in 1857.
1857 – Urban areas set up municipal council. Rural areas have Rural district
councils. But members of RDC wholly appointed from local residents.
DO – chairman
1888 – Principle of elected majority was changed to that of parity where
elected and nominated councilors were equal. Hence 3 elected and 3
nominated
1913 – Municipal council also responsible for health matters
1950 – Local authorities election ordinance 1950- increased number of
councilors from 6 to 24, either wholly or partially elected (but this
ordinance only effective after 1957) Elections to Local councils in
Penang (Georgetown) was held in 1951 and in Kuala Lumpur in
1952.
1957 – Penang was declared a city (first town to be declared a city in
Malaysia)

Development in the Malay States

It was mainly imposed on urban centres and mainly operated as government
departments. Public health matters was the original rationale for setting up Local
Government.
1907 – Sanitary boards established as government departments. Its
members were public officers. It was not a body corporate.
1930 – Sanitary boards replaced by Town Boards. But no financial autonomy.

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 1948 – the more established Town Boards were raised to the status of
Municipal Councils. It had legal status and autonomy. KL became a
Municipal council
1950 – Local Authorities Election Ordinance enabled Town Boards to be
converted to Town councils- either partially or wholly elected majority.
1952 – Local Councils Ordinance established. Local councils in non town
areas established. Each had financial autonomy and one third
members might be nominated by Menteri Besar. Local councils
established in 1952 were supposed to fight the communist insurgency
in Malaysia and to introduce local government elections to the
councils. There were more than a hundred local councils established.
1954 – Town Board granted financial autonomy status. Became a body
corporate.

2.1.2 History of local government elections

It is important to discuss the period in the history of Malaysia when elections were
held to local councils. This is because local government elections had a profound
effect on the way the councils were run in the early period of Malaysia’s
independence. It is also pertinent because local government elections which have
long been abolished has been on the opposition agenda in Malaysia for the past few
years.

The first experience in electing representatives in the government was in 1857, when
ratepayers in Penang elected three out of five municipal commissioners of George
Town. Unfortunately, the experiments at local democracy did not last very long. In
1913, elections were abolished and the colonial government of the Straits
Settlements reverted to appointing all municipal commissioners.

It took 38 years before local government elections were reintroduced. Again George
Town took the lead and in 1951, nine out of the 15 municipal commissioners were
elected.

In 1952, elections were held to elect 12 out of 18 councillors in the K L Municipal

Council. In the following years, similar elections were held for the state capitals.

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 Surprisingly, elections were also held for the new villages, which had been created to
resettle farmers in enclosed settlements as part of the war against the communist
insurgency. This was to inculcate the virtues of democracy as a way of life to the
people and prevent the spread of the communist ideology.

Although George Town played a leading role in local democracy, the elections in
Kuala Lumpur had the greatest impact on the politics of Malaysia. As the capital of
the Federation, this would set the trend for elections at the state and federal
government levels at a later stage. Following Kuala Lumpur, local elections were
then held in Kuantan, Kota Bahru, Seremban, Ipoh and Malacca all the way up to
1960.

In December 1956, George Town Municipal Council became the first local council to
be fully elected. The president was chosen from among the councillors. By
December 1957, when the head of the George Town City Council was officially
designated as mayor, the Alliance had lost its majority and D. S. Ramanathan of the
Labour Party was elected the first Mayor of George Town.

By the early 1960s, parties in opposition to the Alliance were also in control of other
local councils, such as those of Ipoh, Malacca and Seremban. In the midst of
progress towards local democracy, there were signs of its impending demise. In
1959, elections scheduled for Kuala Lumpur were suspended on the grounds that the
electoral rolls were not ready. They were abolished the following year.

In 1960, jurisdiction over local government elections was transferred from the state
governments to the Election Commission, meant to ensure independence and
uniformity in its practice for the whole country. A year before that, local government
elections were suspended on the grounds that the electoral rolls were “not ready”
although critics have noted this was done to suppress the powers of the Opposition
(the Socialist Front, made up of the Labour Party and Parti Rakyat) by the Alliance.

The scheduled local elections for the rest of the local authorities for 1965 and 1966
were also suspended. The official reason was Confrontation with Indonesia. Most
scholars, however,believe that the real reason was the Alliance government's fear of
losing more local authorities to the opposition parties.

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 The suspension, which was supposed to be temporary, continued till 1976 when the
Parliament passed the Local Government Act (section 15 specifically states that local
council elections to be abolished) which provided for appointed councillors, thereby
abolishing elected local government altogether. The government said it was
“unnecessary and redundant” to have another tier of representative government at
local authority level since elections are already held for the Federal and State
government.

Tennant in his article, (Decline of Elective Representation in Peninsular Malaysia)

stated four factors which could have resulted in the suspension of local election
which can be categorised as political, racial, administrative and attitude of council
towards higher levels of government.
(For further information, read Tennants article)

2.2 THE PERIOD AFTER INDEPENDENCE

The period after independence was a turbulent one for local government in Malaysia. This
was because there were too many types and numbers of local councils and many were too
small and weak financially and had lack of administrative support.
1960 – Local Government Elections Act passed by Parliament. With this an
Election Commission was established in 1961.
1960 – The National Council for Local Government (NCLG) was established.
(Article 95A, Federal Constitution)

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 The role of the NCLG is
™ to make national policies for the purpose of controlling and administering local
government in Malaysia

™ to give advice to the Federal government on formulation of laws relating to

local govt.

™ to give advice and consultancy services to Local Government.

1962 – the creation of the Amalgamated National Union of Local
Authority Employees (ANULAE). It provided a focal point for
staff complaints and an important medium of communication for
local government staff
1964 – Ministry of Local Government and Housing was established
and provided a focal point for local government research and
coordination.
1965 – Restructuring of local government initiated with the setting up of
the Athi Nahappan Royal Commission

2.3 RESTRUCTURING OF LOCAL GOVERNMENT IN

MALAYSIA AND THE SETTING UP OF THE ATHI
NAHAPPAN ROYAL COMMISSION

2.3.1 What does Restructuring mean?

Restructuring in the context of local government means to reorganize, review and
reexamine the structure, functions, purpose and administration of local government.
There are many aspects to restructuring which can be categorized as below:

1. Physical restructuring – means reducing number and types of local

government units. For eg. From 373- 100 It also means increasing or
decreasing size of local government units. For eg. The very small councils
are amalgamated into bigger ones. It is also to reduce the types of local
authorities. For eg. from 7 types to 2.

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 2. Organisational restructuring – means improving the administration,
organisation and structure of local government units.
This can be done by
- improving the management and committee system in local
government
- looking into the councilor system of appointment

3. Financial and administrative restructuring

It means improving local government finances such as increasing its financial
autonomy and suggesting ways to enhance its financial capacity.
Administrative restructuring means improving its staffing, personnel problems.

2.3.2 Why was restructuring to LG done in Malaysia?

Restructuring was initiated in 1965 by the government due to the following:
™ The number of local government units were too many – there were
nearly 390 units prior to restructuring.
™ There were 7 types of local government units – most had no financial
and administrative autonomy. For eg. town boards, municipal, city
councils and local councils. The local councils were the most.
™ Most councils could not provide basic services due to lack of finance
and administrative staff.
™ The councilors were inefficient and politically motivated and corruption
was rampant.
™ Staffing constraints especially lack of professionals such as valuers
and town planners
™ Financial administration was poor, record keeping bad, and high
arrears
™ There were too many laws relating to local government in Malaysia.
™ Communication between Local Government and higher levels of
government was lacking.

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 ™ The management system was weak. There were too many
committees and no clear demarcation between policy and
administration. Councilors were not supposed to interfere in
administration but were preventing staff from carrying out their duties
such as in collection of taxes and in providing licences.

™ Party political conflict reduced standing of local government. For eg.

boycott by the Batu Pahat council’s finance committee over state
government budget control.

2.3.3 Royal Commission of Inquiry 1965 ( also known as

Athi Nahappan Royal Commission)
In 1965 the Athi Nahappan Royal Commission was set up to examine and
restructure the entire LG system in West Malaysia. Its objectives were:
1. to investigate if the present system of Local Government serves any
useful purpose
2. to report on the above matters and to make such recommendations,
taking into account the adequacy of existing laws with regard to local
authorities

The commission organised many meetings and discussions as well as received

many memoranda from various organisations and managed to finish a complete
investigation four years later. The commission sent its report to the federal cabinet in
December 1969 but its report was only released to the public two years later due to
the state of emergency declared in Malaysia in 1969.

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 Its main recommendations
™ That every inch of the country should be covered by a local authority
™ That every householder in a Local authority should be required to pay
a nominal contribution of not less than $1 per annum in lieu of rates. (
in UK it is called a poll tax)
™ There should be one single law applicable to all local authorities and
every state should enforce the law within 6 months.
™ A local authority should be decentralised and be an autonomous body
corporate consisting of fully elected members with financial and
administrative autonomy but subject to the control by state authority.
™ Elections should be run on a party basis.
™ That every local authority should have a management board.A
Management Board will function as an executive body between the
Council and administration.It will play a similar role as the Cabinet in a
Federal system of government. The Management Board will have 5-9
members consisting of councilors.
™ The secretary of a local authority should be the chief administrator and
executive officer of a local authority.
™ The secretary should be the focal point of public administration in a
district and not the District Officer. The DO should be eventually
abolished.(right now the DO is still the chief executive at the local
level)
™ That there should be Regional Inspectorates in local government.
They can represent the northern, central, eastern and southern
regions in Peninsular Malaysia.
™ That there should be a State Commissioner of local government in
each state.
™ That a state committee for local government should be established in
each state to exercise the functions of the state in relation to local
government.
™ A local government tribunal should be set up to deal with complaints
from public.
™ A ward committee should be set up in every ward of a local authority
™ All trade and business registered under the Registration and Business
Ordinance 1956 should be required to pay a licence fee annually.

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 2.4 ANALYSING THE MAIN PROPOSALS OF THE
COMMISSION
The government set up two committees to look into the recommendations:
1. A Main committee which agreed with most of the recommendations made by
Athi Nahappan
2. A Minority committee which was made up of Development Administration Unit
and Economic Planning Unit officials from the Federal government central
agencies. This committee did not accept most of the recommendations made
by Athi Nahappan.

Which recommendations did the Minority Committee reject?

™ The Minority committee did not accept the main recommendations of the
report such as
™ Elections must be held to local government
™ The secretary of the council must be the chief executive at the local level
™ The District Officer must be abolished
™ A poll tax should be collected from every individual
™ A Management Board should be set up
™ There should be Regional Inspectorates in local government
™ That there should be a State Commissioner of local government in each state.
™ That a state committee for local government should be established in each
state to exercise the functions of the state in relation to local government.
™ A local government tribunal should be set up to deal with complaints from
public.
™ A ward committee should be set up in every ward of a local authority

Which committee did the government accept?

The government had a choice to accept either report but the Federal government accepted
the report of the Minority committee.

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Why?
1. This was because Athi Nahappans recommendations were considered too
drastic and not suitable for a newly developing country like Malaysia which
had many races and having elections could create political disharmony
among the races and political instability. This could be due to the fact that
most of the parties that won the local elections in the fifties were from the
opposition and belonged to a specific race.

2. The government felt that democracy was still a new concept and people were
not politically mature to understand democracy. Anyway, people were still
apathetic towards democracy and will not go to vote.

3. Elections held to local councils will create political instability and will not help
to achieve unity among the races. This could be due to the fact that most
local councils prior to restructuring were led by opposition parties which were
controlled by a specific race.

4. Since Malaysia was a newly independent state, a lot of socio-economic

programs needed to be implemented and democracy was not an important
objective to be attained especially at the local level.

5. Regarding the District Officer, it was felt by higher levels of government that
the District Officer was an important traditional institution in the government
hierarchy and cannot be abolished.

6. The setting up of the Management Board was considered unneccesary. The

Management Board would act as a policy making body just like the Federal
cabinet. However, it was felt that the executive committee system in local
government was sufficient.

7. Elections are too costly to be held at the local level since elections are
already held at the Federal and State level.

8. The public are politically apathetic and will not take an interest in local affairs
via elections.

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 9. The poll tax was also not a good idea since the people already have too many
taxes to pay.

10. The state government was constitutionally in charge of local government. So

it was not necessary to have a state commissioner and regional inspectorates
to control local government.

In 1970,the government finally accepted the minority report done by the DAU and EPU
officials. This culminated with the passing of the Temporary Local Government Act, 1973
and finally the Local Government Act, 171 was passed in 1976. This Act is only enforceable
in West Malaysia. This is because Sabah and Sarawak have their own local government
legislation.

2.4.1 Restructuring of local government

The Act 171 was an important turning point in the restructuring of local government in
Malaysia. Various aspects of restructuring were carried out such as physical,
financial, administrative and organizational.

2.4.1.1 Some important aspects of restructuring:

Physical restructuring
™ Two types of councils set up – municipal councils in the town areas
and district councils in the rural areas( section 3 of Act 171)
™ Smaller local councils were amalgamated to become larger units
(section 5).

Organisational restructuring
™ A local government council was set up made up of councilors
appointed by state government. Number of councilors from 8 –
24.(section 10)
™ Elections to local government cease to have any effect ( section 15)
™ Functions of local authorities increased from purely maintenance to
development oriented.(section 72 and 101)

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 ™ A local authority shall be a body corporate and shall have perpetual
succession and a common seal ( section 13)
™ Local councils may sue and be sued, acquire, hold and sell property
(section 13)

Financial Restructuring
™ Local councils finances improved- specific revenue were allocated to
them( section 39)
™ Local councils have the power to recover arrears in case of ratepayers
who default in their payment ( section 148)
™ Local councils could borrow money from federal or state governments
or from other financial institutions ( section 41 and 47)
™ Local councils can make advances by way of overdraft ( section 49)
™ Local councils have the power to issue mortgages or debenture stock
(section 42)

Administrative Restructuring
™ The State government can issue directions to local government
(section 9)
™ Local councils can make bye laws (section 102)
™ Local councils can hire their own staff and became a closed service
(section 16)
™ Local councils have the power to provide for discipline for their staff
(section 17)
™ A committee system of administration set up – committees comprised
heads of departments and councilors

Local government was thoroughly transformed after the passing of the Local
Government Act. It remains to be seen if the transformation taking place can
enhance local government’s efficiency and effectiveness.

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