After the war, the British Government felt that their policy in Malaya had to be changed and brought up-to-date in the interest of "modernisation". They attempted to unify the various Malay States and the Settlements of Penang and Malacca into a single Malayan Union in order to overcome what they believed to be inefficient pre-War administration of the separate Malay States. This scheme entailed the abandonment of the pre-War policy of recognising the political identity of the Malays. It involved two elements: firstly, the administrative structure was to be unified at the expense of the sovereignty of the Malay Rulers; secondly, the Malays would lose their pre-War position and their political identity as Malays, in that citizenship privileges would be available to everyone (with the exception of Japanese nationals) regardless of race. Those born and resident in the Malayan Union would belong to a common political category. The British White Paper on the subject explained, inter-alia, "a stage is now being reached for the system of government [in Malaya] to be simplified and reformed."
Sir Harold MacMichael, Special Representative of the British Government, was sent to Malaya for the purpose of getting approval of Their Highnesses the
Sultans so as to conclude with each State Ruler, on behalf of His Majesty's Government, a formal agreement that would result in a Malayan Union.
In the face of this threat. Malay nationalism saw a sudden upsurge. The Malays, increasingly conscious of their adverse economic condition, and of the competitiveness of the politico-economic world around them created by the immigrant races, feared that they would be economically swamped and politically overwhelmed in their own country by non-Malays. The Malays "used to be poor men in a poor country, and now they were poor men in a rich country." and felt their very existence jeopardised by this threat to their political survival. Inspired by the examples of Asian nationalism around them, especially in Indonesia and India, the Malays were determined to resist the British scheme to create a "Malayan Union". The Malays feared a rule by the Chinese about whose loyalty to the country they harboured certain doubts. As noted earlier, there was an absence of identification of the immigrant races with the local culture. To the Malays, loyalty to Sultan and country was something traditional: to the Chinese, as seen by the Malays, "loyalty" was political loyalty to the State—related to citizenship, political gain and domination.
As a result of widespread opposition by the Malays, the Malayan Union Plan was abandoned in 1948. The MacMichael Treaties were scrapped and in their place was established a Federation of Malaya with the
understanding that this Federation would constitute a step towards self-government. The United Malay National Organisation (UMNO), the party that fought the MacMichael Plan, was the symbol of Malay solidarity. This party agreed in principle to grant rights of citizenship to non-Malays who were genuinely loyal to the country and prepared to swear allegiance to it. Despite this agreement to grant citizenship rights, there was widespread dissatisfaction among the immigrant races as they considered this concession was inadequate.