Malaysian Trade Ban: Nation torn by breakneck pace of change: Influence is concentrated on a new urban elite as development gathers pace: Raymond Whitaker on the 'tiger' economy in which power is uneven

NEXT to the Federal Highway, one of the ever-thickening tangle of motorways around the Malaysian capital, Kuala Lumpur, is a compound imprisoning thousands of Vietnamese 'boat people'. Signs outside need no words to convey their warning: they show a silhouette of a running man being shot in the back.

Day and night the Vietnamese can be seen, looking out yearningly from their dormitories at a country being transformed by wealth. The motorway is choked with locally- produced Proton cars and the compound, once some distance from the city, is being encircled by housing developments. On the horizon, cranes sprout from nearly a dozen giant commercial projects.

The 'boat people' know they will almost certainly have to go back to their own country, which is beginning to emerge from decades of war and Communist mismanagement, while Malaysia grows so fast that it is sucking in illegal immigrants from around the region.

Now it appears that British companies are going to be in the same position as the Vietnamese refugees: excluded from one of the 'tiger' economies which have made growth in this region the fastest in the world. Yet the fate of this nation, which hangs from the main Asian landmass like a fruit at the end of a branch, could so easily have paralleled Vietnam's. Instead of having British ministers bending the rules to win its favour, Malaysia might have sunk into violence and economic decay.

When the country became independent from Britain in 1957, its horizons appeared limited. It had resources such as tin, rubber and palm oil, but the Communist insurgency that broke out in 1948 had only just been suppressed, and was not to die out completely for more than 30 years.

Far more dangerously, Malaysia was a nation of minorities, in which no single ethnic or religious group was dominant. The mainly Muslim Malays made up nearly half the population, but played hardly any role in the economy. That was controlled by the more cosmopolitan Chinese community, roughly a third of the population except in the self- governing territory of Singapore, where they were in the majority. The Indian community also had economic power out of proportion to its size.

Malay-Chinese tension led to Singapore becoming a separate state in 1965, and in 1970 to rioting in which nearly 200 people died in a single night. A shocked political establishment agreed to form a grand coalition of most of the country's parties, known as the Barisan Nasional, or National Front, which has won every election since.

It drew up a policy of 'positive discrimination' towards bumiputras - indigenous Malays - which aimed to give them control of 30 per cent of the corporate sector within 20 years.

Although that target was not achieved, economic growth has been so fast that everyone's living standards have risen. Within the past decade manufacturing has become the biggest export earner; GNP per head is now dollars 2,490 ( pounds 1,680), putting Malaysia in the middle-income bracket.

Malays enjoy a near-monopoly of political power through the United Malays National Organisation (Umno), the dominant party in the governing coalition, and the bumiputra policy has helped to create an urbanised Malay business and political elite. Its members often have more in common with the Chinese than with their rural cousins, who retain feudal reverence for their local sultan.

When one group has been in power for so long, and the country's wealth has increased so rapidly, it is hardly surprising that corruption is rumoured to be widespread, though not as bad as in many other Asian countries. The sale of influence is more or less institutionalised by the bumiputra policy - most Chinese and foreign business people, for example, find it prudent to have a Malay 'sleeping partner' with good political connections. Money has also been used to ease the pain of the traditional aristocracy at being supplanted.

What the newly privileged elite does not appear to have is self-confidence. The British- style institutions inherited on independence, including the press and the judiciary, have been subordinated to the government's will.

The media routinely suppress any criticism of the government until a minister counter-attacks, leaving readers and viewers to guess what the original allegations were, and opponents are subject to detention and harassment.

Far from the heartland of Islam, and barely in the majority within their own country, many Malays have been left torn, by the breakneck pace of change, between defensiveness and assertiveness. This conflict is particularly strong in dealings with the country's former colonial rulers.

(Photograph omitted)