With 1957's independence, a new series of difficult decisions lay ahead of Malaya, the first of which was to determine exactly what territories would be included in the new state. In 1961, the term "Malaysia" came into being after Tunku convinced Singapore, Sabah, and Sarawak to join Malaya in a federal union (Singapore later opted out of the union, peacefully, in 1965). Afraid that the union would interfere with his expansionistic plans, Indonesia's president Sukharno launched attacks against Malaysia in Borneo and on the peninsula, all of which were unsuccessful. 

Another immediate problem was the determination of a national identity. Malaysia was a mix of people from many races and cultures, and uniting them under a common flag was not an easy enterprise. Because Malays represented the majority, the constitution gave them permanent spots in the government, made Islam the national religion, and made Malay the national language; but the Chinese firmly dominated business and trade, and most Malay were suffering economic hardships. The government, controlled by the United Malay National Organization, passed the New Economic Policy, which attempted to increase economic opportunity for the Malay by establishing various quotas in their favor. Unsurprisingly, many Chinese opposed the new arrangement and formed a significant opposition party. In 1969, after the opposition party won a significant seats, riots swepts through Kuala Lumpur and the country was placed in a state of emergency for two years. It was a painful moment in the young nation's history that most Malaysians prefer to forget.