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Document, BT 11/4189, in the Public Record Office at Kew explains some of the thinking behind the design of the Malaysian Flag.
Federation of Malaya Order No.61 of 1949 announced that a committee had been set up to make recommendations for the design of a Federation Flag. A competition was organised with the suggestion that, in any design submitted, the flag should be simple, and have not more than four colours, which might perhaps be yellow, red, white and blue, the colours most frequently used in the flags of the nine states and two settlements of the federation. Suitable symbols would include the kris (a Malayan sword), tiger, and crescent.
A total of 373 entries were received. The committee chose three to put before the Legislative Council.
Explanation. Colours; red was found on six state/settlement flags, white on five, and blue on three, and all were colours of the Union Jack. Eleven stars of equal size, equally spaced, represented the states/settlements in no particular order, and each of equal importance. Kris was of great antiquity and peculiar to the Malayan archipelago, thus identifying the flag with Malaya.
Explanation. The same as (1), with the inner circle of stars representing the Unfederated Malay States and the outer circle the four Federated States and two Settlements.
Explanation. One stripe for each state or settlement. Yellow star and crescent represented sultanate monarchies of the states, and the religion of the states. The red field of the canton represented British protection and the complete red, white, blue associated the Federation with the Commonwealth.
On 6 March 1950 the Federal Legislative Council decided that none of the designs were acceptable, and asked for a revised design that would be considered on 19 April. At this meeting the Council approved a revised version of (3) in which, the blue stripes were replaced by red stripes, the red canton was replaced by a blue canton, and the five point star was replaced by an eleven point star.
According to I.O. Evans writing in 1953 [eva57];
Its colours combine the traditional royal hue, gold, of the Sultans of Malaya with the red, white and blue of Britain; the eleven stripes and points on the star indicate that number of states in the Federation; the crescent and star form the traditional Mohammedan emblem.The company producing the first batch of flags questioned the width of the canton, which was 7 stripes deep, when it could be 6 stripes deep and still more than half the width of the flag. The answer was that the stripes represented the unity of the states and settlements, and it was hoped that Singapore would join the Federation when an additional white stripe would be added to the bottom of the flag.
David Prothero, 2 May 2002