In 1946, the Straits Settlements were dissolved, with Sir Shenton Thomas being the last governor, and Penang became part of the Malayan Union, before becoming in 1948 a state of the Federation of Malaya.
The Penang secession movement was led by the Penang Chamber of Commerce,representing European business interests in Penang, and included organizations such as the Settlement of Penang Association, Penang Eurasian Association, the Chinese and Indian Chambers of Commerce, and the Penang Clerical and Administrative Union. Some of these organizations were driven by economic interests, others by a yearning to return to their pre-eminent status in pre-war days, yet others by a fierce, if parochial sense of ‘Penang patriotism’. But the fact that only 212 persons were present at the meeting to launch the movement indicated the movement’s lack of mass support and mobilizing skills.
During this period, some Straits Chinese began taking an active interest in local politics, especially in Penang, where there was an active Chinese secessionist movement. They identified themselves more with the British than the Malays and were especially angered by references to them as pendatang asing ("aliens"). They avoided both UMNO and the MCA, believing that while UMNO and the Malay extremists were intent on extending Malay privileges and restricting Chinese rights, the MCA was too "selfish", and could not be relied on to protect their interests. They had already raised their ire in the late 1940s, when the government proposed to amend the Banishment Ordinance — which allowed for the exile of Malayans "implicated in acts of violence" — to permit those born in the Straits Settlements to be banished to their ancestral homeland. This was a revolting idea for most of the Straits Chinese. They were also uncomfortable about the merger of the Straits Settlements with Malaya, as they did not feel a sense of belonging to what they considered a "Malaya for the Malays", where they were not considered bumiputra ("sons of the soil"). One Straits Chinese leader indignantly declared, "I can claim to be more anak Pulau Pinang [a son of Penang] than 99 per cent of the Malays living here today." The secessionist movement eventually petered out, however, because of the government's stout refusal to entertain the idea of Penang seceding from the Federation.
A motion for Penang to secede from the Federation and to join Singapore as a separate British crown colony was narrowly defeated 15 votes to 10 in February 1949, mainly by the use of British official votes(Christie,1996).
On 31 August 1957, Penang formally became part of the newly-independent Federation of Malaya (Persekutuan Tanah Melayu) and in 1963, also became a member state of Malaysia.
1. A Modern History of Southeast Asia: Decolonization, Nationalism and Separatism(1996), by Clive J. Christie, published by Tauris Academic Studies, Reprinted in 2000. Pg 28-53