KOTA KINABALU, Nov. 21 -- Just 10 minutes by boat across the state capital's waterfront, Pulau Gaya's stilt villages are still viewed through the lens of squatter settlements and undocumented migrants, even after decades of integration and development.

Their reputation as a refugee settlement from the 1970s has overshadowed the reality that Gaya island has become home to thousands of Malaysians who are now an integral part of the state capital's workforce.

Contrasting the tourist bars and shopping malls, the standard of living on the island varies from modest - sturdy stilt homes with electricity and basic sanitation, with designated living spaces, curtains and television - to squalid with cramped huts that have doors that cannot shut a...