A peculiar case of peninsula paranoia; profile
Mahathir Mohamad: Malaysia's PM seems bent on destroying his country's economy.
Sunday 28 September 1997
It was a great show, delivered to an audience comprised almost entirely of the people who are supposedly involved in the conspiracy. After Dr Mahathir had dropped his bombshell about banning the "unnecessary, unproductive and immoral" business of currency trading, a former Malaysian fund manager described it as "one of the most impressive acts of suicide I have ever seen".
So it proved: international investors holding positions in the Malaysian currency took Dr Mahathir at his word and, last Monday, the first day of trading following the speech, queued up to sell the ringgit, pushing it down to a 26-year low.
The speech in Hong Kong can only be seen as an act of deliberate provocation. Dr Mahathir's remarks were guaranteed further to undermine confidence in the Malaysian currency and stock market. As George Soros put it in his reply the next day, the man is a menace to his own country.
For the financial crisis that started in Thailand in July and spread to other South East Asian economies had already prompted a fall of one fifth in the value of the ringgit in less than two months. The Thai economy has since been propped up with the help of a $17.2bn IMF-led rescue package. Malaysia, on the other hand, has been hammered by the increasingly outrageous statements of its Prime Minister.
Last weekend Dr Mahathir made it clear that he sees the summer's crisis as an international conspiracy against him. The self-obsession of the autocrat shines through in these words: "There may be no conspiracy as such, but it is quite obvious that a few at least, media as well as fund managers, have their own agenda which they are determined to carry out."
He added: "We are warned that these are powerful people. If we make a noise or act in any way to frustrate them they would be annoyed. And when they are annoyed they can destroy us altogether, they can reduce us to basket cases."
However, many fund managers think Mr Mahathir is in no need of reduction to basket-case status, having got there so effectively by himself. His furious lashing out at those he sees as the architects of Malaysia's misfortune has seriously damaged the country's attractiveness to foreign investment, on which it has relied so heavily for its economic development.
It is hard to escape the conclusion that Mr Soros was right when he said the Malysian Prime Minister would never have got away with his outbursts if he had not been an autocrat living in a country with a politely subservient press.
Malaysian officials accompanying the premier were appalled, none more so than his deputy, Anwar Ibrahim, who also serves as finance minister, and had apparently not been told in advance. Mr Anwar, who has been waiting for years to take over the top job, was left to explain. Clearly embarrassed, he said that notwithstanding any impression given by the Prime Minister, there would be no change in the rules about currency trading. "My task as finance minister," he said pointedly, "is, of course, to deal with specific measures."
The problem for Mr Anwar is that he is not in charge. Dr Mahathir has been Prime Minister for 16 years, during which he has survived two serious challenges within the ruling party and emerged in a far stronger position.
Dr Mahathir is identified with the aggressive advancement of the majority Malays - though he does not hesitate also to berate them for passivity and lack of enterprise - at the expense of the ethnic Chinese and Indians, who make up over a third of the country's population. The New Economic Policy, as it is called, has been declared a success, and the theme is now "Vision 2020". This is designed to make Malaysia a fully-developed country in the next 23 years, thrusting it to the forefront of Asia's high-tech and manufacturing industries.
The aim is to create a society of entrepreneurs and skilled workers, but so far Vision 2020 seems to have been more about size than anything else. Malaysia has the world's tallest building and is still planning to build Asia's largest airport, though several other mega-projects, such as the Linear City project, the world's longest building, and the "Multimedia Super Corridor", a high-tech concentration intended to rival California's Silicon Valley, have been cancelled or put on hold as a result of the latest upheavals. But instead of acknowledging that these grandiose schemes are at the root of Malaysia's massive debt problems, leading in turn to the currency crisis, the Prime Minister says it is all the fault of speculators.
In Hong Kong he defended the mega-projects as being "basic infrastructure", not "monuments". Then he launched into a tirade against those who questioned the "big idea" strategy. "We are not going to be allowed to do this because you don't like us to have big ideas," he complained. "It is not proper. It is impudent for us to try, or to even say we are going to do it."
This was classic Mahathir, combining wit with a sense of self-righteous indignation. It has won him a following in developing countries, but Dr Mahathir is not in the classic mould of Third World leaders who were suspicious of private enterprise and statist in their outlook. He believes, up to a point, in free markets, and wants Malaysia to compete in the world market on equal terms. He has presided over the enormous economic growth of his country, which has per capita income of $5,000 today, compared to just $350 on independence in 1957. The population then was just five million, compared to today's 20 million. Vision 2020 sets a goal of average growth of 7.5 per cent a year over the next 23 years, bringing income per head to $16,000.
At 72, and not in the best of health, Dr Mahathir might be expected to step down soon. He talks tantalisingly of handing over the reins of power, but is notoriously vague when asked when this might happen. Many members of the Prime Minister's party want him to go while his reputation is still high, and before he does anything which will really tarnish it.
The problem is that there is no one around who is strong enough to tell him his time is up, or even to warn him against actions such as his wild attacks on speculators - attacks which have done far more damage to Malaysia than the speculators could have wrought on their own.
Copyright: IOS & Bloomberg
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