MALAYSIA UNDER MAHATHIR MOHAMMED

MAHATHIR AS THE LEADER OF MALAYSIA

Mahathir came to power in 1981 and was the first non-aristocratic leader of Malaysia. He is credited with replacing colonial subservience with national pride, an raising a country from the Third World to developed world status at an astounding pace. He forcibly united Malays, Chinese and Indians. He held them together without having the whole thing coming unravaled as happened in Indonesia.

Mahathir Mohamad’s ascendency to the position of prime minister caused concern among ethnic Chinese and Indians in Malaysia who regarded him as interested in promoting Malay status at the expense of other ethnic groups. However, Mahathir’s early years in office were marked primarily by attempts to prevent official corruption and by success in increasing the power of elected officials relative to Malay rulers. Mahathir also ambitiously pursued economic reforms, such as orienting the economy toward the production of export goods, promoting joint ventures with Asian firms, and privatizing many state industries, which often were taken over by ethnic Malay-controlled corporations. [Source: Library of Congress, 2006]

Soon after becoming Prime Minister, Mahathir strengthened his office by dramatically reducing the power of the sultans who ruled Malaysia’s states. Often he acted like a sultan himself. He often made decisions based on instinct with little consultation with his aides. He lectured those around him, who in turn gave instructions to their subordinates and they spread out to convey Mahathir’s wishes. In 1988 Mahathir undermined the independence of the judiciary by removing the president of the supreme court and other senior judges from office. Some opposition leaders have been jailed under the internal security act.

Mahathir ruled under what was called the Barisan Nasional (BN), or National Front, a coalition of the UMNO and 13 ethnic parties. In the 1990s, UMNO and the BN continued their impressive streak of election victories, and Mahathir’s influence continued to grow. The Nation Front won 166 seats (84 percent )of the 192 parliamentary seats in the 1995 election and 149 of the 193 parliament seats in the 1999 election.

See Separate Article on MAHATHIR MOHAMMED factsanddetails.com .

Mahathir’s Early Years as Prime Minister

When Mahathir became prime minister in 1981 there were doubts whether he was up to the task. "Worse still, critics branded him as being anti-Chinese," one journalist told The Nation, noting that Mahathir's rise and the anti-Chinese label did scare a number of Chinese into leaving. "But look at today, it's the Chinese who cannot hide their love for Mahathir," he said. [Source: Thepchai Yong, The Nation, October 2002]

Early during Mahathir's tenure as prime minister, a bitter dispute erupted within the ruling UMNO party and it was divided into two camps, which were colloquially known as 'Team A' comprising Mahathir loyalists, and 'Team B', which supported former Minister of Finance Tengku Razaleigh Hamzah and former Deputy Prime Minister Musa Hitam. Mahathir prevailed, leading to the exclusion of Tengku Razaleigh Hamzah from the newly established UMNO (Baru) or New UMNO in February 1988,

Mahathir’s Domestic Policies

Mahathir bin Mohamad was the leading force in making Malaysia into a major industrial power. He is credited with turning Kuala Lumpur into a modern city with (for a while) the world’s tallest building and high-tech industrial areas but criticized for ignoring the villages and provinces. Even, his home province of Kedah seems undeveloped and stuck in a time warp. Over the years, Islamic parties have gained power there at the expense of his party.

Mahathir developed the "Malaysia Can" slogan in 1993 and developed the Vision 2020 program in which he planned to make Malaysia a fully developed country with 70 million people (compared to 20 million in 1998) by the year 2020.

Mahathir put a lot of money into expansive infrastructure projects (see infrastructure) and high-tech development even when Malaysia was suffering an economic crisis. Mahathir once called himself as "cyber addict." He was one of the first world leaders to have his own blog and website and said he to create a paperless government in Malaysia. Prodded by his daughter, he spoke out on women’s rights and AIDS awareness.

Mahathir’s economic and other policies were subject to widespread criticism, which occasionally led to contentious divisions within UMNO. He was often viewed as uncompromising and highly aggressive in the pursuit of his policies, yet throughout the 1980s he led UMNO and the BN to successive election victories. Heightened criticisms of Mahathir coincided with rising ethnic tensions over religion, Chinese-language education, and other issues. Claiming to preempt violent ethnic riots, in 1987 Mahathir ordered a crackdown on critics of government policies, and police arrested more than 100 individuals—including politicians—and closed three newspapers. The detainees were later released, but the government introduced numerous restrictions on civil liberties, such as making the dissemination of “false” news illegal. [Source: Library of Congress, 2006]

New Development Policy Under Mahathir

John H. Drabble of the University of Sydney wrote: “Positive action to promote bumiputera interests did not end with the NEP in 1990, this was followed in 1991 by the New Development Policy (NDP), which emphasized assistance only to "Bumiputera with potential, commitment and good track records" (Malaysian Government, 1991, 17) rather than the previous blanket measures to redistribute wealth and employment. In turn the NDP was part of a longer-term program known as Vision 2020. The aim here is to turn Malaysia into a fully industrialized country and to quadruple per capita income by the year 2020. This will require the country to continue ascending the technological "ladder" from low- to high-tech types of industrial production, with a corresponding increase in the intensity of capital investment and greater retention of value-added (i.e. the value added to raw materials in the production process) by Malaysian producers. [Source: John H. Drabble, University of Sydney, Australia \+\]

Ian Buruma wrote in The New Yorker, “One of Dr Mahathir’s ambitions was to make Malaysia into an Asian Silicon Valley. Foreign companies were invited to invest in a “Multimedia Super Corridor” between the new international airport and the twin Petronas Towers (also known as Dr Mahathir’s Erections), which rise like gigantic pewter cocktail shakers in the centre of Kuala Lumpur. An international committee of experts, including Bill Gates, advised Dr Mahathir that, if he wished to attract foreign investment, censoring the Internet would be unwise. As a result, Malaysian readers now have access to news and commentary that is independent of the government. [Source: Ian Buruma, The New Yorker, May 19, 2009 <>]

Alan Sipress wrote in the Washington Post: “Mahathir sought “to shake the colonial past, to remake his county and people much as he has transformed the natural landscape of Malaysia. Omar bin Sidek, a 91-year-old with a wispy white beard, remembers the long years when his town of Dengkil in Selangor state was a modest jungle outpost in the midst of vast oil palm plantations, long a mainstay of the Malaysian economy. "Ooh, I'm speechless to describe the change," said Omar, squinting to recall life before Mahathir's major public works came to this area 25 miles south of Kuala Lumpur, the capital. There were just four rows of small shops, fashioned from hand-chopped wood. Local laborers had to travel as far as 15 miles on rutted roads to buy anything but basics. The streets were deserted at sundown.[Source: Alan Sipress, Washington Post, October 27, 2003]

But in the 1990s, Mahathir's administration bought up huge surrounding tracts, razed the palms and started to build. Just to the south now is the new international airport. To the north is Cyberjaya, a sprawling campus of modern office buildings and fresh construction sites, the heart of the country's high-tech corridor. And carved wholesale out of the nearby hills is Putrajaya, a rolling expanse of processional boulevards, monumental bridges and ornately landscaped lawns. The green and rose-colored onion domes of imposing government buildings rise beside others erected in a contemporary Western style.

Yet Mahathir's national project is unfinished. He moved to Putrajaya, Malaysia's new administrative capital, but foreign embassies have not followed him out of Kuala Lumpur. And while companies are constantly arriving in his high-tech corridor, few are world-class research outfits. Mahathir” also acknowledged “that his longtime mission to build a national steel industry had failed, blaming poor management. His drive to develop a national automobile industry, meanwhile, has filled the highways with the Malaysian-made Proton, but economists say it will be hard-pressed to compete as the country expands international trade.

Second Phase of Development: Exports and Technology

While the export of raw material remained an important part of the Malaysian economy, manufacturing became more of a focus under Mahathir. Important manufactured goods have included rubber gloves, catheters, rubber-threads, room air conditioners, semiconductors and audio visual equipment.

By the 1990s Malaysia had become the world's largest exporter of semiconductors, an industry that dates back to the mid-1970s when many U.S. and Japanese companies set up factories in Malaysia. At that time there was also a trend to produce more assembled products like cameras and VCRS from semiconductors in Malaysia.

Malaysia's rapid development has been attributed to the transparency of government policies, its educated and skilled workforce, well-developed infrastructure, good communications facilities and efficient bureaucracy.

High tech industries developed in Malaysia in the 1990s and 2000s included advanced electronics, scientific instruments, biotechnology, automated manufacturing systems, electra-optics and non-linear optics, advanced composite materials, optoelectronics, software engineering, alternative energy sources and aerospace.

Malaysia in the 1990s was reminiscent of South Korea in the 1980s and Japan in the 1960s and 1970s, when people are intoxicated with their new affluence and happy to leave their poverty behind them.

Over these three decades Malaysia accomplished a transition from a primary product-dependent economy to one in which manufacturing industry had emerged as the leading growth sector. Rubber and tin, which accounted for 54.3 percent of Malaysian export value in 1970, declined sharply in relative terms to a mere 4.9 percent in 1990 (Crouch, 1996, 222). \+\

Malaysian Economy Under Mahathir

Malaysia experienced rapid economic growth from the 1980s. After a 1985–86 property market depression, growth returned through to the mid-1990s. Mahathir increased privatisation and introduced the New Development Policy (NDP), designed to increase economic wealth for all Malaysians, rather than just Malays. The period saw a shift from an agriculture-based economy to one based on manufacturing and industry in areas such as computers and consumer electronics. It was during this period, too, that the physical landscape of Malaysia changed with the emergence of numerous mega-projects. Notable amongst these projects were the construction of the Petronas Twin Towers (at the time the tallest building in the world, and, as of 2010, still the tallest twin building), KL International Airport (KLIA), the North-South Expressway, the Sepang International Circuit, the Multimedia Super Corridor (MSC), the Bakun hydroelectric dam and Putrajaya, the new federal administrative capital. [Source: Wikipedia]

The Malaysian economy continued to boom at historically unprecedented rates of 8-9 percent a year for much of the 1990s. There was heavy expenditure on infrastructure, for example extensive building in Kuala Lumpur such as the Twin Towers. The volume of manufactured exports, notably electronic goods and electronic components increased rapidly. Under Mahathir, Malaysia’s economy grew at a rate of over 8 percent per year until mid-1997, when a currency crisis in neighbouring Thailand caused the Asian financial crisis plunging the whole of Southeast Asia into recession.

In the late 1990s, Malaysia was shaken by the Asian financial crisis, which damaged Malaysia's assembly line based economy. Mahathir combated it initially with IMF approved policies. However, the devaluation of the Ringgit and the deepening recession caused him to create his own programme, based on protecting Malaysia from foreign investors and reinvigorating the economy through construction projects and the lowering of interest rates. The policies caused Malaysia's economy to rebound by 2002, but brought disagreement between Mahathir and his deputy, Anwar Ibrahim, who backed the IMF policies. This led to the sacking of the Anwar, causing political unrest. Anwar was arrested and banned from politics on what are considered trumped up charges.

High Growth Rates in Malaysia in the 1980s and 90s

Malaysia was one of the fast growing economies in the world until the Asian economic crisis in 1997-98. The growth rate in Malaysia averaged 8 percent between 1986 and 1996, one of the highest rates in the world. In that time Malaysia grew from near developing country status to the world's 13th largest economy. The Per capita income in Malaysia rose from US$2,255 in 1990 to US$3,908 in 1995 and was expected to reach US$6,500 a year in the year 2000 before the Asian economic crisis in 1997-98 hit.

Malaysians, like Indonesians, and Thais, tripled their income levels between 1965 and 1995. By contrast the The Four Tigers—South Korea, Taiwan, Hong Kong and Singapore—raised the per-capita incomes sixfold in the same period. The growth rate in Malaysia averaged 5.2 percent in the 1960s, jumped to 8.3 percent in the 1970s, fell in the 1980s because of a drop in the price of oil, palm oil and rubber. Between 1987 and 1995, it averaged 8.8 percent a year and topped 8 percent for eight consecutive years.

Growth between 1991 and 1995: China (11.8 percent); Singapore (8.6 percent); Malaysia (8.5 percent); Thailand (8.5 percent); South Korea (7.6 percent); Indonesia (6.9 percent); Taiwan (6.7 percent), Hong Kong (5.6 percent), the U.S (2.0 percent), the Philippines (2.4 percent), Japan (1.2 percent).

Growth in Japan and the Four Asian Tigers in 1960-69, 1971-80 and 1981-89: A) Japan 10.9 percent in 1960-69; 5.0 percent in1971-80; 4.0 percent in1981-89. Asian "Tigers" : B) Hong Kong: 10.0 percent in 1960-69; 9.5 percent in1971-80; 7.2 percent in1981-89. C) South Korea 8.5 percent in 1960-69; 8.7 percent in1971-80; 9.3 percent in1981-89. D) Singapore 8.9 percent in 1960-69; 9.0 percent in1971-80; 6.9 percent in1981-89. E) Taiwan 11.6 percent in 1960-69; 9.7 percent in1971-80; 8.1 percent in1981-89. [Source: Drabble, 2000, Table 10.2]

Growth in ASEAN-4 in 1960-69, 1971-80 and 1981-89: A) Indonesia 3.5 percent in 1960-69; 7.9 percent in1971-80; 5.2 percent in1981-89. B) Malaysia 6.5 percent in 1960-69; 8.0 percent in1971-80; 5.4 percent in1981-89. C) Philippines 4.9 percent in 1960-69; 6.2 percent in1971-80; 1.7 percent in1981-89. D) Thailand 8.3 percent in 1960-69; 9.9 percent in1971-80; 7.1 percent in1981-89. [Source: Drabble, 2000, Table 10.2]

Malaysia posted these impressive growth rates and per capita income gains with modest inflation increases of only 4.0 percent. This meant that incomes grew while the low cost of living remained relatively low. In 1995, the growth rate was 9.5 percent and the unemployment rate was 2.8 percent.

Mahathir is credited with creating export-driven industrialization programs, improving the work ethic in Malaysia and increasing entrepreneurial skills. The boom was spearheaded by money from Japanese companies and Malaysian Chinese businessmen, who maintained their influence despite affirmative action for Malays. The manufacturing sector of the GDP increased from 6.7 percent in 1960 to 27 percent in 1990 behind expansion of production of textiles, cars and electronic items.

Japanese electronics manufacturers began setting up assembly plants, primarily in the Penang, in the 1960s and 1970s. Many of the workers were women in their 20s who worked for low wages. The United States also set up electronics assembly plants in Malaysia. To boost moral factory owners organized Miss National Semiconductor, Miss Advanced Micor Devices and Miss Free Trade Zone beauty contests.

Mahathir, the Malays and Race

Alan Sipress wrote in the Washington Post: Publicly, Mahathir has said his chief regret has been his failure to hoist the Malay majority to the same level as the country's non-Malays, in particular the Chinese. He has overseen years of affirmative action that steered public contracts and other benefits to Malays. This has enriched an elite close to the ruling party. But many Malays feel bypassed. "The great irony is that this great Malay nationalist wanted to lift up the Malay people by their bootstraps to new heights and now these very same people can't wait to see the back of him," said Edmund Terence Gomez, a social analyst at the University of Malaya. [Source: Alan Sipress, Washington Post, October 27, 2003]

Ian Buruma wrote in The New Yorker: “Mahathir, whose father had some Indian ancestry, had always been obsessed with race, and the modern era of Malaysian politics can be traced to his book “The Malay Dilemma,” published in 1970, a decade before he came to power. It is a distillation of the kind of social Darwinism imbibed by Southeast Asians of Dr Mahathir’s cohort through their colonial education. The Malay race, the book argues, couldn’t compete with the Chinese for genetic reasons. Whereas the Chinese had been hardened over the centuries by harsh climates and fierce competition, the Malays were a lazy breed, fattened by an abundance of food under the tropical sun. Unfettered competition with the Chinese “would subject the Malays to the primitive laws that enable only the fittest to survive,” Dr Mahathir warned his fellow-nationals. “If this is done it would perhaps be possible to breed a hardy and resourceful race capable of competing against all comers. Unfortunately, we do not have four thousand years to play around with.” [Source: Ian Buruma, The New Yorker, May 15, 2009 >>>]

“And so the Malays had to be protected by systematic affirmative action: awarded top positions and mandatory ownership of business enterprises, along with preferential treatment in public schools, universities, the armed forces, the police and the government bureaucracy. Otherwise the “immigrants,” as the ruling party still calls the Chinese and the Indians, would take over. “The Malay Dilemma” was immediately banned for being divisive. The country was still reeling from the race riots of 1969, when, after a predominantly Chinese party enjoyed an election victory, hundreds of Chinese were attacked by Malays. Killings led to counter-killings. Such intergroup tensions were hardly new: ever since Britain left its former colony, political parties have used ethnic resentments to gain votes, while PAS sought to turn Malaysia into an Islamic state. Presiding over this fraught mosaic of ethnic and religious politics throughout the nineteen-sixties was the aristocratic Prime Minister Tunku Abdul Rahman “” until, in the fall of 1970, he was brought down by the brand of Malay nationalism advocated in Dr Mahathir’s book.” >>>

Corruption Under Mahathir

Although Mahathir championed himself as a corruption fighter and friend of the poor, the gap between rich and poor and cronyism rose under his watch. He awarded contacts for some of Malaysia’s biggest multibillion dollar projects to his friends and friends of his ministers. Still, these friends had to perform. If they didn’t they were purged.

In a typical case, a company owned Mahathir’s close friend Syed Mokhtar Albukhary, was awarded the contract to bought the a new $3.8 billion railroad across peninsular Malaysia. The contract was awarded without any competitive bidding and previous deals made with China and India were canceled.

Mahathir Mohamad claimed he was not corrupt. He took only a $4,000 a year salary and turned over gifts and cars given to him to the state museum on the island of Langkawi. He told Newsweek that when ever the topic of his children come up at meetings he excuses himself. “They’re not idiots, they are doing well in business,” he said. In 2001, Mahathir’s son Mokhzani told Newsweek that he was probably worth about $60 million. A good chunk if his money came from a hospital supply contract for the southern provinces o Malaysia.

Malaysian Tycoon Claims Mahathir Forced Him to Buy Malaysian Airlines

In July 2006, an ex-tycoon has accused former prime minister Mahathir Mohamad of forcing him in 1994 to buy a controlling stake in Malaysian Airline to bail out the government. AFP reported: “Tajudin reportedly purchased a controlling stake of 29 percent in Malaysia Airlines in 1994 from the central bank, paying about twice the market price for the ailing carrier. The well-connected tycoon claims a conspiracy over the deal and is suing the government and a number of state-owned companies for 13.46 billion ringgit ($3.69 billion), according to Malaysia's Sun newspaper. Tajudin was one of a number of Malay entrepreneurs hand-picked by Mahathir in business dealings as part of efforts to boost the wealth of the country's majority ethnic group, or bumiputras as they are called. Analysts have said the affair has shed light on long-held beliefs about government assistance given to bumiputra businessmen in the country. [Source: AFP, July 25, 2006]

Associated Press reported: “Tajudin Ramli filed a court document 29, saying his purchase of the 32 percent stake in Malaysian Airline System Bhd for 1.8 billion ringgit, then worth US$750 million, was not a normal commercial deal as was made out at the time but a forced "national service." If true, Tajudin's allegations would point to shady financial practices and lack of transparency in the government in the 1990s when many private entrepreneurs with close links to top politicians were obliged to carry out business on behalf of the state and received favors. [Source: AP, July 7, 2006 |*|]

“The Sun said Tajudin's court document was in support of a lawsuit that he filed against the government and other individuals, seeking 13 billion ringgit in compensation, alleging a conspiracy by the government to take over his companies. Tajudin claims he was directed by Mahathir and his then-finance minister Daim Zainuddin to buy the MAS shares from the airline's main owner, the central bank, for 8 ringgit per share even though its market price was 3.50 ringgit a share. Tajudin said Mahathir and Daim told him he was buying the shares as a national service to save the central bank, the Bank Negara, which at the time was hit by multibillion ringgit foreign exchange losses. |*|

“Tajudin was hailed then as a national hero. But in his court document, Tajudin says he was a reluctant hero. He says he did not want to buy the stake as he was worried about financial losses, but agreed to do it because it was a directive from the government. He also claims that Mahathir and Daim assured him verbally he would be protected from financial losses and liabilities. But he was told by the two leaders not to reveal this arrangement. "Due to the sensitive nature [of the deal] Tajudin did not seek any written confirmation from Mahathir or Daim, " the Sun said. "Tajudin had never known [Mahathir] ... to renege on any agreement before." Tajudin took out a personal bank loan to fund the purchase of the stake and pledged his companies, Naluri and Technology Resources Industries Bhd (TRI), as collateral. |*|

“After the 1997 Asian financial crisis, his debt-ridden companies were taken over by the state debt restructuring agency Danaharta. Also, TRI-owned Celcom, a mobile phone operator, was forced to merge with the state-owned phone company, Telekom Malaysia. In 2000, the government repurchased Tajudin's Malaysia Airlines stake for 8 ringgit, even though the market price was around 3.6 ringgit, causing a public outrcry that the government was bailing out a crony. But Tajudin says he was a victim rather than a beneficiary because Danaharta not only took over his companies but also sued him in May this year to recover 589 million ringgit that it claims he still owes to the government. Tajudin said he filed the 13 billion ringgit lawsuit and revealed the secret deal with Mahathir because of Danaharta's actions.” |*|

Mahathir denied the allegations. "I don't remember instructing him to buy MAS shares. At that time the government was not short of money. Yes we lost some money but we know what to do, how to recover, and we recovered," Mahathir told reporters. "Perhaps you should ask him how he came up with the conclusion that I forced him to buy MAS...I don't ask people to do national service.” Recalling his version of events, the former premier said he was informed of Tajudin's interest in buying MAS by then finance minister Daim Zainuddin -- who himself has been dogged by corruption allegations. [Source: AFP, July 25, 2006]

Repression Under Mahathir

After nearly losing an election in 1987 and facing leadership challenges among his own party, Mahathir placed the independent judiciary under parliamentary control, threw critics in jail without a trial or even charges, and muzzled the free press. As the years passed after that he became more authoritarian and accusations of cronyism and running the country through a system of political patronage increased.

Under Mahathir, Malaysia’s political culture became increasingly centralised and authoritarian, due to Mahathir's belief that the multiethnic Malaysia could only remain stable through controlled democracy. The Internal Security Act was invoked in October 1987 arresting 106 people, including opposition leaders. The head of the judiciary and 5 members of the supreme court who had questioned his use of the ISA were also arrested, and a clampdown on Malaysia's press occurred. This culminated in the dismissal and imprisonment on unsubstantiated charges of the Deputy Prime Minister, Anwar Ibrahim, in 1997 after an internal dispute within the government. The complicity of the judiciary in this piece of persecution was seen as a particularly clear sign of the decline of Malaysian democracy. [Source: Wikipedia]

Mahathir concentrated power more and more and more in his own hands without being accountable to anyone. He controlled the police and his image stood behind every cash register in Malaysia. Young people were arrested for "spreading false news on the Internet." Mahathir used to joke that maybe he was the first dictator in the world to elected in the democratic process.

Under Mahathir, Richard Lloyd Parry wrote in The Times: “Malaysia was a democracy, but a timid one in which the press agreed with almost everything the government said. Those who spoke out against the government were liable to find themselves locked up without trial under the British colonial era’s Internal Security Act. One of the low points for human rights came in 1998 when Anwar Ibrahim, his then deputy, was arrested on charges of sodomy and corruption — charges that many still regard as trumped up by allies of Dr Mahathir, who felt threatened by the younger man’s popularity. He appeared in court with his face bruised from a beating in police custody. The perpetrator, it later turned out, was Dr Mahathir’s own chief of police. [Source: Richard Lloyd Parry, The Times, October 30, 2006 ///]

“In his 22 years as their prime minister, the prickly Dr Mahathir was not noted for his tolerance of criticism, constructive or otherwise. Newspapers toed the government line or soon found themselves in difficulty, and judges whose rulings were not to Dr Mahathir’s liking were unceremoniously dismissed. It was an open secret that his method of governing combined strong state intervention with complex patterns of political patronage, but curiosity about the lucrative business opportunities enjoyed by his sons and specially favoured associates was robustly discouraged. Anwar Ibrahim, the deputy he initially groomed to succeed him, spent years in prison on trumped-up charges for daring to say publicly that corruption had reached critical dimensions. ///

Human Rights Under Mahathir

The Mahathir government banned rallies, took the police from their normal jobs and used them to initimidate members of the opposition, and discharged people on trumped up terrorism, murder and robbery charges. When asked about the American concept of freedom and human rights," Mahathir roared, "Free for whom? For rogue speculators. For anarchists wanting to destroy weak countries in their crusade for open societies."

Many ordinary Malaysians were afraid of openly criticizing the government out of fear of what might happen to them. Civil servants were been forced to sign a “good behavior” document that made it easier for the government to fire them if they criticize the government. Students were kicked out of university and a lecturer was fired and 47 other were disciplined for engaging in “anti-government” activities.

Alan Sipress wrote in the Washington Post: Hishamuddin Rais, 51, a filmmaker and columnist, was released in 2003 after two years in prison under Malaysia's draconian internal security act, often used to silence political opponents and human rights advocates. Rais was jailed following his role in organizing street protests....Recalling the weeks spent in solitary confinement -- the spartan underground cell, the handcuffs and blindfold, and the long hours of abusive interrogation -- Rais suddenly looks away, his brow deeply furrowed. He was not physically tortured, he said. But he conceded: "I broke down. I cried." Rais, once a student activist, said he has seen the spirit of Malaysia's universities crushed during Mahathir's rule. "The campuses have become very docile, kind of barren areas where contending ideas are no longer debated," he said. "This is a very dangerous situation. They are a breeding ground for one-track thinking like Muslim fundamentalism." [Source: Alan Sipress, Washington Post, October 27, 2003]

See Separate Article ANWAR IBRAHIM

Mahathir and Foreign Policy

Mahathir was very outspoken and independent-mined when it came to foreign policy. He entertained Castro, spoke out against the sanctions and war in Iraq, and even suggesting using “oil” as a weapon to avert war in Iraq.

Mahathir some say used xenophobia to prop up his image at home. In the 1980s, Mahathir organized the "Buy British Last" and "Look East" campaigns, which promoted cooperation with Japan and United States rather than the West.

Mahathir was seen as a leader among Third World Nations. He was an advocate of “noninterference”---not meddling in the affairs of other countries. He sharply criticized Western nations for making a big deal on human rights issues in countries like Cambodia and Burma in Asia.

Mahathir like to blame Malaysia’s problems on unspecified “foreign enemies” and accused the Western nations of recolinization. In 2003, he said the United States and Britain want “to control the world again...Their strategy to fight terrorism is through attacking Muslim countries and Muslims. whether they are guilty or not.” On another occasion he said, “Foreigners that once colonized us, who have done nothing to help us, these foreigners have no good intentions...They hate Malaysia....They wish us to become their puppet client state.”

Mahathir was especially fond of attacking Australia. He called it a “deputy” of the United States and a spearhead a drive to keep Australia out of Asian economic organizations because they were "Anglo-Saxon." In 1994, Mahathir dismissed Australians as "descendants of convicts" and then freaked when the Australian prime minister called him "recalcitrant" and demanded and won an apology. On another occasion, Mahathir accused Australia of behaving “as if these are the good old days when people can shoot Aborigine without caring for human rights.”

Under Mahathir, Malaysia was a staunch supporter of the Palestinian cause, and established diplomatic relations with the Palestine Liberation Organization. (Israeli citizens remain banned from entering Malaysia and Malaysian citizens from Israel without special government permission.) In 1986, a major diplomatic row erupted with neighbouring Singapore when Chaim Herzog, the President of Israel, paid a state visit.

See Separate Article TERRORISM IN MALAYSIA

Mahathir and Asian Values

Mahathir and Singaporean Prime Minister Lee Kuan Yew were major mouthpieces for the Asian values viewpoint. In the late 1990s it was fashionable to explain Asia’s economic success and prosperity in terms of “Asian values,” a collection of attributes such as a belief in hard work, thriftiness, propensity to save, filial piety, national pride, respect for order and authority, coherence of a society, and a commitments to common ideals, goals and values that place the common good ahead of the individual. Questioning authority and seniors was regarded as disrespectful, un-Confucian and un-Asian.

Some Asian value advocates went further and argued that Asian values created a better society. High rates of crime, unemployment, divorce, drug use and welfare dependency in Western societies were explained in part, the advocates said, by the fact that Westerners were lazy, selfish and greedy; and they sent their elderly to nursing homes and married several times. Asians by contrast did not have so many problems because they cared for their grandparents, shunned divorce, worked hard, saved their money and were devoted to their families.

Mahathir attributed Malaysia's success to Asian values. He once said, "The Eurocentric world is finished. Asians have now found the formula." In his book The Voice of Asia, Mahathir Mohammed wrote, "Western societies are riddled with single-parent families...with homosexuality...with unrestrained avarice, with disrespect for others and, of course, with rejection of or religious teachings and values." Mahathir blamed the Western media for destroying Asian values. He also said that too much freedom was a bad thing and getting smacked with a rod when he was a child helped set him in the right path. He was interested in setting up a Southeast Asia Common Market to foil speculators.

Mahathir’s Controversial Statements

Mahathir made a number of anti-Jewish statements. In October 2003, he said, “Jews rule the world by proxy. They get others to fight and die for them.” After being widely condemned in the West and reportedly snubbed by U.S. President George Bush at an international meeting he said, “Lots of people make nasty statements about us, about Muslims. People call Muslims terrorists, they even say, Mohammed was a terrorist...But if you say anything at all about the Jews, you are accused f being anti-Semitic.” The statements drew little attention in the Middle East, where most people regarded what he said as historical facts. Many Malaysians had no problem with the statement either.

Mahathir once lashed out against “Jews who determine our currency levels, and bring about the collapse of economies.” In a speech before 57-nation Organization of the Islamic Conference, the world’s largest Muslim organization, Mahathir received a standing ovation after he said that Jews control the world and frustrated Muslims should emulate them. In the speech he said: “We [Muslims] are actually very strong, 1.3 billion people cannot be simply wiped out. The Europeans killed 6 million Jews out of 12 million [during the Holocaust]. But today the Jews rule the world by proxy. They get others to fight and die for them. They invented socialism, communism, human rights and democracy so that persecuting them would appear to be wrong so they may enjoy equal rights with others. With these they have now gained control of the most powerful countries. And they, this tiny community, have become a world power. He also named Israel as "the enemy allied with most powerful nations."

Later U.S. President Bush told Mahathir in private the comments were “wrong and divisive.” Mahathir defended his remarks, saying: "I am not anti-Semitic.... I am against those Jews who kill Muslims and the Jews who support the killers of Muslims." He tagged the West as "anti-Muslim", for double standards by "protecting Jews while allowing others to insult Islam." He also said "But when somebody condemns the Muslims, calls my prophet, "terrorist", did the European Union say anything?" Mahathir's public remarks about Jews date back as early as 1970 when he wrote in his controversial book The Malay Dilemma: "The Jews for example are not merely hook-nosed, but understand money instinctively."

Mahathir has also been critical of Muslims, calling them superstitious and backward, saying they need to overcome divisions and unite, embrace modern knowledge and technology and said they have achieved “nothing” in more than 50 years of fighting Israel.

Mahathir’s controversial statements often served his interests both domestically and internationally. They often played well at home plus propelled him to the world stage. When he made his remarks about the Jews, for example, he received a standing ovation from leader in the Islamic word, made headlines in newspapers in the West and received a positive response at home. Mahathir once likened a Chinese lobby group to Communists and racial extremists.

Asian Financial Crisis in 1997-98 in Malaysia

During Asian Financial Crisis in 1997-98, the stock market in Malaysia crashed 75 percent and the currency plummeted 40 percent to a 24 year low. One billion dollars in foreign reserves were blown trying to prop up the currency. Ethnic Chinese tycoons were hit hard by the Asian financial crisis. Many remained technically bankrupt for years afterwards.

One of the causes of the crisis in Malaysia was that it had a high current-account deficits (when imports exceed exports), which made it a target for currency speculators. The deficit was partly caused by money poured into infrastructure projects. Growth was spurred by government spending and tax breaks than efficiency.

John H. Drabble of the University of Sydney wrote: “The Asian financial crisis originated in heavy international currency speculation leading to major slumps in exchange rates beginning with the Thai baht in May 1997, spreading rapidly throughout East and Southeast Asia and severely affecting the banking and finance sectors. The Malaysian ringgit exchange rate fell from RM 2.42 to 4.88 to the U.S. dollar by January 1998. There was a heavy outflow of foreign capital. To counter the crisis the International Monetary Fund (IMF) recommended austerity changes to fiscal and monetary policies. Some countries (Thailand, South Korea, and Indonesia) reluctantly adopted these. The Malaysian government refused and implemented independent measures; the ringgitbecame non-convertible externally and was pegged at RM 3.80 to the US dollar, while foreign capital repatriated before staying at least twelve months was subject to substantial levies. Despite international criticism these actions stabilized the domestic situation quite effectively, restoring net growth (see next section) especially compared to neighboring Indonesia. [Source: John H. Drabble, University of Sydney, Australia \+\]

Overall Malaysia wasn't in as bad of shape as Thailand before the crisis and after. In Malaysia, the corruption wasn't so bad, banks and companies were not as indebted as their Thai and Indonesian counterparts, and investment money wasn’t wasted on frivolous real estate developments like it was in Thailand (instead it was poured into expensive public works projects).

Mahathir Statements on Speculators and Globalization

At an World bank-IMF meeting in Hong Kong after the Asian Financial Crisis in 1997-98 began, Mahanthir said that Western banks had developed a conspiracy to knock off Malaysia as a competitor. Mahanthir called the currency speculators Jews, "neo-colonialists," "racists," "international criminals," "wild beats" and unidentified "sinister force." he then added, "They should be shot." He then said that "currency trading is unnecessary, unproductive and immoral."

When the Russian rubble tanked after foreign currency poured out of that country Mahathir said, if currency speculators continued to attack Russia “they may want to drop the bombs on those who attack them.” In 2001, he said, “There are so many corporate giants hiding their teeth and intent on gobbling us up...The second great Asian colonialism is upon us.”

Mahathir said "people who are in control of the media and in control of the big money seem to want to see this Southeast Asia countries in particular Malaysia stop trying to catch up with their superiors and to know their place." He also said, "We are Muslims, and the Jews are not happy to see Muslims progress...We may suspect them of having an agenda, but we do not want to accuse them."

Mahathir called financier George Soros "a moron" even though he was buying not selling Malaysian currency at the time of the crisis. Soros responded by called Mahathir "a menace to his own country" and a "loose cannon" who should not be taken seriously. There had been bad blood between Soros and Malaysia for some time. Malaysia's central bank, the Bank Negara, was burned when Soros made his $1 billion profit by speculating on the British pound in 1992. The Malaysian bank had backed the pound and ended up losing $5.73 billion during a two year period around 1992.

Mahathir's Policies During the Asian Financial Crisis in 1997-98

Malaysia didn't seek IMF help like Thailand, South Korea and Indonesia and didn’t have the massive foreign debt that these countries has either. Instead it tried to revive the economy through domestic policies such as lowing interest rates and government spending, reducing corporate and bank debts, and enacting legislation that reduced the power that foreign investors could have the Malaysian economy.

Mahathir encouraged Malaysians to "Buy Malaysia," and helped put together "Love Malaysia" trade exhibits. He told students studying abroad to come home, discouraged companies from hiring foreign workers and told rich families to send their foreign servants home. Malaysians were even urged not eat one of their favorite snacks, curry puffs, because they were made with Australian beef.

Mahathir imposed capital controls and tried to restrict the activities of speculators. The government imposed sweeping controls of the capital markets, passing legislation that made it more difficult to take ringgits out of the country. It pegged the ringgit against the dollar at a fixed rate, banned trading of the ringgit, and banned foreign capital from leaving the country for a year.

Mahathir also adopted isolationist and protective policies to protect Malaysian industry and relaxed some rules to help ailing companies stay afloat. He also made strong statements, implying that if his policies were not followed Malaysia risked breaking apart and collapsing into ethnic riots.

The capital controls were made largely after the foreign capital had already left and the currency had fallen and thus had little impact. Over $7 billion of taxpayers money was spent to liquidate nonperforming loans and bail out ailing banks. Malaysia's isolationist policies initially stymied its recovery. When Mahathir banned some trading practices, investors fled taking their money with them. When he set up special share-buying funds, people only sold into it and the stock market crashed 21 percent in 10 days. But in the end Malaysia recovered pretty quickly. Things started to pick up after the capital controls were relaxed and infrastructure projects were cut to save money. The market responded and jumped 12.4 percent in a single day.

Effects of the Asian Financial Crisis in 1997-98 in Malaysia

The downturn in Malaysia after the 1997-1998 Asian financial crisis was shorter and shallower than in other Asian countries. The economy shrunk by 6 percent in 1998 but started growing again after that. Malaysia’s bad loan problem was not as bad as some of its neighbors. Most of its $13 billion in bad loans was cleared up in four years Most of the loans were bought by the government at about 46 percent of their original value.

For a while banks couldn't give out loans. At the peak of the crisis in Malaysia bank credit equaled 160 percent of GDP; Debt collectors received more work than they could handle and number of Mercedes sold in Malaysia dropped 60 percent. Malaysia was forced to delay its ambitious construction plans, stretching out loan payments to banks on the airport and other infrastructure projects.

The 1997 economic crisis resulted in a reduction of pollution as people drove less, car sales plummeted, factories reduced their output or were closed, construction ceased and development projects were scrapped. Spending on the environment fell from 67 cents per person to 53 cents.

Recovery After the Asian Economic Crisis

The Malaysian economy contracted by nearly 7 percent in 1998. By 1999, the economy had rebounded. Growth was 5 percent that year. In 2000, growth was 8 percent, unemployment was 3.2 percent, and inflation was 1.8 percent. Growth slipped again to under 1 percent in 2001 but stabilized at between 4 and 5 percent growth in 2002-04. In 2003, growth was 4.5 percent, second in Southeast Asia to Thailand. The recovery was driven by exports an the use of government funds to prop up ailing companies and finance employment-providing infrastructure projects.

Since the 1997 Asian Financial Crisis, Malaysia has enjoyed an average real GDP growth rate of 5.6 percent. As an export-oriented economy, the country’s major exports in 2007 were electronics, electrical machinery, chemical products, palm oil and crude oil. Its top five trading partners are the U.S., Singapore, Japan, China and Thailand. In addition to exports, Malaysia’s economy also has strong manufacturing, services and tourism industries.

Mahathir trumpeted the recovery as a sign that his economic policies were working. Some economists disagreed, saying the recovery had little to do with controls and in fact occurred in spite of them. Whatever the case, th ability of Malaysia to weather the crisis gave it more confidence. Still some economists felt that Malaysia could have rebounded even more strongly. Foreign investors were still reluctant to invest in Malaysia out of fear that capital controls might be imposed again

In July 2005, Malaysia scrapped the ringgit’s peg to the dollar which had been in place since 1998.

Mahathir and Anwar Ibrahim

In the late 1990s long-simmering tensions between Mahathir and Minister of Finance Anwar Ibrahim led to one of Malaysia’s most controversial political episodes. In 1993 Anwar won UMNO’s internal election for deputy president against Mahathir’s close ally Ghafar Baba and thus became Malaysia’s deputy prime minister and, in the eyes of some observers, a potential rival to Mahathir. In May 1997, Mahathir took a two-month leave of absence and appointed Anwar acting prime minister. In July 1997, many Asian countries were plunged into an economic crisis, and Mahathir severely criticized international investors for precipitating the crisis. By contrast, Anwar gained political favor by attempting to reassure investors with various free-market reforms, many of which financially threatened banks and infrastructure projects favored by Mahathir and some of his associates. In 1998 Anwar was arrested and eventually prosecuted for alleged sodomy and corruption, although many observers suggested that these developments were politically motivated. In 2004 the sodomy charged was overturned, and Anwar was released from prison. [Source: Library of Congress, 2006]

See See Separate Article on ANWAR IBRAHIM

1999 Elections

In November 1999, Mahathir became prime minister again as the Barisan National (BN) coalition won a decisive victory in national elections. Mahathir’s party amassed a huge majority in parliament. His 14-party coalition won 149 of 193 seats. The election was marred somewhat by a protest vote that supported Anwar and the surprising showing of Islamic parties. Mahathir had originally planned to step down in late 1998 but in the end decided to call the elections early in 1999 to take advantage of positive economic news.

The four-party Alternative Front won 43 seats. The Parti Islam se-Malaysia, (PAS), Malaysia’s main Islamic party. tripled the number of seats to 27 and took control of two state governments. The Chinese-dominated Democratic Action party (DAP) increased its seats in parliament from 7 to 10.

Keadilan (National Justice Party), the new multiracial party started by Anwar’s wife Azizah Ismail won five seats in the 1999 election. Azizah won a seat. The showing was considered a blow to the refromasi moment. Anwar decided not to run, in part because he was in prison. Mahathir’s coalition suffered s humiliating by-election defeat in 2001?? Some safe seats were won the opposition Islamic party.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Malaysia Tourism Promotion Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated June 2015

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