Malaysian Premier Proves to Be a Double-Edged Sword

The behavior of Malaysian Prime Minister Mahathir Mohamad seems contradictory at best, hypocritical at worst.

At the Kuala Lumpur Hilton, the youthful 71-year-old implores a group of European executives to join him in building an economic partnership that will “rise above the narrow loyalties of color and creed, of history and geography.”

A day later, in the same luxury hotel, he rails to a group of journalists that greedy Western investors and currency speculators are to blame for the economic crisis that is threatening two decades of spectacular growth in Southeast Asia.

From Mahathir’s vantage point, serving dual duty as Asia’s most aggressive salesman and the West’s most strident critic is a political necessity and point of personal pride, allowing him to oversee the transformation of Malaysia from a plantation economy to a high-tech export platform while still serving as a champion for Asia’s downtrodden.

Mahathir’s blunt self-confidence and shoot-from-the-hip approach--highly unusual among Asian leaders--assure him headliner status this week in the Canadian city of Vancouver when he meets President Clinton and top Asian leaders to discuss the region’s financial crisis and trade liberalization at a summit meeting of Asia-Pacific leaders.

With South Korea having rushed to the international community for a huge bailout last week, it is clear that Asia’s ride on an economic roller coaster is far from over.

But after a tumultuous several months in which he lambasted the very global capitalism that has benefited his nation, Mahathir appears to have emerged relatively unscathed, having carved out a new role as Asia’s defender in an era of downsized dreams and global belt-tightening.

“Southeast Asia, Northeast Asia and other regions of Asia will become much stronger, much more influential, much richer in the 21st century,” he told the Europeans at the Hilton. “Asian inventiveness and science will return. Asia must remain a great learner, but others would be wise to learn a thing or two from this vast continent.”

Perhaps, but this year the high-wire act that has kept the outspoken prime minister in power for 16 years in a region beset by ethnic and religious tensions nearly collapsed.

Mahathir’s tirade against Wall Street financier George Soros and other speculators spooked investors, causing Malaysia’s stock and currency markets, which had already been rocked by the July devaluation of the Thai baht, to plummet further.

And the tensions escalated after the U.S. government threatened to impose sanctions on a Malaysian oil company doing business in Iran and a resolution was introduced in the U.S. Congress calling on Mahathir to resign after he refused to apologize for making a comment that appeared to blame Jews for causing the currency crisis.

When the U.S. Embassy in Kuala Lumpur received a threat from a purported Islamic militant group recently, U.S. Ambassador John R. Malott called on both sides to “cool it” and pleaded with Malaysia’s leaders to stop their “America-bashing.”

But while Mahathir’s fiery rhetoric has scorched eyebrows in Washington, it has bolstered his status here at home, a predominantly Muslim country where he is hailed as one of the few Asian leaders willing to stand up to the West.

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Last week, the Malaysian Parliament passed a measure denouncing the U.S. congressional action and the threatened sanctions.

“The resolution before Congress has strengthened [Mahathir’s] position further,” said Chandra Muzzafar, director of the Center for Civilizational Dialogue at the University of Malaya in Kuala Lumpur. “One gets the impression that people who are usually a bit skeptical about things are all rallying behind him on this issue.”

Mahathir also finds his concerns about the damaging effects of sudden movements of money gaining credibility.

His criticisms have helped prompt the International Monetary Fund to agree to look into the role that currency speculators have played in the ongoing currency crisis, a topic expected to be discussed at this week’s Vancouver meetings.

Even Soros, who called Mahathir a “menace to his own country”--and was called a “moron” in return by the prime minister--has acknowledged that the “instability of financial markets can cause serious economic and social dislocation.”

For all Mahathir’s bombast, Malaysia’s banks and large companies are in much better shape than their heavily indebted counterparts in Thailand and Indonesia. But its stock markets and currency have taken a serious hit. The government has put a number of major infrastructure projects on hold and launched a national campaign to increase exports and dissuade the citizenry from buying expensive imported goods.

Those who follow Malaysian politics closely say they are confident that Mahathir will keep his seat until the economy recovers and certainly through 1998, when Malaysia is scheduled to host both the annual Asia-Pacific Economic Cooperation conference and the Commonwealth Games, a high-profile gathering of athletes from Britain and its former colonies.

“People realize that they sink or swim with Mahathir,” said Alasdair Bowie, a Southeast Asia expert at George Washington University. “They may not like these policy positions. They may not like their stocks falling and interest rates going up. But they don’t have an independent champion separate from Mahathir.”

Mahathir’s defenders argue that his strident outbursts of recent weeks were understandable given the emotions that he could legitimately have felt watching the successes of nearly two decades of leadership seemingly vanish overnight.

“What we’re hearing is pain, an anguished concern that everything that has been put together, all that tremendous effort, could somehow be weakened or washed away by forces from the outside,” said a sympathetic Malaysia expert living in the United States.

Mahathir learned about economic inequality early in life.

He was born to a Malay schoolteacher at a time when Malaysia was under British rule and the Chinese and Indians, who were originally imported as cheap labor, dominated the economy.

The indigenous Malays, who call themselves bumiputra, or sons of the soil, represented the majority of the population but languished at the bottom of the heap.

While honing his debating skills in school, Mahathir earned his medical degree and worked as a doctor for several years.

After Malaysia gained its independence in 1957, he grew interested in politics but was expelled in 1969 from his party, the United Malays National Organization, for too openly promoting ethnic Malay nationalism.

But Malaysia’s smoldering racial tensions erupted in violent riots between the Malays and the Chinese later that year, giving new credibility to Mahathir’s position.

He was readmitted to the party in 1972, becoming a champion of policies designed to give a financial boost to ethnic Malays.

After Mahathir was named prime minister in 1981, the first commoner to hold that title, he launched an ambitious program to propel his country of palm oil and rubber plantations into the 21st century. It included a “look East” policy that rejected the country’s historic orientation toward Britain in favor of closer ties with Japan and Malaysia’s Southeast Asian neighbors.

Recognizing that his nation’s 21 million people could not thrive in isolation, Mahathir opened the doors wider to foreign investors, particularly those willing to play a role in developing export industries that would attract technology and hard currency.

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High-tech multinational giants such as Intel and Advanced Micro Devices turned the sleepy island of Penang into a giant export platform, hiring the sons and daughters of farmers and fishermen as factory workers.

Mahathir moved quickly to put Malaysia on the world map, launching the Vision 2020 program to modernize his country and inviting foreigners to help build and finance some of Asia’s most ambitious projects. Those included the 1,483-foot Petronas Towers, the world’s tallest building, and the yet-to-be-completed Multimedia Super Corridor, a 30-mile-long high-technology enterprise zone.

Critics called those projects a wasteful ego trip for Mahathir. But others applauded the effort to give the tiny Southeast Asian country more visibility.

Thanks to those policies, the home of Asia’s most vocal critic of global capitalism is also one of its biggest beneficiaries.

While Malaysia retained tight controls over its financial system and limited foreign ownership, its fortunes were increasingly tied to the outside world. By 1995, the country’s merchandise exports equaled 85% of gross domestic product, and its budget deficit was entirely offset by foreign investment.

While courting international investors, Mahathir has never lost sight of his supporters in the ethnic Malay community, where his strong nationalistic views and social conservatism, including his outspoken disapproval of homosexuality, are popular.

He and his wife, also a physician, have been married for 41 years and have three sons and two daughters.

Mahathir, who does not drink or smoke, maintains credibility with his people in part because he has not surrounded himself with the trappings of wealth flaunted by many other leaders in Southeast Asia.

“If you said to Mahathir, ‘I’ll give you a billion dollars to retire,’ he would say, ‘Absolutely no,’ ” said Bowie of GWU. “I don’t think money drives Mahathir. “

But close ties to the government have proved to be financially beneficial for Malaysia’s largest companies, and allegations of corruption and political patronage have surfaced over the years.

Muslims who believe that his policies are too permissive have also challenged his rule.

After the increasingly autocratic prime minister was nearly unseated in 1987, he drew international censure for jailing his chief critics and clamping down on the media and judiciary.

Human rights activists argue that Mahathir’s attacks on foreigners, and his suppression of public debate about his government’s policies, helped divert attention from the weaknesses in the Malaysian economy.

But Mahathir has steadfastly refused to bow to outside pressure, even when it threatened the flow of foreign money that his economy had grown so dependent on.

In 1994, he imposed sanctions on British companies after British journalists published allegations of corruption involving several major Anglo-Malaysian projects and of kickbacks to top officials, including Mahathir. Earlier that year, he threatened to cut off trade with Australia after then-Prime Minister Paul Keating called him “recalcitrant” for refusing to attend the APEC forum in Seattle.

When Asia’s currency contagion began to spread last July, a frustrated Mahathir imposed limits on short-selling of currency and hinted at further restrictions on investors, sparking an exodus of foreign funds.

By the time the Malaysian government realized the extent of the capital flight and rescinded that controversial decision, the damage had been done.

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Mahathir’s image took another hit when he told a group of supporters in rural Malaysia that many people believe that the currency crisis is the result of a Jewish conspiracy to impoverish Muslims. His comments were widely seen as a reference to Soros, who is Jewish.

Mahathir later claimed that his comments were misunderstood, but he refused to apologize, arguing that he had a right to speak his mind.

“What I said was that it so happens that the traders were of Jewish descent, and the people who suffered happened to be two big Muslim countries,” the prime minister said later, obviously unhappy with the criticism. “There are people who feel this is a Jewish plot. I don’t want to say this is a Jewish plot, but this is a perception.”

Westerners in Kuala Lumpur say it is too early to know how badly Mahathir’s credibility has been damaged in the international investment community, particularly because he continues to give out conflicting signals about how he will run his economy.

While the prime minister insists that he will not impose currency restrictions unless they are adopted by other countries, he also continues to speak harshly against those who are out to make a quick buck.

“The real investors are not affected by this,” he told reporters recently. “But there is another kind of investor, the hot money, temporary kind of investor who puts money in a company in order to push up share values . . . and then dumps them. . . . I would like to say, these people are not welcome.”

Iritani was recently on assignment in Kuala Lumpur.