Washington Report on Middle East Affairs, January/February 1999, pages 37, 92

Special Report

Leadership Split in Malaysia’s Government Puts a Promising Islamic Country at a Crossroad

By M.M. Ali

Prosperity breeds friends and adversity tests them. This adage has never been more pertinent than in the current Malaysian context.

There was a time, not too long ago, when Prime Minister Mahathir Mohammed, 73, and Deputy Prime Minister Anwar Ibrahim, 51, projected a father-son image, although they are not related. It was taken for granted that Mahathir was grooming the Western-educated Anwar to succeed him when he retires.

Articulate Anwar Ibrahim represented Malaysia at almost all international forums and zealously defended the politics of his boss, especially in the fields of finance and foreign affairs. This was so until the Malaysian economy, as in so many other Asian countries, started sagging a year ago.

Mahathir Mohammed saw a Western hand in the downward slide in the region. Instead of listening to Western arguments for further liberalization, privatization and globalization to attract investments, Mahathir sought to insulate his country’s economy from “outside manipulators.”

Anwar disagreed, and did not stop there. He openly charged corruption within the ruling United Malay National Party (UMNO), and in Mahathir’s administration.

It was only when Anwar Ibrahim publicly expressed his disagreement with Mahathir Mohammed that political pundits realized how deep was the division between the two top leaders. Relying on the popularity he enjoyed with the younger generation, and particularly within the student Islamic groups from whose organizational ranks he had risen, Anwar went to the university campuses and other political forums to make his speeches advocating Reformasi, a Reformist agenda that at one stage targeted Mahathir’s retirement, if not ouster.

The Malaysian media gave Anwar headlines, and he received extensive coverage in the Western print and electronic media. Thus the conflict between the two reached a critical point of confrontation.

Mahathir, however, who has been the prime minister of Malaysia for 17 turbulent years, has a history of winning battles against his political adversaries, using whatever means are necessary. During his incumbency he also has campaigned on a platform of political morality, and denounced the West for its duplicity and lack of moral fiber.

Therefore few people were surprised when, on Sept. 2, he dismissed Anwar Ibrahim from the office of deputy prime minister, expelled him from the ruling United Malay National Party, and a week later jailed him under the Internal Security Act, a law that is a legacy from Malaysia’s colonial past.

The surprise was not the charges of “seditious activity” leveled against Anwar Ibrahim, but the additional accusations of sexual improprieties. Anwar, a married man, has denied all charges and attributed them to Mahathir’s intent to demonize him and to shock the country. The courts have refused to let Anwar out on bail, and there also have been reports that he has been physically mistreated in jail.

Mahathir’s Dual Policy

It now appears that Mahathir Mohammed, who has been hailed in the developing world as a forthright leader who pulled his country out of the economic doldrums and who has had the courage to stare down the West when necessary, has one private philosophy for running the internal affairs of his country, and another for public dealing with the outside world.

Whatever the outcome of the legal problems faced by Anwar, at least for the time being Mahathir appears to be winning his economic argument. The outcome of the leadership dispute, like the fate of Bill Clinton, may finally depend on bread-and-butter issues in coming weeks and months.

The International Financial Crisis

The past decade witnessed phenomenal economic growth in East Asia. In addition to Japan’s giant economy, foreign exchange holdings of Singapore, South Korea, Indonesia, Thailand and Malaysia were close to or over the $100 billion mark in each case. China’s annual growth rate in some years exceeded 10 percent.

Then came the domino effect of economic crises in South Korea, Indonesia and Thailand. Malaysia’s currency, the ringit, suddenly declined in value, causing financial instability in the country. The IMF and the World Bank rushed to the rescue of South Korea. Indonesia’s problems were exacerbated by the political turmoil that hit the country. Thailand went into a severe recession as its currency, the bhat, lost more than 30 percent of its value. Subsequently, large doses of foreign investments have given the Thai economy a new lease on life, and Indonesia has accepted an IMF-World Bank bailout package while adopting severe economic controls.

Mahathir Mohammed has taken a different route, attempting to cordon Malaysia off from foreign investors and banking interventions for a period of one year to stave off adverse impacts of international currency manipulations. Early indicators show that Malaysia has survived the financial shocks of last winter, and interest rates have dropped from 11 to 7 percent. Mahathir’s strict capital controls may have provided Malaysia with a quick fix, but financial analysts are unsure about the performance of Malaysia in the long run.

Others outside Malaysia see some wisdom in insulating self-sustaining economies from the speculative waves of international financiers. U.S. Vice President Al Gore’s frontal attack on Mahathir’s treatment of Anwar Ibrahim notwithstanding, U.S. officials are avoiding criticizing Malaysia’s current economic measures. Mahathir Mohammed has even been invited to join the Group of 22, an informal group of countries that the United States has convened to devise “the architecture” of future global financial management. The Malaysian prime minister admits he has embarked on an untrodden path, but hopes he will be left alone to demonstrate whether his policies are workable.

Islamic Malaysia At a Crossroads

A whole lot therefore rides on Malaysia’s current economic policy. Mahathir Mohammed’s one-year financial moratorium coincides with the run up to Malaysian elections next year. If the economy remains stable in coming months, it is doubtful if Anwar Ibrahim, now imprisoned, can sway the voters away from his one-time mentor. There is no question, however, that in leveling bizarre charges against his rival, Mahathir Mohammed has resorted to sordid means to deal with the threat to his power. Presumably he is aware of the risks involved as his rule enters its 18th year and he brings Islamic Malaysia to a new crossroad.