Malaysia expected to avoid neighbors' turmoil

By Simon Cameron-Moore

KUALA LUMPUR (Reuters): When the time comes for Malaysian strong man Mahathir Mohamad to stand down, his country will be better equipped to ride the transition than some of its troubled Southeast Asian neighbors.

Impeached Philippine President Joseph Estrada was bounced out of office last month after a "people power" revolt swept Vice- President Gloria Macapagal Arroyo to power, with the military's approval.

In Indonesia, President Abdurrahman Wahid's fragile hold on office rule following allegations of graft raises the prospect of spiraling political and separatist violence and an erosion of stability throughout the region.

Thailand's newly elected Prime Minister Thaksin Shinawatra, a telecoms billionaire, could face difficulties serving out his four-year term after being indicted by the country's anti-graft agency. He denies any wrongdoing.

Malaysia has its problems, but it also has history and wealth on its side. It is more developed, has a stronger middle class, a more cohesive elite, and, unlike its three aforementioned neighbors, no record of military intervention.

"Now is not the time to be alarmist about Malaysia's future, but there is uncertainty," said Carlyle Thayer, a strategic analyst at the Pacific Center for Security Studies in Honolulu.

Like Singapore, Malaysia is not a perfect democracy, but it has democratic structures and a bureaucracy that works.

Its institutions are hardier than those in Indonesia, the Philippines and Thailand, although its judiciary needs to rebuild credibility following the conviction and jailing of Prime Minister Mahathir's former deputy, Anwar Ibrahim, on corruption and sex charges, which raised questions about its impartiality.

"I think they have real institutions in Malaysia, and they have not been weakened to the same extent as elsewhere in the region," said Bob Broadfoot, managing director of the Hong Kong- based Political and Economic Risk Consultancy.

Known locally as "the Old Man", Mahathir, 75, has led Malaysia for two decades, establishing it as one of the region's wealthiest countries, behind tiny Brunei and Singapore.

It bounced back from the late 1990s financial crisis better than most. It pegged its currency, erected capital controls and, after Anwar's jailing, drove protesters off the streets.

International financier George Soros says Malaysia will eventually pay the price for its repressive government. Mahathir, well known for lashing out against western economic hegemony, called Soros "a moron".

There is speculation Mahathir may resign before elections in 2004. At 75, with a history of heart problems, his health is an issue.

He says this is his last term. No-one knows if he means it.

If one institution dominates the landscape, it is Mahathir's United Malays National Organization (UMNO), which has led every coalition since independence from Britain in 1957.

"The key thing is not Mahathir, it's UMNO," said Harold Crouch, an academic currently serving as director of the International Crisis Group's Indonesia project in Jakarta.

"In Malaysia there is an institutionalized political party, UMNO, with institutional ways of doing things," said the author of Government and Society in Malaysia.

UMNO votes for a new leader in 2003.

Home Minister Abdullah Badawi is Mahathir's named successor, his appointment as deputy was uncontested, but if he does get the top job he can expect a rough ride from rivals in UMNO.

At least he will know where the challenge is coming from. Other Southeast Asian nations have more fragmented elites, spawning more potential challenges for power.

If Anwar is freed early, he might pose a challenge, unless he is banned from politics. Analysts say Anwar becomes more marginalised the longer he stays in jail. The Parti Keadilan Nasional, led by his wife, has been hit by internal bickering.

The biggest risk of instability in Malaysia would be if infighting distracted UMNO from responding to the changes people want and race-driven politics increased ethnic tensions as they did in 1969 when 200 people died in Malay-Chinese clashes.

Under half the Malays, who make up 55 percent of Malaysia's 22 million people, voted for UMNO in the 1999 election.

The disenchanted reckon UMNO has failed ordinary Malays, despite economic growth seen averaging seven percent for last year and this year.

They are angered by rumors of corruption and cronyism, and view Anwar's jailing for 15 years on charges they think were trumped up.

The main opposition is a regional Islamic party, which can hardly count on support from the Chinese and Indian parties, and has a limited appeal to those Malays enjoying material wealth.

"Malaysia, because of its economic growth, is not ripe for Islamic revival," Thayer said.

The onus is on UMNO to choose a leadership people can trust. UMNO Youth Committee member Nur Jaslan sees his party emerging from the post-Mahathir reactions fit to reclaim the Malay votes.

"The way political change is motivated here is different -- we Malaysians are a more forgiving people," Nur said.

Observers expect Anwar's freedom to be part of the forgiving process.