Malaysia's Mahathir returns to swirl of issue

Malaysia's Mahathir returns to swirl of issue By Reme Ahmad

KUALA LUMPUR (Reuter): A rested Malaysian Prime Minister Mahathir Mohamad will have to deal with a swirl of issues on his return next week from a two-month break, political and economic analysts said.

From a slumping stock market and ringgit, beauty contestants arrested for parading in bathing suits, to controversial plans for the world's largest reclamation project, the premier will have his plate full when he returns on July 22.

Also eagerly awaited are his answers to doubts over the $6.18 billion Bakun hydroelectric dam project and an ongoing crackdown on corruption in high places.

But analysts said Mahathir was already in the know of things as he has been in close touch with events back home, including constant contact with Acting Prime Minister Anwar Ibrahim.

"It's always clear that on big issues Anwar will consult Mahathir. That's why Mahathir is still around although his body is not here," said opposition politician Syed Husin Ali.

Mahathir, 71, spent most of his holiday period in Europe, resting and giving public speeches on one of his pet projects, the Multimedia Super Corridor, an investment zone near Kuala Lumpur which Malaysia hopes will attract high-technology firms. His absence from May 19 is the longest holiday break Mahathir has taken during his 16 years in power, leaving Anwar formally in charge.

Analysts said Mahathir was not likely to vary much from the positions already taken by Anwar on some of these issues.

"Of course they have their own personal styles, but that's as far as it goes. In practically everything, they are like-minded," said Bunn Nagara, chairman of Geopolicy Research.

During Mahathir's absence, the stock market and the ringgit have both slumped due to a regional currency turmoil following a property and banking sector-driven economic crisis in Thailand.

The ringgit has plunged by 2.5 percent from May 19 to its level of 2.5580/10 a dollar at the close of Kuala Lumpur trading on Tuesday. The Composite Index of the Kuala Lumpur Stock Exchange has skidded by 2.78 percent to 1.012.48 points.

Analysts said Malaysia will have to decide where the ringgit should be to match the competitive advantage gained by Thailand and the Philippines from the de facto devaluations of their currencies. Similarly, interest rates would also have to stabilize after rising sharply due to the currency problems.

"Right now, people are concerned with how far the ringgit will depreciate to maintain competitiveness, and whether interest rates will remain high," said Derrick Lee, senior analyst at market analysis firm Technical Data.

The issue of religious tolerance came to the fore last month, when Moslem authorities in Selangor state arrested three Moslem women who paraded in bathing suits at a beauty pageant.

How Mahathir will react to plans to build an international airport on the world's largest land reclamation project in northern Kedah state will also be watched.

The $12 billion sea reclamation plan involving 16,300 hectares (40,277 acres) raised eyebrows due to its grandiose scale, its financing and its necessity.

"Do we need to reclaim land when we could have done it on land? And how do we finance such a huge project?" asked the chief economist at a foreign investment house.

Anwar on Tuesday announced that the $6.18 billion Bakun hydroelectric dam in the jungles of Borneo, may be delayed due to differences between the project's two main contractors. The project is strongly backed by Mahathir.

Yet another issue is an apparent slowdown in the government anti-corruption drive after a strong start, analysts said. Pronouncements by the powerful premier are often accepted as the final word on any issues.

"His word is the law...that seems to be the impression," said politician Syed Husin.