What if there had been no Mahathir?

What if there had been no Mahathir?

Thang D. Nguyen, Program Coordinator, United in Diversity Forum, Jakarta

As Prime Minister Mahathir bin Mohamad of Malaysia retired
after 22 years of leadership, it is interesting to ask, how and
what would Malaysia be today, had he not been there? The answer
to this question depends on whom you ask. My take is as follows.

First, the Malaysian economy would not be strong as it is now.
Since its independence in 1957, this former British colony has
been transformed from a commodity-exporting country to one of
Asia's "tiger" economies and the world's 18th biggest trader --
with a per-capita GDP of about US$9,300.

As one lands at the new Kuala Lumpur International Airport
(KLIA), drives on its clean highways, and takes a lift to the top
of the Petronas Towers, it is hard not to wonder how all of
Malaysia's progress has been made.

Malaysia's economic development has arguably been most
influenced by Mahathir's Look East Policy (LEP), which encourages
Malaysians to look after Japan and South Korea as model economies
and adopt their working ethics and methodologies. At the same
time, this policy also calls for increased intra-Asia trade, as
the region's diverse economies do have their own comparative
advantages.

In retrospect, Malaysia would be one of the most prominent
victims of the Asian financial crisis of 1997-1998, had it not
been for Mahathir's Cassandra-like monetary decisions. At the
peak of the crisis -- a contagion that started out in Thailand
and spread to Indonesia, Korea, and the Philippines -- Mahathir
called for a fixed exchange rate of $1.00/MR 3.80. His rationale
was that a floating exchange regime would beget more financial
speculation and make foreign assets -- which were borrowed in
dollar and yielded their profits in local currencies -- more
expensive to pay back if and when the Malaysian ringgit
depreciated against the U.S. dollar. At the same time, he
authorized a recall of Malaysian assets from abroad.

What made Malaysia's capital controls stand out was that they
were implemented against the advice of the International Monetary
Fund (IMF). Whereas other Southeast Asian victims went to the IMF
cap in hand, Malaysia rejected the Fund's recommendations, which
Mahathir called "the IMF's bitter medicine."

Were these capital controls the right thing to impose? Yes.
In his influential book, Globalization and Its Discontents,
Joseph Stiglitz, Nobel laureate economist and a former World Bank
official, wrote: "There was little evidence that the capital
controls discouraged foreign investors. Foreign investment
actually increased." This, he argued, was because investors were
concerned about both economic and political stabilities, and
Malaysia did a far better job than its neighbors in keeping
itself stable and secure.

Second, Malaysia would not be a stable and harmonious society
as it is today. Few would deny that managing a society as
diverse as Malaysia is extremely difficult. The Malaysian
populace is made up of 48 percent Malays, 36 percent Chinese, and
9 percent Indians. This means that the economic pie must be big
enough for everybody, and each group must have its share, if
society is to be in order and peaceful.

When this arrangement is tilted, social violence becomes the
solution to which the destitute and powerless come. This
happened in May 1969 when riots broke out in Malaysia and took
almost 200 lives. A state of emergency was declared and lasted
for two years. Tun Razak, Malaysia's second prime minister, came
to the conclusion that economic tensions were the root cause of
these riots and, therefore, called for a New Economic Policy
(NEP) to reduce poverty. In a nutshell, NEP was a 20-year plan
designed to bring about economic balance among Malaysia's ethnic
Chinese, the indigenous Malays (bumiputeras, or sons of the
soil), and the rest of the population -- the equivalent of the
U.S. "affirmative action" policy.

Even though Mahathir -- who lived through the 1969 riots
himself -- did not invent the NEP, the Malaysian government has
under his leadership successfully implemented it. The result is
a stable place, in which both Malaysians and foreigners can work,
invest, and live well. The proof of this is the ironic fact that
the U.S. is still the biggest investor in Malaysia, despite
Mahathir's views on globalization and other international
challenges, which many perceive as to be anti-U.S., anti-West,
and anti-Semite.

Finally, Malaysia would not be as progressive and, therefore,
respected nation in the international community as it is now, had
it not been for Mahathir's visions, boldness and convictions. A
trained medical doctor who is known for his outspokenness, Prime
Minister Mahathir always stresses open-mindedness, education, and
diligence as keys to success.

He has initiated such projects as the Petronas Towers (the
world's tallest building); the Proton (Malaysia's national car);
the Multimedia Super Corridor (Malaysia's Silicon Valley); and
the car-racing track Formula 1. Even though some have criticized
them as expensive projects, they do reflect well on Malaysia's
economic success and promote a strong sense of national unity and
pride among Malaysians.

Whatever one thinks of the man and however one perceives his
views, on thing is certain: Many developing countries want to
achieve the same progress that Malaysia has, and the Muslim world
can certainly use a few more Mahathirs. The problem is, leaders
like him don't come by often.

Thang D. Nguyen is also the author of The Malaysian Journey:
Progress in Diversity, and this article is a personal comment.