Asiaweek
Issue April 27, 2001

Discord Rules

The wagons are circling but not around Mahathir.

Is this the last stand?

By PENNY CRISP

The orchestra strikes up for another turn around the dance floor. By now, most Malaysians know the tune. It starts with rising ethnic tensions. Then the economy kicks in - sluggish, with future prospects dim. Discord within the dominant ruling party, the United Malays National Organization, spills out from behind closed doors. Oppositionists are restless. Minor parties in the governing coalition start to squirm. In undertones, the political survival of Prime Minister Mahathir Mohamad is questioned. And with a crashing of police cymbals cued by the Internal Security Act, it all ends in jail.

In the nearly 20 years under helmsman Mahathir, Malaysia has followed this score several times, and Dr. M was always smiling at the end. It has been played out again recently, but this time there are none-too-subtle shifts in cadence. Once quick to fall in line behind the prime minister's line, the loyal backing choir is no longer easily assuaged. The Malay electorate, trades unions, businessmen and even members of UMNO are openly standing apart from Mahathir.

In recent weeks the Malaysian Trade Union Congress, the country's biggest labor group, called for an unheard-of nationwide picket over various complaints - not least the decline of its state-controlled pension fund. Unionists accused the government of using the fund to help out a politically connected tycoon. "Enough is enough," says congress secretary-general G. Rajasekaran. "The time has come for us to go out and make ourselves heard."

In turn, business pressure is rising for a revision of the ringgit peg. Foreign direct investment slowed to a trickle last year. Last week most gross domestic product forecasts plunged from 7% to between 3% and 4%. "Capital controls have sent all the wrong signals," says William Kaye, head of the Pacific Group in Hong Kong. "Few people are now interested in investing in Malaysia because they have a habit of changing the rules all the time."

Other grumblings are more familiar. Formerly loyal voters began deserting Mahathir's Barisan Nasional coalition, led by UMNO, after the prime minister fired his annointed successor and deputy, Anwar Ibrahim, in 1998. Electorally the government since has gone from bad to worse, culminating in December with the loss of a formerly safe state seat on Mahathir's home ground. This cut deep into the UMNO psyche, unleashing the previously obedient to start publicly criticising the prime minister. "I don't think there is a problem with UMNO," says Shahrir Samad, a former cabinet minister and current member of UMNO's Supreme Council. "The problem is with the leadership."

Once, Mahathir knew exactly where he wanted Malaysia to go. He had a vision - one that most Malaysians largely shared. It encompassed an economy that wasn't a joke. It asserted a strong Malay sector in a racially mixed society. It shook off colonial baggage and stood proudly on its own feet. Now 75, Mahathir has accomplished much of that - often through the sheer force of his will. But the payoff is that newly confident Malaysians feel bold enough to challenge him. For them, his vision is no longer relevant. Says James Wong Wing On, a former opposition parliamentarian and now a political columnist for the Chinese-language daily newspaper Sin Chew Jit Poh: "For the first time for more than 20 years the outcome of the next elections is very unpredictable."

At the moment, a poll two years down the track is the least of Mahathir's worries. In keeping with his habit of firing at all targets when under siege - preferably before they realize they are targets - he allowed the police to arrest seven oppositionists on the eve of an April 14 public rally in Kuala Lumpur. The rally, which marked the second anniversary of Anwar's conviction on corruption charges, went ahead anyway. There were no untoward incidents. But as Asiaweek went to press, the activists were still being held under the controversial Internal Security Act (ISA), which allows for indefinite detention without trial.

Mahathir claimed the police had evidence that rally organizers - mainly members of the Keadilan opposition party formed by Anwar's wife, Wan Azizah Ismail - had planned to use bombs and even rocket launchers. Hatta Ramli, a leader of the main Malay opposition group, Parti Islam se-Malaysia (PAS), dismisses the notion. "They have come to a level where they will use any excuse to stifle the opposition," he says. "If they have the evidence, bring the people to court instead of keeping them under the ISA."

Meanwhile, the trade union congress remains unrepentant over its call to arms. Citing what it calls "five burning issues about the Employees Provident Fund (EPF)," it has urged its 550,000 members to picket the fund's offices all over Malaysia on May 12 to reinforce their complaints. Chief among the union's claims is that the EPF investment board, appointed by powerful Finance Minister Daim Zainuddin, used members' money to buy into the initial public offering of Time dotCom. Labor leaders expressed their anger after the fund announced its lowest dividend payout in 26 years. At the same time, it revealed a paper loss of about $25 million on the Time dotCom deal, which was largely shunned by other investors. Furious unionists say the EPF lacks transparency and accountability.

"Some people are accusing us of playing politics or playing into the hands of dissidents," says union congress secretary-general Rajasekaran. "But our members are just fed up with the way EPF has managed our money - changed the rules in clear and utter disregard of the interest of EPF contributors." He says the fund reduced its annual dividend because of bad investment decisions. "Then they had audacity to go and bail out . . . Time dotCom. Why do these people need to be bailed out from a poor people's provident fund?"

On the economic front, a key aspect of Malaysia's "miracle" growth in the 1980s and early 1990s was foreign direct investments by multinationals seeking a manufacturing base. The country regularly pulled up to $6 billion a year in new investments for manufacturing. That figure was down to $2 billion last year. Malaysia now ranks below South Korea, Thailand and India. Emerging markets guru Mark Mobius, who runs funds worth $12 billion for the Templeton group, says investors worry about political stability, lack of corporate governance and cronyism. But above all, he says, uncertainty over the ringgit peg has stymied growth. (He believes the peg will go sooner rather than later.) Reasons Mobius: Why invest in Malaysia now when you can invest after it has adjusted the peg downward by 15%-20%? Adds Pacific Group's Kaye: "What does Malaysia have to offer that other countries in Asia don't?"

But the Mahathir broadsides keep coming. He renewed attacks on Anwar while officiating at the country's International Islamic University on April 17. This shows he is "under intense pressure again from within UMNO and the Malay community in general," says columnist Wong. Three trusted lieutenants lost out in UMNO divisional elections this month, indicating that even his powerful faction is losing authority in the party. "The Mahathirian vision is transforming into something else," says Wong. "As the order [in UMNO] becomes more democratic, more centers of power are emerging."

Snipes one middle-ranking UMNO leader: "Mahathir is a desperate man looking for desperate solutions." One day he tries to talk to PAS on Malay unity, the next he talks tough to Keadilan over street protests. "He is trying to tighten the grip on the media, rein in civil servants, woo younger voters and women voters. It's all contradictory. Every day he's trying to do something new." Or something old. Like playing out that familiar tune. One last dance, anyone?

With reporting by ASSIF SHAMEEN and ARJUNA RANAWANA Kuala Lumpur

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Newsmakers

BUZZ Speaking of revision - or vision, at any rate ... Malaysia's perennial Prime Minister Mahathir Mohamad has a dream: the rise of the thoroughly modern Muslim. By too stridently shunning the secular world, he says, Muslims missed the Industrial Revolution and are now in danger of being left behind in the Information Age. Muslims have a duty to acquire knowledge and skills, says Mahathir - including skills to defend themselves against enemies. In the case of cloning, for instance, he says Muslim scientists have to acquire the same skills as their Western counterparts to frustrate their "evil designs." If you can't beat 'em, join 'em. And then clobber 'em good.

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