The Asian Wall Street Journal
1st June 2001

Malaysian Finance Min Exit Rumored, Govt Doesn't Clarify

KUALA LUMPUR -- On a day when the leading Malay-language newspaper ran an article on the front page noting rife speculation on Finance Minister Daim Zainuddin's resignation, Prime Minister Mahathir Mohamad didn't take the opportunity to clarify when Daim would return from his current leave of absence.

Asked Friday whether he had received a letter from Daim on a decision to step down, Mahathir responded: "So far, nothing yet."

Daim has kept markets guessing. He has repeatedly declined to state when he will return from his leave of absence from attending cabinet and party meetings. For the first time last week he raised the possibility of extending his leave, saying it was "too early" for him to make a decision on when to return. And the finance ministry hasn't responded to queries about whether his leave has officially ended.

The Utusan newspaper is linked to the predominant political party, Mahathir's United Malay National Organization, and Friday's report has some Malaysia-watchers speculating the article could be aimed at flushing out a decision by Daim.

A replacement of Daim is important for the political future of the country because that person would be well-placed to challenge Mahathir's expected successor Abdullah Ahmad Badawi in the next general election, as well as within UMNO.

While most observers note any removal or voluntary exit by Daim won't serve to dramatically alter policy, some say there could be adjustments to the government's privatization stance, which is under the charge of Daim. Others note there could be relief among some international investors, depending upon his replacement. Most agree an ouster would exacerbate leadership transition uncertainty in UMNO.

Certainly, there are more concerns about friction between Mahathir and Daim ever since two corporate deals spurred public controversy over the government's spending policies earlier this year.

Investors had expressed concern when the government bought back a 29% stake in Malaysian Airline Systems Bhd. at 8.00 ringgit ($1=MYR3.80) per share, above the market price.

In a separate case, the national pension Employees Provident Fund's purchased shares in telecommunication company Time dotCom's initial public listing at MYR3.30, far above the current market price of MYR2.06.

Observers say it isn't so much the fact that foreign investors have shunned Malaysian markets, despite enticements such as a removal of the 10% exit levy on repatriated portfolio profits and easing property purchase restrictions for foreigners.

Far more disturbing to Mahathir is the specter of disgruntled voters when the next election rolls around, they say. The EPF purchase of Time dotCom shares prompted demands by the public for better investment decision controls at the fund.

There are even signs of institutional disfavor with government policies. A recent hallmark decision by a judge to free two persons detained under the controversial Internal Security Act, and his call for a review to the act, is an exceptional challenge to the government's authority. Earlier this week, the Malaysian human rights commission openly urged the government to reverse its decision to keep former deputy prime minister Anwar Ibrahim from seeking medical treatment abroad. Anwar is in prison serving sentences for s###my and the abuse of power.

The unusual public criticism of the government comes at a time when UMNO has been trying to close ranks in the face of the opposition. Malay unity has been the theme ahead of the party's general assembly June 21.

And Mahathir is taking action. After months of talking about the ills of power abuse, UMNO is finally clamping down. The UMNO supreme council recently affirmed findings by a committee which concluded that six party members are guilty of "money politics", pending appeals.

Mahathir's housecleaning also includes a proposal to prevent top UMNO members from holding lucrative government contracts.

Meanwhile, if Daim is replaced as finance minister a power scramble during the next general elections is likely. Mahathir has said he won't run again; this July will mark his 20th anniversary as prime minister.

"Whoever takes up (Daim's) position, would be in a very strong position in the next general election," noted a source, who declined to be named.

Pundits speculate that two potential contenders for the position include the Minister for Domestic Trade and Consumer Affairs Muhyiddin Yassin and former finance minister Razaleigh Hamzah who challenged Mahathir in a bid for power in 1987 and has subsequently returned to the UMNO fold.

-By Monica Houston-Waesch,
Dow Jones Newswires;

http://interactive.wsj.com/

The South China Morning Post, HK
2nd June 2001

Resignation rumours and Anwar headache greet returning Mahathir

REUTERS

Prime Minister Mahathir Mohamad returned home yesterday to fresh rumours that his Finance Minister is quitting and rare rebukes over the treatment of his jailed former deputy and his supporters.

Dr Mahathir, returning from a summit of developing countries in Indonesia, denied he had received any resignation letter from Finance Minister Daim Zainuddin, who he announced in April had taken leave due to tiredness. A series of government bail-outs for Malay tycoons close to Mr Daim has drawn public criticism.

Meanwhile, his erstwhile heir, Anwar Ibrahim, is again causing him headaches. Anwar is serving 15 years' jail for sex and corruption crimes he says were fabricated to stop him challenging Dr Mahathir for power in 1998. Dr Mahathir says all of Anwar's trials were fair.

On Thursday, Malaysia's Human Rights Commission said the Government was wrong to deny Anwar's request for surgery overseas for a slipped disc. On Wednesday, a judge freed two Anwar supporters, who were arrested under the Internal Security Act and accused of planning violent street protests to topple the Government.

Political scientist Khoo Boo Teik called the moves "indications that the Government should begin to respond more sensitively and more imaginatively to the widespread disenchantment".

Dr Mahathir said yesterday the Government would study the judge's decision to free the two detainees, which could have a bearing on the fate of eight other pro-Anwar activists seeking release after their arrest nearly two months ago.