Date: Sat, 27 Sep 1997 08:08:10 -0600MALAYSIA'S prime minister, Mahathir Mohamad, generally takes some pride in bucking conventional wisdom. The result, he says, has been "to make Malaysia stable politically and successful in its . . . economic development." Perhaps. But even businessmen in Kuala Lumpur, traditionally among Dr Mahathir's greatest fans, fear his unorthodox approach might now bring political uncertainty and financial disaster.
They are not alone. Worries that their country may be the next Thailand are shared by businessmen in neighbouring countries, especially those already suffering Thai contagion through a loss of confidence in their currencies and markets. So far, pragmatic U-turns have limited the damage of some of Dr Mahathir's heresies. More, however, are probably needed.
Dr Mahathir might have been expected to have learned his lesson. When, last month, he responded to a slump in the stockmarket by introducing a ban on certain types of trading, the market fell sharply, and the ban had to be lifted. But, with the eyes of the financial world upon him at this week's meetings of the World Bank and IMF in Hong Kong, it was perhaps too much to expect Dr Mahathir not to steal the show. He coupled his, by now familiar, attack on currency speculators, notably America's George Soros, with a threat to ban dealing in the Malaysian currency, the ringgit, for purposes other than trade. When the foreign exchanges opened two days later, the ringgit predictably fell to a new low, some 19% lower against the dollar than it had been in early July.
Dr Mahathir's deputy and probable successor, Anwar Ibrahim, was left to make what he called a "tricky clarification": that his boss had not really meant what he said. While reassuring in itself, Mr Anwar's spin-doctoring fostered the impression of a policy disagreement at the top. The political stability of which Dr Mahathir has so often boasted since taking office in 1981 looked less solid. After all, for years the only significant questions in Malaysian politics have been whether the prime minister will hand over to Mr Anwar, and when.
But in Malaysia, even those who agree with Mr Soros that Dr Mahathir has become "a menace to his own country" believe he is still safe in his job. Dr Mahathir remains in control of his political party, the United Malays National Organisation (UMNO), which dominates the ruling coalition. At times, Mr Anwar and some of his backers have seemed impatient to take over, but they now seem content to wait at least until the next election for the UMNO leadership, which is due in 1999.
"Just think what damage he can do by then," laments one gloomy analyst, alarmed at Dr Mahathir's influence on economic policy. In the past, the central bank and foreign ministry have been far more conventional. Now, however, Dr Mahathir is seen as an obstacle to the type of unpleasant policy adjustments needed to stop the slide in the economy.
Thailand has been obliged to adopt drastic measures by an IMF bail-out. The other countries most affected, the Philippines and Indonesia, have likewise introduced tough austerity measures and tight monetary policies - unnecessarily tight in the view of some economists. Dr Mahathir has, reluctantly, agreed to postpone some of the grandiose projects that formed part of his vision of an industrialised Malaysia by 2020: the huge and controversial Bakun dam, a new airport, and part of a new administrative capital, for example. But so far interest rates have been kept low, so as not to strangle high growth rates.
The worry is that this policy will lead to a continued fall in the ringgit. The stockmarket has already lost 40% of its value this year. Banks, which have lent heavily to finance share purchases and a glutted property market, might find themselves in big trouble. Malaysia has relatively little foreign debt compared with Thailand, but the total volume of bank lending, at about 160% of GDP, is similarly huge. On September 24th and 25th, jitters led to a nationwide run on deposits at MBf, Malaysia's largest finance company, sparked by rumours - denied by both the company and the central bank - about its liquidity, and the health of its founder.
Dr Mahathir tends to see apocalyptic warnings of a Thai-style catastrophe as the prophecies of international conspirators bent on thwarting Malaysia's modernisation, and on subverting his authoritarian style of rule. He is not alone in South-East Asia in blaming foreigners, but in Thailand, the Philippines and Indonesia such views are more tactfully expressed.
What seems obvious to so many western policymakers=97that there is, in fact, a shared interest in the region's well-being=97is not universally believed. As the effects of the economic downturn begin to be felt more acutely by South-East Asians, the political temptations of xenophobic nationalism will rise. The task for those trying to persuade countries such as Malaysia to make painful policy changes is to convince them there is no international conspiracy. Rather, Dr Mahathir has lost the plot.
Havana, September 26(RHC)-- Cuban President Fidel Castro received visiting Malaysian Prime Minister Mahathir Mohamad, who arrived in Havana late Thursday at the head of a large governmental and business delegation. Following a private conversation, President Castro and Prime Minister Mohamad presided over a ceremony for the signing of three important accords.
An investment promotion and protection agreement, another broad agreement on bilateral trade and an accord on the exemption of travel visas between the two countries were signed by Cuban Foreign Trade Minister Ricardo Cabrisas and his Malaysian counterpart Samy Vellu. Both government ministers called the signing of the accords an historic event in relations between the two countries.
Cabrisas said that "in this unipolar world of globalization, in which the rich nations attempt to impose their models on the poor, South-South cooperation is that much more important." The Cuban minister said the trade accords signed between Cuba and Malaysia open broad perspectives in the areas of pharmaceuticals, biotechnology, tourism, sugar, construction and foodstuffs.
Nearly 60 business representatives accompanying the Malaysian prime minister are to participate in a seminar on the Cuban economy, focusing on trade and investment. The delegation will travel to numerous sights of economic interest before wrapping up the official visit on Sunday.
Date: Sat, 27 Sep 1997 10:20:31 -0500
Sender: Forum on Labor in the Global Economy <LABOR-L@YORKU.CA>
From: Doug Henwood <dhenwood@PANIX.COM>
Subject: Re: Malyasian PM takes on IMF
In-Reply-To: <3.0.32.19970927080627.00727b44@mail.geocities.com>
Hmm, let's not get carried away with enthusiasm for Mahathir Mohamad. He was perfectly happy when the capital was flowing into Malaysia; it was only when the fickle funds started flowing out that he developed a problem with "globalization." His economic development strategy was highly export-oriented, and welcomed Japanese and other MNC investment. As far as I know, there was little technology transfer or local sourcing, so the spillover effects were minimal. His love of gigando development projects is hardly one we should share, and his country, like most in the region, is an ecological wreck. Lyndon LaRouche doesn't like the IMF either.
Doug
Doug Henwood
Left Business Observer
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Date: Sat, 27 Sep 1997 08:42:20 -0600
Sender: Forum on Labor in the Global Economy <LABOR-L@YORKU.CA>
From: EW Plawiuk <ewplawiuk@MAIL.GEOCITIES.COM>
Subject: Re: Malyasian PM takes on IMF
Hey I wasn't overly enthusiastic for him or for George Soros. However the cracks are begining to show in the new global hegemony and we should use those cracks to bring down the walls.
Eugene Plawiuk
ewplawiuk@geocities.com
