June 29, 1999
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| June 29, 1999 | atimes.com | |
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| Southeast Asia EDITORIAL: The house that Mahathir built In 1969, Malaysia, young and inexperienced, was nearly torn asunder byethnic riots. It was a formative experience for Malaysia's current leaders,notably Prime Minister Mahathir Mohamad and his economic czar, DaimZainuddin. We can imagine what went through their minds as Indonesians rioted inMay 1998, Jakarta's Chinatown was ransacked, and ethnic Indonesian Chineserefugees streamed into Malaysia by the thousands? This is not the kind of stuff IMF officials sitting in far away Washington,D.C., or American institutional investors normally give a whole lot of thoughtto. And why should they? It's not their mandate, not their business. But itIS the business of political leaders entrusted with the responsibility ofkeeping a volatile multi-ethnic society at peace and on an even keel. So, say what you will about Malaysia - that patently silly attempts byMahathir to blame foreign hedge fund operators for the Asian crisis werejust so much self-serving propaganda; that the firing and harsh judicialtreatment meted out to crown prince and oppositionist Anwar Ibrahim were atravesty of justice; or that capital controls did little or nothing torestore Malaysia to economic health - the country stayed in one piece andexperienced little of the social disruption and hardship that hitIndonesia, South Korea and Thailand last year. And now - economically - it appearson the mend, as they are. Capital controls, that horrifying anathema to ideologically hide-bound freemarketeers, did not allow Malaysia to recover any faster than othercrisis-ridden East Asia nations. Nor, however, did they lead toirresponsible new credit extension on political grounds or deliberatethwarting of economic reform as the ideologues had confidently predicted.By allowing an immediate easing of credit well in advance of market forces'induced easing eleswhere, they DID, however, cushion the fall of theMalaysian economy and DID keep a bad economic situation from beingtransformed into an untenable social and political one. Now, says Bank Negara, the country's central bank, the worst is over. GDPfigures just released show a smaller than expected 1.3 percent contractionin the first quarter; show 1.4 percent growth in February/March and portendreturn to 2 to 3 percent growth for the year as a whole. Barring unforeseeneconomic calamities elsewhere around the world, Malaysia by year-end willcome in with recovery figures somewhere between new star performerSouth Korea and still-laggard Thailand. But that should not tempt Prime Minister Mahathir to deliberately orinadvertently confuse a canny political move with proved contrarianeconomic wisdom. Much like South Korea and Thailand (and, more decidedly, likeIndonesia), Malaysia still has a long ways to go to undo the excesses ofthe pre-crisis 1990s and install reform measures andrestructuring exercises to put its economic future on a sound footing. In the late '60s, American cynics among Vietnam War opponents used tosay: Why not just declare victory and get out? Being a contrarianoppositionist and a man with a considerable sense of humor himself, Dr.Mahathir might be well-advised to do the same: Declare capital controls haveworked, are no longer needed now - and then get on with a reform agenda thathis economic advisers have, indeed, ably charted. Such a declaration ofvictory would, in turn, serve as a fine kick-off rally slogan for comingelections and, what, four more years? | |||||||||
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