William Pesek
South China Morning Post
26 July, 2017

OPINION

William Pesek says the newfound Mahathir-Anwar Ibrahim coalition could lead Malaysia out of economic stagnation and, even if Najib Razak plays tough, the good news is it can no longer be business as usual

Twenty years after the financial crisis that devastated Asian economies, Malaysia’s Mahathir Mohamad still hates currency traders. But the deputy prime minister he fired, and later jailed, during that chaotic period? Not so much.

Mahathir’s 180-degree turn on Anwar Ibrahim is as disorienting as any bromance Asia has seen. What otherworldly force was enough to reunite the 92-year-old firebrand who ruled Malaysia for 22 years and his nemesis? A shared disgust for current Prime Minister Najib Razak, whose corruption scandals have Malaysia in the global headlines for all the wrong reasons.

Since 2009, Najib hasn’t just tarnished the national brand at every turn – he has pursued an agenda ensuring a lost decade for a resource-rich economy that should be booming. Cronyism isn’t new to Malaysia; there was plenty during Mahathir’s 1981-2003 tenure. When Malaysia hit a wall in 1997 along with Thailand, Indonesia and South Korea, its culture of patronage, political ties over merit, and weak institutions sent currency speculators, including George Soros, pouncing on the ringgit.

Mahathir hasn’t forgotten that episode, during which he pegged the currency and imposed capital controls. He called Soros a “moron”, while the financier called Mahathir a “menace”. In recent interviews explaining his return to politics, he said currency dealing “should not be a business at all” and is “causing a lot of poverty” around the world.

Najib is now the menace, in Mahathir’s view. Studying his gripes about Najib, another protégé turned arch-enemy, Mahathir seems less perturbed by the stench of corruption than the reek of economic backsliding. Malaysia’s population, like those of Japan, China and elsewhere, will put up with dodgy governance practices so long as living standards rise. The ends tend to justify the means if bellies are full and bank accounts grow. But as Indonesia, the Philippines and other neighbours move forward, Malaysia is regressing in dangerous ways.

When Mahathir left office 14 years ago, Malaysia ranked 37th on Transparency International’s corruption perceptions index. It’s now 55th. Since Najib grabbed the reins, Malaysia has stagnated in competitiveness and innovation rankings. He’s huge on buzzy conferences heralding Malaysia’s success in raising its game, but the facts belie the hype.

Najib pledged to dismantle the affirmative-action policies his prime-minister father implemented in 1971. Those productivity-killing quotas favour the ethnic Malay majority for jobs, education and government contacts, and scare off foreign investment. Once scandal hit, Najib went the other way – backward – and expanded what can be best termed apartheid economics.

Many of those controversies surround 1Malaysia Development Bhd (1MDB), the state fund Najib created in 2009 to burnish Kuala Lumpur’s image as a financial centre. Instead, it’s been a national embarrassment, sparking money laundering investigations from Singapore to Zurich to Washington, and pulling Hollywood, Leonardo DiCaprio and Miranda Kerr into the fray. There’s also a little matter of US$700 million that found its way into Najib’s personal accounts (he claims it’s a donation from rich Saudis).

Watching Malaysia return to cautionary-tale status was too much for nonagenarian Mahathir. He and former deputy-turned-foe-turned-ally Anwar are joining forces with opposition coalition Pakatan Harapan to unseat Najib.

Anwar must get out of jail first, of course, but that seems a mere formality, as many in Putrajaya turn on Najib and perhaps the United Malays National Organisation (Umno), which has ruled for seven decades.

Is all this good news for Malaysia’s calcified economy? In the short run, no. These last eight years of drift and dysfunction resigned it to a multi-year period of lower living standards and perhaps the dreaded middle-income trap. Longer-term, though, Mahathir could be the jolt that rescues Malaysia from mediocrity.

Granted, Mahathir is as much a forefather of Malaysia’s one-party sclerosis as anyone. And his headline-generating tirades against currency traders, capitalism and Jews over the years did their own damage to the Malaysian brand.

Mahathir also should have done more in the years after 1997 to discard growth-draining policies championed by Najib’s father 26 years earlier. Years of being somewhat removed from Putrajaya’s political bubble and an eye on his legacy, though, have ­re-energized a man with more gravitas than anyone in the nation of 30 million. Just as Singapore’s Lee Kuan Yew held larger-than-life sway in his post-leadership incarnation, Mahathir’s voice has a resonance that is unmatched.

That makes Mahathir both Najib’s worst nightmare and Malaysia’s best hope. There is a risk that Najib, desperate to maintain power, clamps down on dissent and monkeys with the rule of law, as, frankly, Mahathir once might have. This tussle of leaders past and present could extend Malaysia’s lost decade if Najib digs in for a protracted fight.

Najib, for example, has resorted to playing the God card, harnessing intolerance in his Muslim-majority nation at the expense of Chinese and Indian minorities. This could descend into a political catfight that roils markets and slams business and consumer confidence.

But even if Mahathir fails to wrestle the premiership from Najib’s hands, his return ensures business as usual is no longer an option. That could lead to a more dynamic and modern Malaysia.