A Soaring Success in Malaysia
International Herald Tribune
May 25, 1996
Philip Bowring  

It has been a banner year so far for Prime Minister Mahathir bin Mohamad of Malaysia.

He has topped out what is now officially recognized as the world's tallest building, the twin Petronas Towers in the center of this city. He has unveiled the Seventh Malaysia Plan, a five-year economic and social development blueprint, with the assurance that comes from knowing that most of the targets in the preceding plan were exceeded.

He has presided over this month's 50th anniversary celebrations of the ruling party, the United Malays Nation-al Organization, or UMNO, marking the occasion by bringing back into the fold his old adversary Tunku Razaleigh Hamzah, who broke with UMNO after a bitter leadership contest in 1987. He appears to have brushed off a potential challenge to his leadership by supporters of his heir apparent, Deputy Prime Minister Anwar Ibrahim. And he has put down minor state-level revolts against his decrees.

No one ever doubted Mr. Mahathir's determination, but his touch has become so sure after 15 years in office that he is not far short of the political Old Master status of his neighbors Suharto and Lee Kuan Yew.

The return of Tunku Razaleigh Hamzah and his followers cemented UMNO dominance of Malaysian politics and also enabled Mr. Mahathir, whose ambition and forcefulness have often been viewed as divisive, to present himself as a unifier. It also diluted the Anwar camp in the run-up to UMNO's triennial assembly in October. Mr. Mahathir, who only a few months ago looked vulnerable, now seems set to stay as long as his health holds.

But there are some problems. For most Malaysians, Petronas Towers are a source of national pride and a symbol of Malaysia's remarkable economic progress in the past decade. But to some they are a symbol of investment in projects with a low rate of return.

Last year, Malaysia's gross domestic product growth was 9.2 percent, led by investment, which was a stunning 42 percent of GDP and brought average growth for the Sixth Plan (1991-1995) to 8.7 percent against a target of 8.1 percent. The problem was that savings lagged behind investment, producing a current account deficit of $7.5 billion, or 8.8 percent of GDP.

The Seventh Plan recognizes that Malaysia must now go for quality, not quantity. It must achieve 8 percent growth with fewer inputs of foreign capital and cheap labor.

The growth itself is unlikely to be a political issue, unless external constraints cause a sharp contraction. But the administration could be embarrassed by the income distribution figures revealed in the Seventh Plan.

For the first time since Malaysia began its campaign of racial income equalization in the aftermath of the 1969 riots, the gap between the Malay majority and the richer minorities has widened significantly. Average Chinese incomes are 80 percent above Malays'. This was probably an inevitable consequence of Mr. Mahathir's drive for industrialization and emphasis on growth over distribution. But it is a potential source of unease.

Less certain is whether Malays are troubled by increased inequality in their own ranks as a result of priva-

tization's creation of a rich business class. Malays are happy that they now constitute the majority of leading businessmen in the country, but not all of them are happy ab-out the process by which this has been achieved — priva-tization of state and Malay trust company assets.

The younger generation of Malay beneficiaries of Malaysia's decade-long boom acknowledge Mr. Mahathir's catalytic role in the nation's social and economic transformation, and his sometimes controversial way of putting Malaysia on the international map. But many — not just Mr. Anwar's supporters — fret over the prime minister's imperious ways and autocratic grip on a traditionally democratic UMNO. Others simply want wider or different distribution of offices and opportunities. Some find his anti-Western tirades outdated or inappropriate. In short, few dare cross him but many question his indispensability.

The topping out of the Petronas Towers, the return of Tunku Razaleigh Hamzah and the success of the Sixth Plan symbolize Mr. Mahathir's achievements. But as the Seventh Plan suggests, the ingredients of the next decade of success need to be a little different from those of the last.

Copyright © 2006 The International Herald Tribune