Malaysia Unrest: 'We Are Prepared to Handle It'
International Herald Tribune
September 23, 1998

Prime Minister Mahathir bin Mohamad of Malaysia has led his country down an unorthodox road in his quest for economic recovery, shutting his country off from global currency markets. He also dismissed his anointed successor, Anwar Ibrahim, leading to a large-scale street demonstrations. Mr. Mahathir spoke with Thomas Fuller of the International Herald Tribune on Tuesday. - Q. For the first time in decades, there have been large numbers of protesters on the streets of Kuala Lumpur, clashing with police and in some cases calling for your resignation. What does this mean for Malaysia and your premiership? A. We have always maintained that one of the most attractive things about Malaysia for foreign investors is the political stability. I'm quite sure what has happened is going to be interpreted by foreigners as meaning there is no political stability. But it is not something that is as violent as seen in other countries and we are quite prepared to handle it. Q. This all happened during the Commonwealth Games, and Queen Elizabeth II was here. With hindsight was Mr. Anwar's ouster mistimed? A. I didn't even think about the timing. I thought that he needed to be removed and I removed him. Q. What effect did Suharto's stepping down have on you? A. I think he [Anwar] was much more influenced with Suharto's stepping down than I am. He thinks that because Suharto had to step down it follows that I could be subjected to the same pressures. But my situation is quite different. I'm here actually by popular support — at least I think so. From the reception I get wherever I go, there is no animosity toward me. Q. Following Mr. Anwar's ouster, you are now prime minister, finance minister and home minister. Isn't that putting too many eggs in one basket? A. I hope it will not be for too long. Contrary to the usual belief that I am a dictator, I actually work as a team. Q. You said before Mr. Anwar was removed that you would remain prime minister as long as it took to fix the economy. Now, without an anointed successor, will you remain in power longer? A. Slightly longer perhaps until I can find a successor. Q. Can we expect a larger crackdown beyond those detained on Monday? A. I don't think so. It all depends on how violent they are. If they are violent and they do things like looting or breaking shop windows, the police have to put a stop to that. And to put a stop to violence you cannot use kid-glove methods. You have to be a little bit rough. The police have been very restrained. In other countries they would be beaten. Q. Anwar had a lot of friends and supporters. Do you think there might be an electoral backlash to this? A. There may be, but we think that we can handle it. Our party has got very popular support. It is a mass-based party. We've got 2.4 million members and, by and large, they are loyal to the party. Q. Will you call elections soon? A. I have a lot of time to mull over these things. I'll think about it. Q. What would you look for in a successor? A. An honest man who is capable. Not a genius. I am not expecting a fair copy of myself. … This is a country that depends so much on trade, and any leader of the country must understand economics. Q. One year ago in Hong Kong, you were jeered when you proposed a ban on currency trading. [The hedge fund pioneer] George Soros called you a menace to your own country. Since then a lot of people have expressed the need for some sort of control over the international capital flows. Do you feel vindicated? A. Yes, to a certain extent. But that is not too important to me. What is important is whether my views are taken seriously now for people to act. The world should recognize the truth. Q. What should the world do? Is there a Mahathir Manifesto on currency trading? A. In Hong Kong I have already said we need to have some rules or regulations about currency trading. That it should be more open. Currency trading is unnecessary. You should exchange currency for the purpose of financing trade. But you should not trade in currencies as a commodity. Currencies have got no intrinsic value. Q. But can you stop currency trading altogether? Is a fixed-exchange rate system viable? A. You had it before and the world was growing at a faster rate. People say, ''Well, that is out of date.'' An old idea is not necessarily bad simply because it is old. We should re-examine it. Q. Is it possible to change decades of free-market ideology? A. It is possible if there is political will. If you look back at all the systems and all the ideologies, you find that people become fanatical to the point where they are prepared to accept bad results because they are doing the ''proper'' thing. It took 70 years for the Russians to realize that communism was bad. Everybody else knew it, but the Russians insist that it was good for them. We should be open-minded enough to examine everything that we are doing to find out whether they are really good or they have some faults with needs to be curbed. Q. Malaysia has already taken its own measures to insulate its currency. By doing so you were able to slash interest rates without any immediate effect on the value of your currency. But will this cheap money support companies and industries that might otherwise be viable? A. Bad companies will fail even if interest rates are low. But high interest rates will kill good companies. You have that choice. Whether you want to kill all the companies, or you let at least the good companies survive. Q. Singapore has been politically isolated in recent months. Both you and Indonesian President [B.J.] Habibie have indicated your disappointment that the island nation has not been helpful enough to its neighbors. But is this isolation dangerous for the stability of Southeast Asia? A. Not dangerous for the region, but certainly not good for Singapore. Singapore should learn to manage itself not through undermining its neighbors. They increased the interest rate on the ringgit, causing the ringgit to flow out of Malaysia and drying up the liquidity in the country. That undermines us.

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