Can the unthinkable become reality in Malaysia?

News and opinion on finance

One to watch: Malaysia’s prime minister Mahathir Mohamad

As a Malaysian Bob Dylan might have put it: “The times, they are a-changin’.”

And how, in the country that likes to describe itself as ‘Truly Asian’, and which is one of the region’s pivotal economies.

For a start, there is an ethnic Chinese economist heading the finance ministry. An Indian – and a Christian too – attorney-general presides over the Muslim-majority nation’s legal system. Malay hero Anwar Ibrahim is not just free but pardoned, and free to run for office. And it was all made possible by Anwar’s old mentor-cum-rival Mahathir Mohamad, who decided to bat for the other team this time, and won the premiership. Again.

As that new finance minister Lim Guan Eng likes to say, the election on May 9 was his country’s Berlin Wall moment, putting an end to Malaysia’s 61 years as a virtual one-party state and allowing the unthinkable to become reality.

Mahathir 2.0’s first months have been bold and sure-footed. The lust of the public for official accountability, if not blood, has been sated by the prompt re-opening of probes into the government corruption scandal that most disgusted them, the 1MDB outrage, as well as various other scams unearthed since the poll. Voters were also happy that the election promise to abolish the goods and services tax was kept.

Senior ministry and government appointments have been transparent and largely based on merit, with posts filled by those qualified to do so. A civil service that had only known one government is progressively being de-politicized. At Malaysia’s raft of state-owned corporations, the crony free-for-all for top positions ended, and Mahathir slashed long-held sinecures and installed professionals.

Ebullient Malaysians are proud they have pulled this revolution off peacefully and seem determined to normalize their wounded country.

The ringgit and stock market wobbled briefly but, five months into this uncharted voyage, are mostly back to where they were pre-poll. The gyrations have been as much due to the general global distaste for emerging markets as to local concerns.


In Kuala Lumpur, bankers and businesspeople are daring to believe that maybe, just maybe, their once-delicate engagement with government will now be conducted on a transparent and professional playing field. As one foreign banker put it to Asiamoney: “You might see contracts being awarded on a genuine basis.”

So far so good, but, inevitably, there are looming flashpoints. One is the fear that having slain the long-ruling UMNO’s crony culture, a new one will emerge under the new government. It’s too early for that, but some old faces from the Mahathir 1.0 era have re-surfaced, raising eyebrows. After all, many of the problems that the new government must tackle have their origins in Mahathir’s first 22 years as prime minister.

And the gathering of power at a new super-ministry for the economy under ambitious rising star Azmin Ali also gives some pause for thought. Azmin’s portfolio has assumed some of the responsibilities previously held by the finance ministry. Government insiders hint at a possible turf war between Azmin’s ministry and Lim’s.

Malaysia can be a cultural minefield. Some in the majority Malay community … fear their ethnic and religious primacy in Malaysian society could be threatened 

One possible future trigger could be how much of the state sector might be privatized, and to whom. A lot of money was stolen and squandered by the previous government, and Lim has complained that the books he inherited are far redder than expected.

The lower revenues from the abolition of the GST may be partially offset if the resulting stimulus to consumer spending lifts corporate profits and taxes. But Lim is also compelled to honour the obligations made under UMNO mismanagement, such as the near $2 billion of extra debt at 1MDB that only came to light after May 9.

Malaysia can also be a cultural minefield. Some in the majority Malay community, their passions whipped up by defeated UMNO politicians, fear their ethnic and religious primacy in Malaysian society could be threatened.

Though they have both attempted to dispel such concerns, the fact that ethnic Chinese Malaysian Lim holds a key economic portfolio and Indian Christian lawyer, Tommy Thomas, is attorney-general, has heightened such chauvinism among some Malays.

Lim’s Democratic Action Party, the ethnic Chinese-dominated member of Mahathir’s ruling Pakatan Harapan alliance, also has more seats in both the coalition and parliament than the Malaysian Chinese Association did in the UMNO-led previous coalition government.


And then there is the formidable Mahathir.

He is 93 but seems as hale and alert as ever. His test is to not repeat the mistakes of Mahathir 1.0. The last few years of that first term were marked by his obsession about who would follow him, after falling out with his first prodigal son, Anwar, over how to manage the impact of the Asian financial crisis.

Anwar had argued for IMF invention, austerity and shutting off the spigot of cosy government deals channelled to party cronies. Mahathir threw Anwar in jail and instituted currency controls, the impact of which still lingers.

Mahathir eventually settled on the affable but ineffectual Abdullah Badawi as a successor; he was quickly devoured by Najib Razak, the entitled son of Malaysia’s second prime minister, Abdul Razak, who had often tangled with the young Mahathir back in the day.

A contrite Mahathir 2.0 released Anwar from jail, where Najib was happy to have him, and the 71-year-old is now free to run for office. A pre-election deal brokered by the Pakatan coalition, one made when victory seemed remote, has it that Mahathir will step down by 2020 and that Anwar will succeed him as prime minister.

All of which assumes that Mahathir, warming again to power, will keep his word.