Malaysia: The Mess Mahathir created

July 29, 2015

Malaysia: The Mess Mahathir Made

by  Dan Slater, University of Chicago
Mahathir Lawan Najib

At least embattled Malaysian Prime Minister Najib Razak is right about one thing. The current mess in Malaysian politics is the making of his greatest nemesis, Mahathir Mohamad, who led the Southeast Asian nation with an iron fist from 1981–2003. What Najib fails to fathom is that Mahathir has not produced this mess by criticising his leadership, but by paving Najib’s path to power in the fashion he did during his decades in office. Mahathir may believe that he can end the crisis by bringing Najib down. But history should judge Mahathir himself as the author of a long national decline that has culminated in this latest crisis.

To be sure, Najib’s fingerprints are all over the current mess. The proximate source of the crisis has been the collapse of Najib’s pet sovereign-investment company, 1Malaysia Development Berhad (1MDB). This has caused Malaysia’s stock market and currency, the ringgit, to plummet in turn. All this has transpired amid credible allegations that the prime minister siphoned an eye-popping US$700 million into his personal bank account.

But this road toward ruin commenced with Mahathir, not Najib. It is vital to realise that Mahathir rose to power in blessed circumstances. Malaysia’s economy had been growing healthily for decades, thanks to the prudent economic management of a highly capable bureaucracy. Governance and tax collection were effective, and debts were few. Natural resource wealth, including oil, was professionally stewarded. A decade of muscular redistribution to the country’s ethnic Malay majority had restored social stability after the race riots of 1969. Incoming foreign investment was copious and about to mushroom even further. Mahathir commanded one of the most cohesive ruling parties (the United Malays National Organization, or UMNO) and coalitions (the Barisan Nasional, or BN) in the world. The regime was authoritarian, but not intensely repressive or disliked in comparative terms. In short, Mahathir was holding a winning hand when he became Prime Minister in 1981.

Then came the debt. Obsessed with following in the footsteps of Asia’s technological leaders, Mahathir began borrowing heavily to fund his ‘Look East’, state-led heavy-industrialisation program. Privatisation was part of his growth package, but the beneficiaries were businessmen of loyalty more than talent. When the global economy went into recession in the mid-1980s, patronage started drying up. UMNO split, largely in reaction to Mahathir’s strong-armed style of rule. Mahathir’s two most talented rivals, Tengku Razaleigh and Musa Hitam, bolted from UMNO despite their deep personal ties to the party, mostly to get away from Mahathir himself. Mahathir responded by launching a police operation under the pretext of racial tensions, imprisoning and intimidating political rivals, and cementing his autocratic control.

Hence by the late 1980s, all of the defining features of Malaysia’s current crisis under Najib’s leadership were already evident under Mahathir. The regime was increasingly repressive. The office of prime minister was becoming a haven of autocracy. Ethnic tensions had been reopened to political manipulation. The economy was worrisomely indebted. UMNO was shedding some of its most capable leaders. This was the beginning of Malaysia’s sad national decline, under Mahathir’s watch and at his own hand.

Fast-forward a decade and all of these syndromes would recur in even nastier forms. The Asian Financial Crisis of 1997–98 punished Malaysia for the unsustainable dollar-denominated debts it had accumulated under Mahathir’s single-minded push for breakneck growth. Mahathir blamed everybody but himself for the crash. He sacked and imprisoned his popular and gifted deputy, Anwar Ibrahim, largely for his temerity in suggesting that Malaysia needed deeper reforms to regain economic health.


Mahathir didn’t pull Malaysia out of its crisis with economic reform or adjustment, but with more and more borrowing and spending. This was possible because Malaysia was still sitting on the fiscal reserves it had been amassing for half a century, since the British colonial period. Mahathir grandiosely claimed that his imposition of capital controls had saved the economy. But capital flight had basically run its course by the time controls were implemented. Mahathir imposed them to facilitate political repression as much as economic recovery. The spectre of anti-Chinese riots in neighbouring Indonesia was then callously manipulated to keep ethnic Chinese voters in the BN fold in the 1999 elections.

Hence even before the turn of the millennium, Malaysia was hurtling down the very trajectory of decline we are witnessing in the current crisis. Like Mahathir, Najib assumed autocratic control over the economy and embarked on reckless borrowing and investment schemes, especially 1MDB. Like Mahathir, Najib unleashed a torrent of repression under antiquated security laws to protect his own position amid rising criticism from civil society and from within UMNO. Like Mahathir, Najib has recklessly played the ethnic and religious card as his position has weakened. And in consummate Mahathir style, Najib has now even sacked his deputy, Muyhiddin Yassin, for questioning Najib’s repression of the media in response to the 1MDB scandal. In sum, Mahathir has nobody to blame more than himself as he watches Najib drive Malaysia even further into the ground.

The 2015 Najib Cabinet

Neither Najib nor any of his current plausible replacements appear capable of reversing Malaysia’s decades-long decline. Herein lies perhaps Mahathir’s worst legacy of all. By forcing the three most capable politicians beside himself out of UMNO during their prime, Mahathir ensured that only relative lightweights would command leading positions in Malaysia’s most powerful political institution. If Malaysia is to exit this crisis on a path to restored health rather than steeper decline, the political and economic reforms first demanded in the reformasi movement of the late 1990s will finally need to put in place: either by a new generation of leadership within UMNO, or by Malaysia’s repressed but resilient political opposition.

Dan Slater is associate professor in political science at the University of Chicago.

27 thoughts on “Malaysia: The Mess Mahathir created

  1. With reference to the last sentence in the article, does Mr. Slater have either Anwar Ibrahim or Tengku Razaleigh in mind? Hmm. . . just curious and trying to find alternatives to the present cadre of Malaysian leaders.

  2. I’m no fan of mahathir but to read another apologist of Najib putting the blame on mahathir, this is really sick.

    Najib stole the country’s money! That is criminal 101! Does Dan think there are acceptable reasons to allow a pm to steal?

  3. Good account of Malaysia’s political economy. Mahathir deserves the big share of the blame for the country’s economic mess. The culture of cronyism, nepotism and corruption is deeply embedded and it is going to take a cadre of honest and dedicated leaders ( like Lee Kuan Yew and his lieutenants in Singapore) and years to build a system of good governance, backed by a top quality civil service with a merit based culture.

    Right now, Malaysia is without honest and dedicated leaders and that is our tragedy. It is going to be a tough and grueling crawl to the top for us with success uncertain. Getting rid of piles upon piles of dirt and corruption is going to be a challenge for anyone who takes over. Politicians on both sides can talk about change, that being the easy part, but I do not see anyone with the strength of character and integrity in the horizon who can do it. –Din Merican

  4. In a nutshell, Slater got it all down but there were more reasons. It was not just in government that we had ‘relative lightweights’. It was reflective in all tiers of bureaucracy including the military and police. Just look at our IGP who behaves more like a ‘samsing kampong’. We were prepared to send mediocre students overseas who came back with mediocre qualifications. The present state in Malaysia is not just a failing of the political system but of the entire country. So no, UMNO could NEVER lead us out of our dilemma . We have to pin our hopes on the opposition with the liberal and enlighten leaders from the PAS splinter group to take us forward. But sadly we have to wait for another 3 years to do that. And who knows what Najib could do in the meantime?

  5. Din,
    To a certain extent, Toh Chin Chye was kinda forced to retire from his ministerial post. However, during the later years as back bencher, he has been very active being critical to singapore second generation leaders. Chin Chye had once said

    “In this last term, I hope I will be of public service and not a wallflower in the chamber of parliament of a dumb cow.”

    In this, I would like to include this english version of The Troubadour

    Eurovision winner Lenny Kuhr

  6. History should be learn, analyse and not repeated,, who started this rot anyway ?, go back to the basic and the changes to our constitution that has been done countless times, now it’s biting back the arse that started it, Karma acts in a funny way, so be humble and accept your mistakes. you know to whom I’m referring to??? Don’t you Dato Zaid, I too am a Kelantanese and am proud of it.Just to show the other guys mistakes, you’ve convieniently forgot your biggest egoistic self and the mistakes you’ve made, Karma too acts in a different way, life’s a circle, to me only Allah SWT is MAHA, the rest of you are nothing to me.

  7. As an oldie who has lived through the days of Tunku Abdul Rahman, Tun Razak, Tun Hussein Onn, Tun Mahathir, Tun Abdullah Badawi and now Datuk Seri Najib, with due respect, I must say that I tend to agree with what is written in Dan Slater’s article and Din Merican’s comments. True, we have thank Tun Mahathir for a lot of the what we are going through under Najib’s regime. Malaysia might have been a better country to live in if Tun Mahathir had not been the Prime Minister for 22 years. But what to do? What has happened was destined to happen and had happened. Chung Tat Lim.

  8. Actually when the NEP was launched in the 1970s, the Malay population was smaller less about 5 million because according Wikipedia the total population
    is 10 million. The foreigners that is the Britishers owned 60% of the economy
    So distribution of wealth is easy, you take the % of the English owned estates
    eg. Sime Darby, Harrisons & Crosfields. etc. So now the Malay owned almost all
    the big estate conglomerates & Felda. Spreading the wealth is easier because
    a smaller Malay population base.

    & ORANG ASAL. Today Malaysia has 16 million Malays & Orang Asal &
    it will difficult to look funds to make the people contended.

    When oil price was high you can cover up the economic
    mismanagement. There was no competition for palm oil etc. & you
    can bloat the civil service & absorbed all the universities’ graduates.
    With foreigners estates & tin mines taking over & they leaving the country
    but still Malaysia survived because of low cost labour & because we had
    an English Language base education system, factories put up. Malaysia
    was a stable country then compared to their neighbours.
    As Malay population becomes 90% of the out of say 70 million as
    stipulated by the Indian Muslim retired P.M. Dr. Mahathir when he
    asked the Malay Muslim to go for 5 children, Malaysia is going to be hard pressed
    to create jobs for all of them.
    Malaysians should not & never be angry with their leaders because you all
    voted for them & you have to live with your decision. YOU GET THE GOVERNMENT OR THE PEOPLE YOU ELECT & YOU SHOULD BE ANGRY WITH YOURSELVES

  9. There is no one to blame other than Al Kutty for the tragedy that has befallen this once bountiful country. This one evil man has, in one single blow, wrought destruction to a thriving economy that was the envy of many in the region.

    I totally agree with the writer that it would take a herculean effort to right the wrongs committed by an egoistic megalomaniac whose only claim to fame is his propensity for making a mess out of anything and everything good.

    Al Kutty, for want of a better word, is the devil incarnation. He should be tried as a war criminal at the Hague.

    It’s a sad sad day for ordinary Malaysians who have worked their butts out to remain above water. I know how they have suffered and are still suffering.

    How long more must we endure this indignity?

  10. “Politicians on both sides can talk about change, that being the easy part, but I do not see anyone with the strength of character and integrity in the horizon who can do it.”

    If we were to reflect on the personalities and events since the Sixties, one fact would emerge: the politically-significant majority have always had a high tolerance for gross misbehavior and corruption. It never caused widespread outrage even when details of misdeeds spilled out into the open. We may recall the fellow who despite being found guilty of corruption, got posted to Cairo as Ambassador by the Tunku and more recently, the groper who was handpicked by the Thief to represent the nation in Washington.

    So for well over 50 years, notions such as “strength of character and integrity” were deliberately and routinely cast aside… and ALWAYS for the sake of Race and Religion.

    Today, even as details of the grand theft by a sitting PM emerge, the instinctive response of the ruling class of both cronies and royals appears to be no different. RM2.6 billion in his personal account? Just another day in morally-hazy Malaysia.

  11. 1. Gross misgovernance in 1Malaysia:

    Rule of law is a joke; corruption at highest levels and pervading outwards and downwards; lies and propaganda in govt-owned mass media every day; economic policy subordinated to politics (and the politics of survival) and distorting the economy; cynical stirring up of ethnic and religious tension; deterioration of public institutions etc

    2. If a regime change occurs in GE14, de-Mahathirisation needs to be carried out (much like West Germany had to undergo de-Nazification after May 1945). Replace the ideology of race-supremacist, semi-apartheid Ketuanan Melayu with a more decent ideological mix of Scandinavian-style Social Democracy and welfare state, moderate and modernist Islam.

    Will (2) ever happen in Malaysia ?

  12. I am in my sixties and I fully agree with most of the comments here about TDM. He single-handedly started the rot by operation lalang and the Judiciary crisis to get his way. He started the tolled highways and the privatization of our public utilities. And today the Rakyat has to pay through our noses everyday and I have lost count of the number of tolled roads. Sickening and very sad for our future generations.

  13. “Mahathir didn’t pull Malaysia out of its crisis with economic reform or adjustment, but with more and more borrowing and spending. This was possible because Malaysia was still sitting on the fiscal reserves it had been amassing for half a century, since the British colonial period. Mahathir grandiosely claimed that his imposition of capital controls had saved the economy. But capital flight had basically run its course by the time controls were implemented.”
    — Dan Slater

    This salient point must not go unappreciated. The other reason that Mahathir had to impose capital controls was that our forex reserves had fallen to as low as USD 20bn during the 1998 Asian financial crisis, and BNM could defend the RM anymore. I don’t know how much of forex reserves we had prior to the 1998 crisis. (Dato Din may have a better perspective with his BNM experience).
    A similar situation seems to be unfolding now. According to the latest reports, Malaysia’s forex reserves fell from USD 137bn from a year ago to USD 105bn in June 2015. That’s a quarter gone.
    Remember, our forex reserves also includes gold which also falls in price with the USD’s rise and Special Drawing Rights (SDRs). SDRs are strictly not reserves but more like an overdraft facility from the IMF. So our reserves is not as strong as some would imagine. Even with the aggressive defense of the RM, the USD/RM pair is now quoted above 3.8.
    The acid test will come when the US Federal Reserve begins the interest rate liftoff cycle, widely believed to be in September. Foreign institutions/investors now holding Malaysian government debts will certainly sell some of it if not all and repatriate capital back to the US because US treasuries will then be a more attractive investment. Given the Fed interest rate liftoff is not a one-off affair but a cycle, the RM’s value will be under pressure for the next couple of years at least.

    We hardly reformed our economy during the high oil price years — with a handful of exceptions in Penang, our industrial sector is still labor-intensive of the low value added assembly kind that creates little economic linkages. We are still rather dependent on crude oil and palm oil exports. The more lucrative upstream oil exploration and downstream oil refinery sectors has not been vigorously expanded locally. Ditto the high value added downstream oleo-chemicals industry. Instead, our oil fields may have already been collateralized to foreigners for some dubious capital raising that may have ended up in some politician’s personal accounts. Capital formation has been notable mainly in the property sector, much of it speculative – driving prices sky-bound and out of reach for the common folk. Labor productivity and real wages have hardly risen.

    The coming months where a massive reversal of capital flows (just think back how much money Uncle Sam has printed for QE1, 2, 3 …..) is inevitable, are those during which we must batten the hatches down real tight.

  14. /// Wayne July 29, 2015 at 10:47 pm
    The author knows next to nothing about Malaysia’s history and culture. ///

    Ha, ha, ha, just what the Foreign Minister would say…….

  15. I agree with the writer, but Henry is right too … it is the people who allow the mess to perpetuate. Pointing fingers at who started the mess is now irrelevant. What matters now is what we must DO to stop the rot from getting worse. Umno is thriving on the docility of the Malay population to carry on their thieving ways and do more damage to the country. It is this group of the populace that holds the greatest power to cause a change in the status quo, not the opposition. Time to see what the present regime is doing as a bigger tragedy (than MH370) and band together to save our beloved country. We are a “live Titanic” and the captain and his generals will have used all the life boats to sail to safety while the rest will be left to drown. I don’t know whether we’ve hit the iceberg or are we ABOUT to hit it?

  16. He has forgotten that the TAA Tun’s era was financed by the control of wages. In 1970 a newly appointed clerk in Government got RM240.00 a month. In today’s terms that is about RM2,400.00. Even a newly appointed clerk in the private sector does not receive that pay today in one month. The PTD service is no better. In 1970 the pay in one month for a newly appointed officer was RM720.00. In today’s terms it is RM7,200.00. Today that is not even the starting salary for executives in the private sector.In 1970 a hair cut cost RM0.80.Today it is RM10.00 and no air-con. The workers paid then and the workers will pay again.

  17. When the first NEP of 1971 was introduced, The population of Malaysia comprised 65% Bumiputeras and 45% Non-Bumiputeras.. To-day, it is 65% and 35% respectively. The orang aslis and the natives of Sarawak and Sabah were lumped under “Bumiputeras” so that the Malays could fill up the vacant places if there were not sufficient orang aslis and natives around to take up their share. The primary aim of the NEP then was noble. It was to promote greater unity among the different races of the country and to eradicate the hard core poverty among the people, comprisng mainly the Malays. It was also prepare the poor to involve themselves in all modern economic activities of the country at all levels. But in the end, it was the

  18. Sorry, my comments got posted before I completed them. As I said, in the end, the rich among the Bumiputeras became richer leaving the majority of the poor just as poor – due mainly to measures taken by the Government. But,as Henry says, we have to blame ourselves because we elected the Government in power.

  19. Dinobeano,
    ” Right now Malaysia is without honest and dedicated leaders and that is a tragedy ” No Din, it is not a tragedy, it is Umno own making. It is more by design than accident that Umno’s authoritarian leadership shaped its hierachy with less intelligent, less credible and over subservient individuals to safeguard their position from formidable challenge. And the end result is we have Zahid Komedi as DPM by default or is it by design?

  20. Osman,
    Zahid may have made Sukarno very proud. When Sukarno failed in his attempt in conquering Malaysia, Zahid has achieved it.

    Henry is right. Spitting Image too! There are plenty of stupid voters

    Gosh, how could a mere clerk can earn the same salary as a teacher in Malaysia. Got to double confirm with my parents.

    Well, Nixon was elected with a landslide majority even though watergate break in happened before the election. What more I can say man. Even George Bush Junior can be President

  21. /// chungtatlim July 30, 2015 at 12:33 pm
    When the first NEP of 1971 was introduced, The population of Malaysia comprised 65% Bumiputeras and 45% Non-Bumiputeras.. ///

    You mean 55%? Otherwise you end up with 110%.

  22. Thank you, The. Typing error. Yes, in 1971 the ratio of the population was 55% Bumiputeras, mainly Malays, and 45% non-Bumiputeras. Age catching up on me. Thanks again, The. ChungTat Lim.

  23. What rubbish are we hearing from Chicago? The infamous land of US gangsters..muahaha…
    “If Malaysia is to exit this crisis on a path to restored health rather than steeper decline, the political and economic reforms first demanded in the reformasi movement of the late 1990s will finally need to put in place: ”
    Wow something out of twenty years ago for Malaysia,…more like finally need to be put to sleep. its already in jail…muahaha..

    “The spectre of anti-Chinese riots in neighbouring Indonesia was then callously manipulated to keep ethnic Chinese voters in the BN fold in the 1999 elections.”

    Anti Chinese riots in Vietnam, Phillipines, Indonesia, Malaysia are the only reason why chinese steal quietly in these countries.. you dont want to wake up the natives..

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