Mahathir’s Prescriptions for Malaysia

By Lincoln Yeh

Under the leadership of Prime Minister Mahathir, Malaysia's economy has become one of the fastest growing economies in the world. Malaysia's recent currency crisis should not obscure the fact that Mahathir has fostered rapid and equitable industrialization in what was a poor and racially divided colony

As Prime Minister, Dr. Mahathir Mohamad has been the decisive factor in Malaysia's transformation into a rapidly developing Southeast Asian nation. If one disregards the present currency crisis afflicting the entire Southeast Asian region, Malaysia's progress so far is extremely impressive. It is no longer the sleepy, British colony dependent solely on the export of commodities such as rubber and tin. Malaysia is now an industrializing country that is reaping the benefits of economic diversification and growth.
Such growth was achieved through a combination of two different approaches. One approach was to develop the country's economy through government policies and private investment. The other approach entailed promoting race-neutral economic prosperity.
Using the first approach, Dr. Mahathir made pragmatic and far-sighted changes to the Malaysian economy and government. During the 1980's, the prices of commodities such as tin and rubber fell drastically. Malaysia was heavily dependent upon the export of commodities as a source of revenue. Even with a commodity export diversification strategy, the Malaysian economy suffered from the drop in prices. Prior to this, Dr. Mahathir had recognized that it was necessary to industrialize the nation: the future of Malaysia lay “in the greater value-added secondary and tertiary processing of [their] raw materials and the higher technology industries.” To achieve such a goal, he established a state-owned corporation called Heavy Industries Corporation of Malaysia (HICOM). HICOM then negotiated joint ventures with companies from Korea and Japan such as Mitsubishi. Such deals included a national car project, Perusahaan Otomobil Nasional (PROTON), a steel complex [and] two cement plants that were geared towards boosting Malaysia's national image.

The privatization of state-owned enterprises accompanied Malaysia's rapid industrialization. Dr. Mahathir disliked government-owned companies because of their consistent inability to turn a profit. Mahathir's policy of privatization involved cooperation between the government and the private sector. The government would set down the major policy framework, direction and provide the necessary back-up services while the private sector would represent the commercial and economic arm of the national enterprise. Privatization was a means of achieving greater profitability while fostering an entrepreneurial spirit in the general population. Mahathir's pragmatic approach to solving economic problems is often compared to his past experience as a medical doctor. He has often said that after looking at the symptoms of the economy he decides what prescriptions to order. In fact, Mahathir's first love was law but he decided not to pursue this interest. As a student, Mahathir excelled in his class and has received recognition as an eloquent writer and speaker. However, after being awarded a government scholarship, Dr. Mahathir traveled to Singapore instead to study medicine. He felt that he had to study medicine because there were too few doctors in Malaysia. After graduating in 1953, Mahathir returned to his hometown, where he worked at the Alor Star General Hospital before starting his own practice in 1957.

In 1945, Dr. Mahathir joined the UMNO (United Malays National Organization) party. It was not until 1964, however, that Mahathir became formally involved in politics as a newly-elected member of the Malaysian Parliament. During his term as Prime Minister, Dr. Mahathir experienced several political upheavals that jeopardized his political career. Nevertheless, he has managed to rise from the ashes with even more determination. One upheaval occurred in 1969, when Dr. Mahathir lost in the general elections. In response, he wrote a letter to the UMNO leadership voicing his concern that the government was not addressing the severe social and economic problems facing the Malay population. As a result, he was expelled from UMNO. Dr. Mahathir was unwilling to rejoin UMNO as long as he could not express his views freely and fully. His chance arrived several years later as new leaders, such as Tun Razak, were chosen to lead UMNO. Mahathir was brought back into UMNO in which he became a member of the Supreme Council in 1972 and a Senator in 1973. Between the years 1973 and 1981, Dr. Mahathir steadily ascended in the ranks and rallied enough political support to earn him the position of Prime Minister in 1981.
Mahathir’s resilience and political astuteness allowed him to increase the economic prosperity of the nation's entire population while balancing the interests of the various racial groups. Of the 20 million people in the country, 30% are ethnic Chinese and 10% are Indians. The remaining 60% of the population are bumiputras, meaning “sons of the soil” in Malay, who represent the indigenous people of Malaysia. Yet, despite being the dominant racial group in Malaysia,the Bumiputras are one of the lowestsocial classes. This classification stems from their inability to compete with the ethnic Chinese population. In his book, The Malay Dilemma, Dr. Mahathir states that Malays could not compete because, for Malays,” the monetary system is still primitive, being merely a slight extension of the barter system.” He believed an “inability to understand the potential capacity of money” kept the Malays from succeeding in business. As time passed, this disparity eventually led to the term “private sector” to represent ethnic Chinese capital and resources. Mahathir's empathy and support of the Malays stem mainly from his childhood experience. Born as the youngest child into a family of twelve in the village of Alor Star, Mahathir fully experienced and observed the poor social and economic conditions of the Malays. Two years spent selling fruits and handicrafts in the marketplace imbued Mahathir with an awareness of Malay dissatisfaction. Even in medical school, Mahathir gained “a reputation as the champion of the Malays whom he described then as the economic underdog.” Mahathir's passionate support for the Malays eventually earned him the reputation of being an “ultra.” Yet, he has always stressed that in a country with such racial diversity, racial politics ought to be downplayed and economics should be prioritized.
When Mahathir became Prime Minister in 1981, a “New Economic Policy” had already been in effect for a decade. This policy comprised of two goals: poverty eradication irrespective of race and restructuring to abolish the identification of race with economic function.
The first policy objective involved raising the income of every citizen. The second objective was more volatile because it dealt with the issue of race. In order to increase Bumiputera involvement in the business sector, the government instituted policies that involved affirmative action towards the Bumiputras. Corporations were required to have a certain percentage of Bumiputras as employees in order to continue doing business. Government licenses and contracts were more likely to be awarded to bidders who were Bumiputras and the same quotas and targets that were applied to corporations and agencies were also applied to schools and universities. Nobody disputes that policy has been extremely beneficial to the Bumiputra population. Their equity ownership increased from 2.4 percent in 1970 to at least 19.1 percent in 1985 and many of the country's current premier corporate figures are Bumiputras.
An adverse effect of the NEP, however, has been the rise in discrimination against the Chinese and other races that are forced to deal with quotas and fewer opportunities. The tremendous economic progress has appeased those discriminated against while leveling the overall playing field. Therefore, the new question facing Mahathir is whether affirmative action for a majority group in Malaysia can still be justified now that the Malays are now part of the new and prosperous leadership of Malaysia.

Sources:
Boo Teik Khoo. Paradoxes of Mahathirism. New York: Oxford University Press, 1995.
J. Victor Morais. Mahathir. A Profile in Courage. Selangor: Eastern Universities Press, 1982.