Jan 9, 2004

Malaysia walks in Mahathir's shadow

By Anil Netto

PENANG - Malaysia's new prime minister Abdullah Badawi is involved in a delicate balancing act as a general elections approach. His appointment of Najib Razak as deputy premier, a candidate favored by former strongman Mahathir Mohamad, suggests that the influence of the powerful old guard lingers.
It took Abdullah more than two months to make the appointment since succeeding Mahathir as premier last November. In a minor cabinet reshuffle that reinforces this perception, Abdullah this week also appointed Nor Mohamed Yakcop, economic advisor to the prime minister, as second finance minister. Nor Mohamed is the man behind Mahathir's pegging of the ringgit to the US dollar and the imposition of capital controls in 1998.
With Mahathir having recently been appointed advisor to the national petroleum company, Petronas, the hand of the old regime in financial and economic matters is still evident. And in a sign that he is not yet ready to delegate, Abdullah retains control of the powerful home affairs and finance portfolios.
On the same day that Abdullah announced the reshuffle, he revealed that the government had terminated an agreement between the Minister of Finance Inc and GIIG Capital Sdn Bhd - a firm linked to businessman Syed Mokhtar Albukhary, a rising star among Malay business tycoons during the latter part of the Mahathir era. GIIG Capital was supposed to buy a 60 percent stake in Sarawak Hidro Sdn Bhd, the owner and promoter of the massive Bakun hydroelectric dam project, but failed to meet conditions in time. The huge 2,400 MW dam, built on land inhabited by indigenous people who were forced to relocate, had stirred considerable controversy in the Mahathir years. The government said it would return the 94.5 million ringgit (US$24.9 million) deposit that GIIG Capital had paid for the 60 percent stake. But Abdullah said the Bakun Dam project would go on because construction work had already begun.
GIIG Capital and a $2 billion aluminum smelting plant that was supposed to be built by one of its subsidiaries, Smelter Asia Sdn Bhd Smelter Asia, were set to be the main consumers of the electricity generated by the dam. The amount of electricity produced would have been considerably in excess of Sarawak state's requirements. The controversial aluminum project was estimated to consume 1,000 MW of the electricity generated by the dam, with the remainder slated to go to the state electricity boards of Sarawak and neighboring Sabah in northern Borneo. The termination of the agreement has now cast doubt on the smelter project. The setback was Mokhtar's second since Abdullah took over.
Last year, the government under Abdullah decided to postpone a railway double-tracking project awarded to a consortium led by one of Mokhtar's companies, Malaysia Mining Corporation and Gamuda, after letters of intent had been issued to two foreign firms. The award to the consortium was announced just days before Mahathir was due to leave office.
The new finance man, Nor Mohamad, a technocrat, was Mahathir's special advisor on financial affairs and had briefed Mahathir on how the foreign exchange and stock markets operated, especially in relation to currency speculation and the flow of hot money. In the aftermath of the 1997 Asian financial crisis, Nor Mohamed was tasked with rescuing firms that were regarded as strategic to the state's interests. Among those he was involved in restructuring were politically well-connected firms such as Malaysia Airlines, the UEM Group and Malaysian Resources Corp Bhd.
Critics say that the government has not responded to calls for greater transparency in the financial system. Nor Mohamad was a central bank banker when Bank Negara Malaysia lost over 10 billion ringgit in foreign exchange due to speculation in 1992 and 1993 and later quit his post.
For many analysts, the timing of the appointment of Najib as the new deputy premier indicates that snap general elections could be held soon. The elections must be held by November, but political analysts are predicting that Malaysians could go to the polls as early as March, ahead of party elections of the ruling United Malays National Organization (UMNO).
Najib's appointment is likely to put a temporary halt on the factional jostling within UMNO, which could have diverted attention away from a general election campaign. The urbane Najib, son of Malaysia's second premier, Abdul Razak, is seen in the West as someone who is easy to do business with. As defense minister, he could improve Malaysia's sometimes prickly relations with the major powers.
Domestically, though, he still carries some baggage and very nearly lost in his own constituency in the 1999 general election. His role as UMNO Youth leader during ethnically charged events that led to mass arrests of dissidents in 1987 continues to make some Malaysians wary.
Alarmingly for Malaysians hoping for greater liberalization in the post-Mahathir era, Najib has said that the government would continue using the draconian Internal Security Act, which allows for detention without trial, in appropriate cases where circumstances do not allow for the use of the Penal Code.
These latest moves indicate that while Abdullah's rhetoric since taking over has been encouraging, the reality is that he has to balance the political baggage of the past with the considerable aspirations for change and reform in Malaysia.

Parent site: "Focus on Malaysia"