Mahathir's grand vision for Malaysia turns a little sour

Malaysia's grandiose economic policies of the past have created a headache for Prime Minister Abdullah Badawi.

By Eric Ellis* (From The Sydney Morning Herald of June 13, 2006)

FOR 22 years, Malaysia's Dr Mahathir Mohammad strode the world stage, the economists' pin-up boy for the developing world he championed.
When he wasn't railing at real or imagined demons in the West, he was hectoring his countrymen to rise from the rice paddy and get jobs in the shiny new industries he would create.
His forte was the mega-project and he threw billions at a succession of them; the Bakun Dam, the Petronas Towers, the world's tallest buildings, a Multi-Media Super Corridor that would eclipse Silicon Valley, a 50km-long Linear City that would roof Kuala Lumpur.
There'd be a new Hollywood carved from Malaysia's jungles and the world's most sophisticated port and highway network built around its coasts, on which a new automotive industry, the National Car Project, would run. Formula One? Easy, build a $1 billion track for one weekend of racing a year.
It was Vision with a capital V and Mahathir had oodles of it. All you had to do was ask him and the sycophants that gathered around him, anxious to snare glancing bits of his largesse.
There always seemed enough money in the state coffers to fund Mahathirism, built in large part on his "New Economic Policy", an affirmative action program designed to advantage Malaysia's economically backward Malay majority.
But almost three years after he stepped down as prime minister, Mahathirism's hangover is beginning to bite.
His successor, Abdullah Badawi, is finding that the state-sponsored grandeur of Dr M's plans can't be sustained. Mahathir's cronified network of bumiputra (Malay) tycoons spoon-fed government deals and wealth seem to have largely disappeared from sight.
One of the two great symbols of his rule - the Petronas Towers where Mahathir keeps his retirement office - was topped by Taipei's 101 Tower last year and has never enjoyed full occupancy anyway. Neither has the new airport. That other Mahathir symbol, the National Car Project that spawned the Proton, genuinely runs the risk of collapse.
One of the more telling Mahathir failures of both vision and execution was the Multimedia Super Corridor.
In 1996, he came to San Francisco to tell American tech titans that what MMSC would build "will best Silicon Valley". It was just a month after the Nasdaq listing of search engine Yahoo!
The persuasive PM signed up people like Bill Gates, Larry Ellison and Alvin Toffler to its board. Gates called the MMSC "awesome".
Ten years on, what's awesome is Yahoo's market capitalisation of $US42.8 billion ($57 billion), about a third as big as the Malaysian economy.
Now add to that the later-arriving Google. Its $US117 billion value is about the same size as Malaysia. And then there's the rest. So what happened to the MMSC? Known cheesily as Cyberjaya, it's still largely a vast expanse of palm swamps on the outskirts of the capital, Kuala Lumpur, where it's hard to see much of the $3 billion its promoters claim to have generated over the past decade.
Malaysia is the country that threw a high-tech party and nobody came. If there's a suite of killer apps being developed in the mud, it has escaped this correspondent.
There's a modest "university", the "Cyberview Lodge" hotel and a few of those ubiquitous glass offices.
Mahathir's knowledge economy has about as much oomph as a 28K dial-up net connection, which apparently is how fast net speeds often are out here. As far as tech vision is concerned, Mahathir's seemed more an hallucination.
With its English-language competence, Malaysia could've cornered the outsourcing and call centre trend of the past decade. But that business went to India, in spite of its bumbling bureaucracies, and helps it post quarterly growth numbers of 9 per cent, as it did a fortnight ago.
While America and India were minting the New Economy - and even after destroying much of it in the tech wreck of 2000-01 - Dr M was obsessed by what his former deputy Anwar Ibrahim was, or was not, doing in his private time, stopping any inroads the Australia he hates was making into Asia while demonising the Jewish community in whatever forum would give him a soapbox.
But it's the eclipse of Proton that has Mahathirism in its deepest funk.
While he was PM, he made it a Malaysian duty to buy a Proton, protecting the underpowered Mitsubishi Lancer clone by applying huge tariffs to car imports.
Proton was to be the vehicle in which Malaysian agricultural workers would travel, literally and figuratively, to a shiny new industrial future.
The Japanese helped build a state-of-the-art plant outside KL at Shah Alam. The cars models bore patriotic names; Saga (symbolically named after a seed by a soldier), Wira (Malay for hero), Iswara (a Sarawak butterfly) and Putra (suggesting born of the soil).
The Malaysian coat of arms was part of the Proton logo and an image of the assembly line adorns the 100 ringgit note, Malaysia's biggest. Dr Mahathir has a stretch version made as the official Prime Ministerial car.
Though never known for their quality, they were exported too, joining the joke Western market segments once occupied by the Yugos and Ladas. In Australia, Proton sponsors Sydney West Tigers NRL team. At the peak of Proton's power - and Mahathir's - almost four of every five cars on Malaysian roads were Protons.
Mahathir retired in October 2003, handing Malaysia to his hand-groomed successor, Abdullah Badawi.
Mahathir became a consultant to Proton. But, as Badawi signs up to various free trade agreements, the subsidies and protection Mahathir provided to Proton are progressively being removed. Market share is now 40 per cent and falling fast. Proton's assembly lines have about 40 per cent spare capacity. The company is in desperate search for a foreign partner but it's a tough sell. Malaysia's market is not big enough.
The 82-year-old Mahathir is livid, falling out with Proton's Badawi-esque board and openly feuding with it over just about every decision it has taken, while refusing to take any blame himself for Proton's woes.
He recently declared Proton to be doomed and is now at war with Badawi, despite pledging that he would not interfere in his Government.
Proton's chief executive officer Syed Zainal Abidin Tahir is careful when discussing Mahathir, "the father of Proton" as he calls him. "We listen to his views, he has an emotional attachment, he is ultra-sensitive," he says.
The 44-year-old Zainal, who has been in the chair just four months, admits Proton has problems.
"We cannot be in a state of denial that we are producing quality cars because the fact is we are not," he says. "We need to be brave enough to accept that. It's not a lost cause."
Zainal, who says he is a Malaysian first, a businessman second, supports the reduction of protection, a stance which pits him against Mahathir.
"The Government is saying 'we are not going to subsidise you for the next 20 years, please transform your company'. We still have that nationalism but we must no longer behave like the National Car, we cannot behave like we will be protected forever."
Prime Minister Badawi agrees. He just launched the Ninth Malaysia Plan (9MP) which is conspicuously absent of mega-projects.
"I will not say there will never be a mega-project but the emphasis is on human capital," he told the Herald.
"We are moving up the value chain, eliminating social disparities the gap between rich and poor."

*Eric Ellis is S-E Asia Correspondent of Fortune Magazine

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