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EIU N The Economist cmt By web aNtu 7/12/1999 8:35 am Tue

FROM THE ECONOMIST INTELLIGENCE UNIT The outcome of Malaysia's November 29th election was not exactly what the doctor ordered. The prime minister, Dr Mahathir Mohamad, and his ruling coalition, the Barisan Nasional (BN), won the impressive national victory they had sought. But they lost votes in the Malay heartland, which has always been the core of Dr Mahathir's support, and lost control of a second state to the opposition. Despite this, the ruling coalition seems in no danger of receding into the background, as have other dominant (and often authoritarian parties) throughout Asia. The same, however, cannot be said of the ever-more divisive Dr Mahathir. It is now increasingly clear that Asia's longest serving elected leader will not be able to cure what ails his government, or his country. Ironically, then, Dr Mahathir's victory this week has likely paved the way for the selection of a new prime minister in Malaysia, who may well be in place before the end of next year. The weaknesses in the government that were laid bare by this election, serious as they are, should not overshadow the magnitude of the BN's victory. By any normal political standard, Malaysia's opposition should have been poised to make substantial gains in this election, if not win it outright. Little more than a year ago Dr Mahathir had his popular deputy, Anwar Ibrahim, arrested, tried and jailed on dubious corruption charges-a process that was, at best, clumsily handled by the government and, at worst, a display of shameful persecution by an authoritarian leader anxious to silence his critics. Subsequent street protests rocked the country, and caused many Malaysians, including some of the government's stoutest supporters, to question its fairness in dealing with Mr Anwar. Adding to the government's troubles was the deep 1998 recession, in which the economy--after nearly a decade of 9% annual growth--saw GDP contract by a huge 7.5%. Finally, rising Islamist sentiment in parts of Malaysia should also have damaged the fortunes of a ruling coalition that has been steadfastly secular in its approach to government. Despite all this, the BN managed to come away with a sizeable victory in the election, capturing 77% of the seats (148 of 193) in the national parliament. To a large extent, the powers of incumbency helped the government do well. The election was called with little notice (to the dismay of the opposition), and the press dutifully supported the BN. Government officials also were not embarra#sed to use the power of the purse to influence voters. Still, Dr Mahathir, who has been prime minister for 18 years, understands Malaysians. His basic political strategy--that Malaysia is best served by a secular, modernising, racially-tolerant, pro- business government--is shared by the vast majority of Malaysians. Add to this the fractious nature of the opposition coalition--an uncomfortable mixture of Islamic fundamentalists, pro-Chinese businessmen and unfocused political reformers--and a victory for the BN was never in doubt. The fault lines that emerged from this election, however, cannot be entirely ignored. The largest party within the BN coalition, the United Malays National Organisation (UMNO), saw its share of parliamentary seats fall from 94 in the 1995 election to 74 this time. (Strong support from Chinese voters helped to offset this.) The leading competitor to UMNO for Malay votes, the Islamic fundamentalist Parti Islam sa-Malaysia (PAS), increased its seats from eight to 27. More important, PAS, which already controlled the state government of Kelantan, also captured Terengganu. Add to this UMNO's generally poor showing in the heartland Malay states and Dr Mahathir can hardly afford to be complacent about the results. PAS's strong showing can also be interpreted as confirmation of rising Islamic fundamentalism, another issue that Dr Mahathir ignores at his own peril. The issues, however, go deeper than party loyalties, which can shift quickly. While Dr Mahathir made a persuasive case that he was the best man to lead the country, the events of the past year have made many Malaysians question basic a#sumptions. Malaysia has been among the most successful of Asia's rising economies--more modern, more conservative and richer than many of its neighbours. Most Malaysians a#sumed that their political, judicial and social systems reflected the country's broader success. But the manipulation and abuses of the Anwar trials shattered this notion, as have the sometimes bizarre statements of Dr Mahathir himself. It is telling that the prime minister timed the recent election so that some 680,000 newly registered voters--most of them young and presumably anti- Mahathir--would not be able to participate in the balloting. Malaysians, as a group, may have been too cautious to sack Dr Mahathir, but they sent a clear signal of displeasure with recent events. UMNO officials, including perhaps even some supporters of Dr Mahathir, now seem to understand that the prime minister is ill-suited to deal with a political constituency that will ask more questions, demand more openness and insist on more accountability. For these reasons, all eyes will now be focused on UMNO's leadership elections, which will be held sometime next year. (The head of UMNO, by tradition, also becomes prime minister.) Whether Dr Mahathir will stand again for the presidency of UMNO is unclear. In the aftermath of the election, however, he reminded Malaysians that he had been preparing to retire before the economic crisis hit in 1997. He will almost certainly reconsider that option now. With an impressive election victory under his belt, and with the economy now well into a recovery, Dr Mahathir can make the case--with some justification--that he has seen the country through difficult times, and that his policies have been validated by the voters. Many UMNO officials, it seems, will be happy to allow Dr Mahathir a graceful exit as they go about the business of trying to remake their party. Source: EIU ViewsWire --------------------------- The unstoppable Dr Mahathir K U A L A L U M P U R As expected, Malaysia's leader for 18 years has won again with a big majority. Can anything or anyone dislodge him? PERHAPS Mahathir Mohamad is entitled to gloat. He has certainly defied the predictions that were made 15 months ago, when he put controls on Malaysia's currency a day before sacking his deputy, Anwar Ibrahim. Because the controls were unfair to foreign investors, critics concluded that economic ruin would naturally and swiftly follow. And when Mr Anwar was arrested, beaten by the police chief and tried for corruption and s###my, foreigners believed that most Malaysians would share their outrage. Dr Mahathir judged differently. He knows his people. On November 29th they returned him to power for the fifth time. Once again he can command more than two-thirds of the seats in parliament. His hold on power impresses not only other autocratic-minded politicians; many democrats have also politely extended their courtesies to Asia's longest-serving leader. Australia's foreign minister, Alexander Downer, showed a keen understanding of Malaysia's electoral system when he said that the win doesn't come as a surprise . The reaction on Malaysia's stock exchange was tame, but only because investors had guessed how things would turn out. Most of them are glad that Dr Mahathir has won. They expect the government to press ahead with its overall economic strategy, which they prefer, whatever its flaws, to uncertainty. Next year's budget, announced in October, is expected to generate a deficit of 4.4% of GNP, thus continuing this year's ma#sive fiscal-led expansion. That should help to sustain a recovery that is forecast to bring 5% growth this year, after a 7.5% contraction in 1998. Still, Dr Mahathir's victory was not absolute. The opposition won 45 seats in Malaysia's 193-seat parliament, doubling the number it won in 1995. Almost all of those were won by the loose alliance known as the Alternative Front, which includes the Islamic Party of Malaysia (PAS), the ethnic Chinese-dominated Democratic Action Party (DAP) and the Justice party of Wan Azizah Ismail, Mr Anwar's wife. Despite Dr Mahathir's many advantages, including a formidable system of patronage, the opposition also managed to put a dent in his popular majority: the ruling National Front coalition won 56% of the votes, down from 65% in 1995, a much lower proportion than the number of its seats would suggest. More importantly, the opposition did especially well among Malays, the Islamic majority in Malaysia and the backbone of Dr Mahathir's party, the United Malays National Organisation. UMNO's showing was especially weak in the four northern states of the Malay heartland. Between them, PAS and the Justice party managed to win all the parliamentary seats in Terengganu, take 13 out of 14 in Kelantan, and win a majority of the seats in Dr Mahathir's home state of Kedah. PAS also retained control of Kelantan's state government, and gained Terengganu, a state rich in oil and gas. Such losses for UMNO may seem small; but they do not happen often in Malaysia. Dr Mahathir's detractors are hoping that his poor showing among Malays will weaken his standing in the ruling party. Some UMNO members are disturbed by the spread of corruption, and by the increasing concentration of power in Dr Mahathir's hands. Those who are unmoved by such principles are keenly aware that, if UMNO becomes less united, its gravy train could be derailed. Dr Mahathir's most likely successor, Abdullah Badawi, who was appointed deputy prime minister after Mr Anwar was sacked, has gained a huge advantage from the election. One of Mr Abdullah's main rivals, Tengku (Prince) Razaleigh Hamzah, was put in charge of UMNO's Kelantan campaign, and his own seat was the only one the party won. What kind of prince, UMNO members will no doubt wonder, cannot even deliver his own state? The elections have also hurt Najib Tun Razak, Mr Abdullah's other main rival. Mr Najib, the son of a former prime minister, is articulate and clever and controls the powerful education ministry. But he won his parliamentary seat by only a narrow margin, generating doubts about his gra#sroots appeal. Many UMNO members doubt his Islamic credentials, which are expected to become increasingly important following PAS's strong showing. Many of its 27 seats were won with the help of the Justice party, but PAS has clearly emerged as Malaysia's leading opposition party. The DAP did poorly, partly because many non-Malay voters, keen to preserve economic and racial stability, backed Dr Mahathir. The DAP's leader, Lim Kit Siang, and Mr Anwar's lawyer, Karpa= l Singh, lost their seats. Although Dr Wan Azizah and four other Justice members won seats, the party will be PAS's junior partner. Mr Abdullah is unlikely to challenge Dr Mahathir directly, given the prime minister's control over UMNO procedures. Instead, Mr Abdullah will probably settle for being named UMNO's deputy leader at the next party elections, which must be held by September 2000. That would give him a clear line of succession if and when Dr Mahathir ever decides to step down. The Economist