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FT: 3 in 1 - Mahathir distrusted by Malays
By Kapal Berita

7/10/2000 9:51 am Sat

Makluman: Ada tiga rencana Financial Times Dalam Mesej ini.

1) Mahathir Attacks US Pressure

2) Mahathir FT Interview

3) Mahathir's Last Stand

Rencana ini panjang sangat dan bukan rencana reformasi. Saya hantar ke forum ini untuk di buat kajian. Dia menyebut beberapa perkara yang akan diteruskan walaupun tidak mendapat sambutan - termasuk projek mega.

Anda akan dapat melihat bagaimana Mahathir sanggup menipu dengan berdolak dalih serta menuduh orang lain senang-senang. Bila BSKL jatuh, dia katakan pasaran saham lain pun jatuh juga. Padahal BSKL menjunam sebaik sahaja ucapan Kemerdekaan beliau. BSKL juga terjun lagi bila royalti ditarik balik. Di tambah lagi dengan meletak seekor ikan Jerung Jalur (JJ) untuk menjaga TNB, maka habislah semua ikan kena telan, termasuk manusia sekali. Dia ingat pelabur tidak nampak bagaimana Halim Saad pinjam duit macam pinjam tisu aje. Dia tidak sedar kenaikkan harga minyak dengan pelbagai alasan kerajaan itu sebenarnya melemahkan lagi BSKL yang kini mahukan petunjuk bahawa negara sudah "tidak sejuk".

JIka anda baca sampai habis, anda akan dapati diktator tua ini nak sambung lagi projek Bakun.... patutlah JJ diletak dalam TNB!

Mahathir attacks US pressure

>From The Financial Times, UK
6th October 2000

Mahathir attacks US pressure
By Peter Montagnon, Asia Editor, in London

The US is quietly putting pressure on Asian countries to limit the scope of their efforts at co-operation in the economic and monetary sphere, according to Mahathir Mohamad, the Malaysian prime minister.

Over the past year, the 10-member Association of South-east Asian Nations, Japan, China and South Korea have moved towards closer collaboration to help rebuild their economies in the wake of the 1997 economic crisis.

Issues include currency swap arrangements to help protect against the speculative flows that sparked the crisis, which leaders in Asia feel would be helpful given the absence of broader international monetary reform. But Dr Mahathir said US pressure would ensure that achievements would be modest.

"We are able to discuss minor issues, but we have not made any real progress. The idea of an Asian Monetary Fund has not taken off.

"We are talking about swap arrangements, but that has not been finalised either. So we get the sense that some people are being forced to drag their feet," he said.

Dr Mahathir recalled that Washington had objected to his call in the early 1990s for the formation of an East Asian Economic Caucus that would have excluded the US.

In response, the US pushed to set up the Asia-Pacific Economic Co-operation forum to ensure it had a say in economic matters in the Pacific.

"Although other areas in the world can form their own unions, we are not allowed to talk to each other," Dr Mahathir said.

Malaysia would not remove its capital controls or currency peg until a new financial regime was in place that eliminated speculative activity in financial markets, he said. The impetus for such change had diminished as the crisis receded.

He added that western countries that wanted greater transparency in developing markets were applying double standards. "Countries that are rich and do not feel they are at risk feel that everything is OK, and they're making a lot of money."

The formation of Apec had, meanwhile, undermined Asean, Dr Mahathir said.

Mahathir interview transcript

In general conversation while the interview was being set up the Prime Minister made the point that the markets had lumped everybody together during the Asian crisis. Malaysia had huge savings and low interest rates and didn't need to borrow abroad, he said. Indonesia had high domestic interest rates which had encouraged foreign borrowing. When Asian currencies fell Malaysia did not have to wrorry about foreign debt. Its banking system was stronger than that of Thailand or Indonesia, or even South Korea. It was not that desperate, but it still suffered continuous attacks on its currency.

He said that if Malaysia had practised corruption and nepotism like people in the markets suggested it would have gone down much sooner. It had resisted going to the IMF because it thought it had control over its own economy.

At this point the formal interview started and the transcript follows:

Financial Times: You say foreign borrowings were not a problem, but the Malaysian economy was over-borrowed and there was a large domestic debt problem, which meant you had to restructure your banks. Is that now complete?

Mahathir Mohamad: The banks have merged now. We want bigger banks. Then the management of the banks needs to be improved, and there are lending policies and and they must follow certain guidelines...The banks must learn to manage their funds better, but the banks are very reluctant to lend money, especially for new ventures. They like to finance the construction industry. You find people still complaining that they can't get loans.

FT: What are your views about reform of the international financial architecture?

MM: I think we're not back to normal yet. I think the international financial architecture must be changed in order to get rid of unnecessary speculation, or even manipulation. In fact even Soros admitted that you cannot leave things to the market. The market is not perfect. What we need to do is to have proper rules and regulations even for speculative activities. At the moment there seems to be absolutely no restriction. Capital must be allowed to flow across borders with no restrictions. While that is good when they are flowing in and that stimulates economies. But when suddenly it is pulled out economies collapse and they [speculators] don't seem to have any regard for the consequences of their operations. They are only thinking about how much money they can make. And from what I see, they have destroyed more wealth in order to make just a small bit for themselves...I don't see why it should be allowed at all.

FT: So does that mean you will not be able to remove your remianing capital controls and the currency peg at M$3.80 to the dollar?

MM: Till the world finds a new financial regime that eliminates the kind of speculative game that these people play, I think we shall have to stick with our exchange controls. Because we can't leave it to the market, the market is totally irresponsible and all they can think of is how much money they can make for themselves.

As far as capital controls are concerned, people can bring money in and out of Malaysia quite easily now if they want to invest in the stock market. The only thing that they are asked to do is pay a 10 per cent tax on the profits that they take out of the country. That is all. And that is very minimal because profits are not very big. There is no tax on capital gains. So they make a lot on capital gains. So there is practically no restriction on the flow of short term capital.

As far as investment in productive capacity is concerned there is no control whatsoever. People can come in and invest and take out their money if they want to.

FT: So what exactly needs to be done?

MM: I believe that speculation in currencies needs to be regulated. That is entirely possible. This is one area where they tell us you must be transparent, but they themselves are far from being transparent. You don't know where they are. You don't know how much money they have, how they are operating, what actually they are doing, how they manipulate these things. You don't know. It should be open to everybody and banks should not give such huge leverages. It can be as much as 200 times. In the case of LTCM it ran into trillions of dollars. It's ridiculous that banks could risk so much money with these funds and as we can see things can go wrong. When they go wrong their cronies have to move in to help them out.

FT: Is there any sign at all of reform in the financial architecture or have people moved on?

MM: I think that people are now quite comfortable. They don't seem to see it as urgent. And we find that the IMF is quite resistent to it, although, strangely, people like Soros did mention the need to have some regulation of the currency markets. But the general feeling among countries that can be subjected to attack is that there should be some regulation. But countries that are rich and do not feel that they are at risk feel that everything is OK and they're making a lot of money.

FT: Can anything be done at a regional level? What about the growing collaboration between Asean and Japan, China and South Korea?

MM: I think we can [move at regional level], but there's been a lot of resistance towards the Asian countries coming together to do anything. When we proposed the East Asian Economic Caucus, there was open objection. Although other areas in the world can form their own unions, we are not allowed to talk to each other even. Now, of course, we have to call it Asean plus three but even then we feel we are being watched and, off on and on, somebody suggests that developed countries from other regions should also be a part of the whole thing. I don't see why we should always have the presence of other countries when we are talking about matters affecting our own region.

FT: You're talking about pressure from the US?

MM: Yes. The US objected even to what I was wearing. Mr [James] Baker, [former Treasury Secretary and Secretary of State] didn't like my wearing Malay suits and told the Japanese as much, and he told the Koreans that Malaysia did not fight for South Korea in the war. We couldn't because we were under the British at that time.

FT: But Asean plus three is still an Asian grouping which you must welcome. What prospect does it have for making real progress in these important areas?

MM: We are able to discuss minor issues but we have not made any real progress. The idea of an Asian Monetary Fund has not really taken off. We are talking about swap arrangements now, but that has not been finalised either. So we get the sense that some people are being forced to drag their feet.

FT: So the US is putting pressure behind the scenes?

MM: It looks like that.

FT: What are your views on the role of Asean and its importance?

MM: When APEC was proposed, we were not too keen on APEC because we thought that it would overshadow Asean, and in fact that is what has happened. Because of APEC, Asean has now taken a back seat. Asean in APEC does not function as a group. It functions as individual countries and therefore we were not able to coordinate discussions within APEC for the benefit of Asean.

FT: So is that a fundamental weakness?

MM: Asean is still sticking together, but as you know APEC and even the composition of Asem [Asia Europe Meeting] in terms of not recognising some of the countries - Myanmar - means we are not there as Asean. We are there as individual countries.

FT: But hasn't ASEAN been weakened by the crisis? It doesn't look as though Asean is really pulling together. Does this worry you?

MM: Well it does, although we have achieved our target of having all southeast Asian countries in. All ten of them are now in. On the other hand the newer members are rather weak economically and even politically. And then we were all hit by the financial crisis and instead of being small tigers were are just reduced just some struggling economies, like Indonesia for example. There are many factors which are affecting Asean now. You cannot see things with the same perspective. Each one has got his own problems.

FT: Can you overcome that?

MM: Given time, yes. But it will take quite a long time because many of the countries are still not out of the crisis yet.

FT: And is it wrong to think of APEC as anything more than just a talking shop?

MM: It's just a talking shop, and it has effectively undermined Asean.

FT: What is your view of the Asean Regional Forum? Does it have a role?

MM: I think it has. We would like to keep up discussions with [our ARF partners] because then we would know where we stand but there is nothing very concrete coming out of it, just something that enables us to talk to countries outside the Asean region , countries which have some impact on what's going on in Asia.

FT: What do you hope for out of the ARF?

MM: To make people understand the problems faced by developing countries in the Asean region. I think if we can get their understanding then we may be able to get some cooperation....

FT: Turning to the domestic economy. The stock market is weak and there is concern about invstment flows. A lot of people say you haven't gone far enough in dealing with the corporate restructuring.? How do you react to that?

MM: This applies to the stock market of the whole region. They're not performing well either, but if you look at the performance of the Malaysian stock market since the turnaround, it has done much better than all the other stock markets in the region. But course sometimes we will reflect what is generally happening in other stock markets. I'm not really familiar with what moves the index, but it seems to me that a lot of people are waiting for things to happen and I don't know what it is that they expect from the government. Maybe they want to see the budget, or they want to see the figures in terms of economic performance. We were told for example that if Morgan Stanley would re-admit the Kuala Lumpur index, then things would move up, but in fact the figures went down....

FT: Some people blame it on weakness of corporate governance and say they are waiting for corporate restructuring.

MM: That is their perception, but perceptions can be wrong. A lot of things have been said in connection with Malaysia which, in the end, have been proven untrue. So, when people have some idea about things and they get carried away by that.

We are trying to improve corporate governance. We have looked into the banking system to improve that too. We have done quite a lot. One has to remember Malaysia had been much better regulated before. We even had our bankruptcy laws a long time ago whereas other countries have just begun to put that in place. So in terms of improving corporate governance, there is not that much that we can do.

FT: But isn't one thing which is holding this process back is the reluctance of owners to see the companies broken up and perhaps sold to foreigners? Do you want to keep the big companies for Malaysia?

MM: We still maintain that we need to keep control over some of our companies You must remember that foreign banks have been operating...Malaysia has been open to 100 per cent-owned foreign banks for a long, long time. But there are certain things that we clearly have a need to keep for ourselves. Otherwise we would be merely workers for foreign companies We don't know what policies they might adopt and they might close down facilities here because they are producing elsehwere much more efficiently. So we have to look into that kind of thing too.

FT: Does this mean that you would never sell Proton?

MM: We'll sell a far share of Proton to foreign companies, but to just cut it off and let foreigners decide what automobile production would be in Malaysia, I think would be detrimental to Malaysia.

FT: Isn't another part of the problem that owners are reluctant to realise losses which remain hidden on the balance sheet?

MM: There is that element, too, but there are other means of turning these companies round. We can do something else besides just selling off at firesale prices.

FT: What will be the drivers of economic growth going foward?

MM: We're still a big manufacturing centre for the world. Our manufactured goods are increasing and our exports of manufactured goods are 82 per cent of our total exports. On the other hand, of course, we are not troubled by petroleum prices because we have our own supply of petroleum. We have traditional commodities as well and the demand is still there but we are putting in a lot of effort in the IT industry and that is attracting a lot of investment. Ericsson has invested a huge amount in producing mobile phones in Malaysia, and other companies are looking at this. We are still a very good centre for investment in productive facilities and manufacturing.

FT: And you have a competitive currency?

MM: Yes we have. The cost in Malaysia is very low. It's about one third of the US and less than in Europe. People know that they will get a friendly business conditions.

FT: What are your expectations for economic growth for 2000 and 2001?

MM: We think we should be able to achieve at least six per cent.

FT: One feature of Malaysia in the past has been its predilection for large infrastrucrture projects. Do you still believe in this approach, or has the crisis changed your mind about projects such as the Bakun dam?

MM: In Malaysia we invest for the future. We don't invest for the immediate needs. When we want to do something we look into the future. For example when we wanted to build the new airport. Siting a new airport is always a big problem....If you build an airport that will last for the next ten years, 15 years or 30 years, you're going to have a problem at the end of that period finding another site and you have to be further away and it's not easy to get the land.

So to build this new airport for example, we looked into a hundred years from now, Supposing the number of passengers would increase to 100m, we would need a very big airport. So we reserved 25,000 acres of land for the new airport. At the moment we have facilities for 25m passengers.

Now we learned our lesson when we built our previous airport in 1964. It was designed for 400,000 passengers a year and we thought that it was a very big number. At the end of the period we moved to the new airport, we were handling 17m passengers.

If you plan an airport that can handle just 20m or something like that, then you're going to be landed with a lot of trouble. So it is a big airport, but it is very cheap. By comparison it cost us M$9bn. Even at the old exchange rate of M$2.50, it was about US$3.5bn. But Hongkong airport was built for US$20bn and it is much smaller than our airport. So how can you call it a big project? It is an essential project built at a very low price. And if we were to build now or later, it would cost very much more.

It's the same with all the projects that we build. We are now clogged up in Kuala Lumpur. We have to move elsewhere and we chose an area that is between Kuala Lumpur and the airport and it's only 10,000 acres of land. It will take us 20 or 25 yars to build.

At the moment we have put in the infrastrucrture and the value of the land has increased tremendously. We can sell. We can make a profit on that. Actually, over a period of maybe 20 years we can make a lot of money on that, because land is going to appreciate. The value of the whole property will go up. It is an investment. As much as developing a piece of land would make money, we'll make money out of the new administrative capital. It's an investment and we need it because we cannot stay in Kuala Lumpur anyway and we can sell our Kuala Lumpur properties, if we want to, and make very substantial returns on that. It's a business proposition.

Some people call that mega projects. This is a term invented by others. To us it's not mega at all. It is within our means. We didn't borrow from anybody to build all these things.

We have the money. The money is generated internally, and it has boosted the growth of the economy also. It has contributed to the growth of the economy.

People keep on saying 'ah, these mega projects.' Mega is actually a comparative term. If you spend something that you cannot afford, yes, it is a waste. But we are spending money on things that we can afford and we need.

FT: And can you afford Bakun?

MM: Bakun too will have to come. If we wait the price is going to go up. We will need power at some time or another, and to build this Bakun project will take us five years. Demand for electricity is very great. It's going up at a very rapid rate. Unless we plan sufficiently we will not be able to get cheap electricity, and Bakun is a source of cheap electricity for us.

FT: Turning to politics, what are the outstanding jobs that you have to complete before you retire?

MM: My first job is actually to ensure that the party is strong enough to continue. We have to be revamped. We have to have younger people support the party, and after the party has been strengthened, I think I can leave.

I think we have put the country on the right path. We know we have long term plans. Most of our plans have been very successful. We think we know the direction that we are heading....

FT: What about the ethnic divisions in Malaysia?

MM: We still have this disparity between the different ethnic groups. The indigenous people are still way behind and they suffered more than the others during the crisis and there is a need to put them back on track and to make sure that they will be able to continue to get their fair share of the wealth of the country. The non-Malays, they appreciate and they believe that it was because we made the necessary adjustments in the distribution of wealth that during the crisis there was no outbreak of racial violence in Malaysia.

FT: But have the Malays risen to the challenge and exploited the opportunities you have given them?

MM: It is a problem of having to change the culture of the people. The indigenous people are not monetised. To them money is mere convenience that they carry in their pocket to exchange for goods. They don't look at money as capital. You have to change their mindset. I have found that people in communist countries are just like that too.. They don't know how to handle money as capital. We have the same problem with the indigenous people. We give them money as capital and they want to use that money spend on whatver it is that they want. We have got to change their culture and that is going to take time.

We have succeeded to a certain extent. Otherwise the disparity would have remained bad and there would have been racial clashes during the downturn. We have turned it round. But a lot of that depended on institutions that we set up.

Of the 20 per cent of the economy which is now with the indigenous people, only seven per cent is with individuals. The rest is with institutions that the government set up to take up shares in companies or even to start new companies.

It's not what we want because we don't want to lead. We want eventually to sell off what is held by institutions to individuals and when we find a suitable candidate we will sell off the entity to them. But then we get accused that we are selling them off to our cronies. They are not cronies. They are the people who have been identified as capable of managing. That is why they were given a chance.

If we just sell to anybody who makes a bid, the chances are that the company will be sold off to the other races and that is not going to serve our purpose.

FT: You must be a bit disappointed that it hasn't moved further?

MM: You can say that I am disappointed because I keep on telling them 'look, you have to learn how to manage better.' They don't look far enough ahead. They think of today's wealth They have some money, and they spend the money.

FT: So is there any more you can do?

MM: We were devising new ways all the time. We're talking to them, explaining to them. And people don't change that easily their system of values. It's very, very difficult. But even then I would say that we have succeeded much better than most other countries.

FT: What were the political consequences of the Anwar issue?

MM: Well it had the maximum effect in the 1999 election when the picture of Anwar with his black eye was paraded across the country. I was blamed as being the one who inflicted it and a hate campaign was carried out. This resulted in people turning to PAS, but we have now been able to explain to the people that this had nothing to do with the party. This is something that happened and we could not control it. People have now accepted that he has done something wrong.

It's ridiculous to suggest that we should have had a conspiracy, which is what he keeps saying. He never defended his position, he merely said it was a conspiracy on the part of the government to deprive him of becoming the next prime minister. Why should there be a conspiracy, when I have been the one who has pushed him all along and wanted him to be my successor? His behaviour has not been acceptable in our society.

FT: Has it made it harder to attract young people to the party?

MM: Yes it has, because people find it hard to believe that he could indulge in such things and the theory of conspiracy was quite attractive, and he has during his years in the government been able to create cells of people in various organisations who are his personal supporters even outside the country.

FT: So what do you have to do to get the party bck into shape?

MM: Well we talk to them. We we'll show evidence that we did not have a conspiracy. And a lot of them have now accepted that there was not a conspiracy.

FT: But the Malay community is quite divided, isn't it, and racial tension is increasing?

MM: Well, this thing has been going on for the past three decades and we were not very fast in understanding what is being done by the opposition Islamic party.

They have been sowing hatred against the government, hatred against the government leaders, even amongs the kindergarten students. They used to give pictures to these children to spit on, to step on, to just curse. We didn't think much of it because we didn't want to disturb schoolchildren or kindergarten children, or even people in universities.

Our belief is that we should leave them alone so that they can study and come back and serve the country. But all along the Islamic party has been sending people, even to England. They come here. They stay with the students, they sleep with the students and then they sow hatred of the government, making all kind of accusations, like this government is not Islamic, that it is anti-Islam - all kinds of things.

As a result, the students have become very much anti-government. Even when we say, 'look, we provided you with the scholarship, with the schools and all that', the opposition Islamic party says, 'any government would have done that. If we had been in the government, we would have done the same.'

These people actually believe that any government would have done the same thing. So the sense of gratefulness is completely eliminated. Instead it is replaced by a sense of hatred, just hatred for no reason....For example, they look at me as a dictator. It doesn't matter that they don't see anything that I do which is wrong, but they look at me as a dictator, that in my cabinet nobody can say anything, that nobody has any freedom to say anything, that I dictate.

And then, of course, comes the Anwar incident and Anwar makes good use of that. He's a very clever operator. So he makes use of that to increase the hatred towards the government. Now we have to counter that.

How do we explain to the people that all these conditions are wrong? We have seen recently that the hatred has built up so much that one group was even willing to try and overthrow the government by force. Of course they have been arrested now. They face normal charges in the courts. But among the followers of the opposition, hatred of the government is the one thing that makes it difficult for us. They will not listen to us at all.

FT: This must be a disappointing after your efforts to maintain racial harmony. Do you think you should leave when the problem is getting worse? Should you stay and sort it out?

MM: I'll try to sort it out before I go. It is amazing that I started by being disliked by the non-Malays and they distrusted me. Now I am finding myself being liked by them, supported by them, but distrusted by my own people, but I think it can be overcome over time. It may not be overcome completely, but as far as I can see there are a lot of very rational people among the indigenous people and they still support the government strongly.

FT : Mahathir's last stand

>From The Financial Times, UK
6th October 2000

Mahathir's last stand
by Peter Montagnon and Richard Lambert

Towards the end of an hour-long conversation, Mahathir Mohamad makes a surprising admission. He is amazed, he says, that when he started out in politics, it was the non-Malays who mistrusted him. Now, it is the other ethnic groups, such as the Chinese, who support him, and he is distrusted by his own people.

It is the mark of a shift in Malaysian politics since the divisive trial of Anwar Ibrahim, Dr Mahathir's former deputy as prime minister. The trial, which finished in August, split the Malay community, unleashing a more strident brand of Islamic politics that enabled PAS, the main Malay opposition party, to make inroads in last year's elections. Since then, Dr Mahathir, who has said he will stand down before the next election in three years time, has been under unusual pressure.

It cannot be comfortable for a Malay politician to depend on ethnic Chinese support. The prime minister certainly seems quieter than usual. Gone are the diatribes against financiers such as George Soros, though he does reveal a long-harboured grudge against James Baker, the former US Treasury secretary, for complaining about his penchant for Malay suits. In place of the invective is a more considered view of the world, but the old prickliness still shows, and he is determined to stand his ground.

Dr Mahathir still believes that speculators did great damage during the Asian crisis. Unlike Thailand, Indonesia and South Korea, Malaysia did not have excessive foreign borrowing, but it was lumped together with these other countries and subject to a relentless speculative onslaught that destroyed much wealth. The rules of the game, are one-sided, he argues. Developing countries such as Malaysia are told to have transparent financial regimes. Yet nobody regulates the speculators, and when they run out of money, like Long Term Capital Management, they are rescued by their cronies.

Malaysia cannot lift its exchange controls or abandon its currency peg until this changes, he says, but the prospects are slim, because people in the west have become comfortable again now the crisis has abated. "The general feeling among countries that can be subjected to attack is that there should be some regulation. But countries that are rich and do not feel they are at risk feel that everything is OK and they are making a lot of money."

One possibility would be reform at a regional level, but, again, Dr Mahathir is sceptical. He welcomes closer collaboration between the 10 countries of the Association of South-East Asian Nations on one side and Japan, China and South Korea on the other. It is reminiscent of his attempt some years ago to forge an East Asian Economic Caucus, to have excluded the US.

Yet he believes the US is putting pressure on some Asian countries not to go too far in collaboration. "We feel we are being watched, and, off and on, somebody suggests that developed countries from other regions should also be part of the whole thing. I do not see why we should always have the presence of other countries when we are talking about matters affecting our own region."

He emphasises that the arrangements under discussion are not as ambitious as some had hoped. "The idea of an Asian Monetary Fund has not really taken off. We are talking about swap arrangements now, but that has not been finalised either. So we get the sense that some people are being forced to drag their feet."

Asean, once the showcase for south east Asian collaboration, has itself has been undermined by Apec, the Asia-Pacific Economic Co-operation forum, which groups most Pacific Rim countries including the US, Canada and several Latin American states. Dr Mahathir was never very keen on Apec, which aims to liberalise regional trade, because he thought it would overshadow Asean. Now Asean does not function as a co-ordinated group within Apec, although he admits that this is also because it has been hit so badly by the economic crisis.

If his views on regional collaboration are bleak, Dr Mahathir is adamant in defending his record at home. He is proud of Malaysia's multimedia corridor - including the latest in film animation studios - and of the country's economic growth record. The economy grew at near double digit rates in the run-up to the crisis and, even this year, is expected to grow at 6 per cent.

He brushes aside concern at the slow pace of corporate restructuring and the weakness of the local stock market, which, he says, has outperformed others in the region. "We are trying to improve corporate governance," he says. "We have looked into the banking system to improve that too. We have done quite a lot. One has to remember that Malaysia had been much better regulated before [the crisis]. We even had our own bankruptcy laws a long time ago whereas other countries have just begun to put that in place."

Corporate restructuring does not extend to breaking up Malaysia's large companies and selling parts off to foreigners. "There are certain things that we clearly have a need to keep for ourselves. Otherwise we would be merely workers for foreign companies." Similarly, he is cautious about the need for key companies to recognise the losses lurking in their balance sheets.

Nor does he see any reason for backing away from the large projects for which Malaysia is famous. Kuala Lumpur's new airport is cheaper and bigger than that of Hong Kong and designed for a long life. The government would eventually make a profit from moving the capital to Putrajaya, outside Kuala Lumpur, because it had put in infrastructure and land values would rise.

Even the Bakun dam, one of the most controversial projects, would eventually go ahead because Malaysia needs power for the long term. By waiting, such projects cost more. "If you spend something that you cannot afford, yes, it is a waste. But we are spending money on things we can afford and we need."

Without efforts to redistribute wealth, the country would have faced racial tension when the economic crisis flared up because of resentment over the concentration of wealth in Chinese hands. But he acknowledges that one disappointment is that ordinary Malays have not exploited the advantages they have been given.

"It's a problem of having to change the culture of the people. To them, money is mere convenience that they carry in their pocket. They don't look at money as capital. You have to change their mindset. I have found that people in communist countries are just like that too."

The shortage of entrepreneurs, he suggests, may be why his efforts to build up a Malay entrepreneurial class have been misconstrued. When the government finds a Malaysian to buy a company, it is accused of selling to a crony, but these are people who have been identified as capable of managing. "That is why they were given a chance. If we just sell to anybody who makes a bid, the chances are that the company will be sold off to the other races and that is not going to serve our purpose."

Another disappointment must be the divisions within the Malay community and between the races, which seem to have become wider after the Anwar trial. Dr Mahathir says that Mr Anwar had cells of supporters in various organisations. He also blames some of the tensions on the PAS, which he claims has been systematically sowing hatred against the government, even in kindergartens.

Now the task is to put his own party, UMNO, back on track. When that is done, he will think about stepping down. But he declines to set a date. "We have to be revamped. We have to have younger people support the party, and after the party has been strengthened, I think I can leave."

Additional reporting by William Dawkins