Tun Dato’ Seri Dr Mahathir bin Mohamad was the fourth Prime Minister of Malaysia serving for 22 years, from 1981 to 2003, a record stretch. He was known for his fiercely nationalistic stance when pursuing his dream of placing Malaysia at the forefront of progressive economic development on a par with Western countries and with its own Asian neighbors.
During his watch, Mahathir tried to transform his country into a modern industrialized nation, which, for a long time, just depended on its palm-oil and rubber plantations and mining activities as major economic resources. So he built highways and power projects, and encouraged the establishment of electronics and telecommunications companies and also car manufacturing (remember Proton, which was introduced in the Philippines?). Malaysia was recording 8-percent to 10-percent GDP-growth rate in his time, the five years before the 1997 Asian financial crisis, and everything looked very promising.
Mark L. Clifford and Pete Engardio, both of Newsweek, have this revealing comment in their book, Meltdown (Prentice Hall Inc. 2000, P.61): “Mahathir’s greatest passion was infrastructure…. In the twilight of his political career, Mahathir wanted epic public works that would be remembered for generations. In August 1995 he broke ground on a new $8-billion city, Putrajaya, that by 2005 would serve as the nation’s new capital and home to 250,000 people. More controversial was his plan for a $5.5-billion hydroelectric dam in the heart of Borneo that would transmit electricity across the South China Sea through a 400-mile underwater power cable. Besides the engineering obstacles, the project would require the destruction of thousands of acres of primeval rainforest.… Malaysia also set to work on Mahathir’s ultimate dream project, the Multimedia Super Corridor. The plan was to invest $20 billion in facilities and state-of-the-art telecoms to build Asia’s equivalent of California’s Silicon Valley.”
These authors were writing in August 1999, and we note their slightly derisive skepticism. But today, Putrajaya is a reality, 25 kilometers south from Kuala Lumpur, a modern city of government, commercial, residential and religious structures, part of the Multimedia Super Corridor conceived in Dr. Mahathir’s time. “World’s Best Garden City”, they label it.
It is indeed a propitious time for Mahathir to come visit the Philippines when the Duterte administration has declared its own dream of a golden age of infrastructure—“Build, Build, Build”. Yes, the former Malaysian Prime Minister will be the special guest and keynote Speaker of the Financial Executives Institute of the Philippines (Finex) during its weeklong celebration this October 2017. At the ripe age of 91, he is still spunky and continues to stay in the mainstream of Malaysia’s political affairs. He has publicly launched an attack against the current Prime Minister Najib Razak who has been embroiled in widely publicized corruption charges. Mahathir, in fact, is reported to be ready to challenge the incumbent Prime Minister in elections expected next year, if no one is willing.
It was Mahathir who, during the start of the July 1997 Asian Financial Crisis, lashed out against rogue speculators, pointing out George Soros, the global financial player, as the culprit who led the speculative attack on the Malaysian ringgit. (Soros responded by calling Mahathir a menace to his own country.) We might indeed recall that the Malaysian ringgit was trading at 2.4 to 2.5 to the US dollar before the crisis. In July 1997 the Malaysian ringgit dived to a 38-month low of 2.653 to a US dollar, hitting 3.40 in October and even 4.88 to a US dollar in January 1998. So upset was Dr. Mahathir at the state of the East Asian currency that he called out to make forex trading illegal during an International Monetary Fund (IMF) Conference in Hong Kong in September 1997.
The IMF played a prominent role in the Asian region’s response to the financial crisis by offering rescue packages to Thailand, Indonesia, South Korea and the Philippines. The IMF conditions were strict, including particularly the tightening of credit and the reduction of government budgets. Malaysia rejected the IMF formula, arguing that increasing interest rates, restricting credit and cutting down on public spending would be counterproductive to the recovery of the economy. Instead, Malaysia went on its own separate tack, imposing capital controls in September 1998. Bank Negara Malaysia initially intervened in the foreign-exchange market like the other central banks did, raising interest rates, but this did not stop the ringgit’s deterioration and, in fact, precipitated an economic slowdown. The capital-control measures banned offshore-market trading of the ringgit, aimed at forcing offshore-ringgit deposits back to Malaysia, thereby depriving currency speculators the opportunity of speculative currency transactions. The Malaysian ringgit was pegged at 3.8 to the US dollar on September 1, 1998, to establish foreign-exchange stability.
It’s a long, interesting story, but Mahathir was proven correct in his decision, rather, in his series of decisions. The capital controls were gradually lifted and, in July 2005, the ringgit was unpegged in favor of a managed-float system. (The ringgit is now trading at about 4.2 to the US dollar.)
Ahead of the Asian Financial Crisis, I personally heard Mahathir castigate the Western credit-rating agencies during one K.L. conference, even as he was seeking out Moody’s representative in the audience. He could be extra forthright in his words, and age does not seem to have mellowed him down.
So we expect a good dose of peppery advice and wisdom from our Finex guest who, in fact, is a medical doctor and, therefore, is welcome to give us prescriptions.