A balance sheet for former prime minister Dr Mahathir Mohamad's era suggests that he has much to answer for. His penchant for expensive prestigious projects is well known. These include the new administrative capital in Putrajaya, with the prime minister's palatial official residence at its centre, the Kuala Lumpur International Airport (KLIA), the F1 race track in Sepang, the Petronas KLCC (Kuala Kumpur City Centre) Twin Towers and Dayabumi, among many others.

He has also been associated with expensive speculative failures, most notably the massive speculation on sterling before its collapse in September 1992. Another well-known failure was the costly attempt to corner the tin market in the early 1980s, which resulted in immediate losses of well over half a billion ringgit and incalculable losses due to the collapse of the tin mining industry.

Corporate losses absorbed by the government over the last two decades have also reached new dimensions. The steel corporation Perwaja is probably the most spectacular failure, with losses exceeding RM10 billion by the mid-1990s. Before its acquisition by the Bank of Commerce, Bank Bumiputra Malaysia had been recapitalised several times at the cost of several billion ringgit. There has yet to be a careful accounting of the losses associated with the privatisation and re-nationalisation exercises since the mid-1980s.

Public assets were sold, at discounts, especially to the politically well-connected, but also to the general public to secure popular support for the policy. When re-nationalised after failing to perform, the beneficiaries were paid well above market prices to at least cover their costs and expenses. In short, profits and profitable assets have been privatised, while losses and liabilities socialised - through "bailouts" at public expense - with the cronies bearing minimal risk.

Self-aggrandisement

Despite this poor track record, it would be unfair to dismiss the Mahathir economic policy regime as an unmitigated failure, not only because there is little convincing evidence that the policies were solely, or even principally, motivated by self-aggrandisement except, perhaps, for some notable exceptions. Many critics, however, would insist that the same cannot be said of his long-time ally, Daim Zainuddin - for whom Mahathir should bear responsibility.

Nonetheless, Mahathir probably has to bear ultimate responsibility for both the flawed and the abused policies of his regime, which he seems incapable of acknowledging and withdrawing. Also, he has to bear responsibility for policies that were abused despite supposedly noble intentions, as many such abuses have long been well known but have remained largely unchecked.

Many would challenge the desirability of his policy to aggrandise a selected few, ostensibly to accelerate the creation of 'captains of industry' and the bumiputera commercial and industrial community. There is little evidence that the government's additional revenue from privatisation has more than compensated the costs of the discounts and other direct and indirect official support to privatisation policy beneficiaries.

Ironically, for someone who has attacked the 'subsidy mentality' among the poor who expected government subsidies and support, Mahathir has not had similar criticisms for cronies and others expecting government intervention on their behalf, e.g., in the wake of the 1997-1998 crisis. In fact, he has publicly defended such 'bailouts' and other public assistance as supposedly being in the national interest and necessary for economic recovery and future development.

Hence, my ambivalence in assessing the Mahathir economic policy legacy. While appreciative of his recognition of the need for investment and technology policy interventions to accelerate Malaysia's economic growth and structural transformation (reflected, for example, by the Industrial Master Plans and other such documents), these efforts have been severely compromised by biased, whimsical, and poorly conceived interventions.

'Jobs for the boys'

Such public actions have generated considerable cynicism about and opposition to industrial policy and other interventions, often believed to be intended to benefit cronies. Similarly, while supportive of his willingness to consider and adopt heterodox counter-cyclical policy measures to induce and sustain economic recovery after the 1997-1998 crisis, one cannot defend the bias in and abuse of many such policies, or the failure to adopt appropriate policies to sustain subsequent development instead of merely creating more 'jobs for the boys' through fiscal deficits.

Sadly for Mahathir, it seems likely that the baby will be thrown out with the bathwater when his economic policy record is subject to critical scrutiny. It also seems likely that the post-Mahathir regime will revert to New Economic Policy-type ethnic preference policies and to neo-liberal economic policies in other regards. The former will be justified as necessary to try to retrieve ethnic Malay political support, but it is probably also reflective of heir apparent Abdullah Ahmad Badawi's preferred political and financial base.

After all, Abdullah takes office with only limited and conditional access to the ruling party's finances, which were reorganised beyond accountability to the entire party leadership after the party crisis in the late 1980s. And insofar as many failures associated with the Mahathir era have been blamed on his public policy interventions, it is quite likely that neo-liberal economic orthodoxy, preferred by financial markets and most academically trained economists, will become much more influential.

However, the circumstances of the transition have been such that it may be quite some time before Abdullah will be able to assert himself in terms of public policy as Mahathir's long shadow forces him to look over his own shoulder.

Tomorrow: Rehman Rashid - Destinies delayed (but not denied)



KS JOMO is a professor in the Faculty of Economics and Administration, University of Malaya. The above article is an excerpt of an article which appears in Reflections: The Mahathir Years (The article is also adapted from the introduction to M Way: Mahathir's Economic Legacy).

Reflections contains a collection of essays of over 40 authors reflecting on the Mahathir era in areas such as domestic politics, foreign and defence policy, the economy, society, public health, the media and the arts. It offers fresh perspectives on the changes during the last 22 years and points to some of the key challenges for the future.

The book will be launched this Saturday (Jan 17) at 4.30pm in Bilik Wawasan, Rumah Universiti, Universiti Malaya.