The government's decision to dismantle capital control on funds flowing in the Kuala Lumpur Stock Exchange (KLSE) was a bit of an irony. Anyone watching the TV advertisement sponsored by Country Heights before the 1999 general elections would recall how the 'Malaysian formula' was portrayed as having saved the country.

Capital control was a key element of this formula and seeing it dismantled just as the country is expecting another economic slowdown is amusing. If the so-called 'Malaysian formula' was indeed successful why is it dismantled now? If it worked in 1998 why is it not expected to work to help Malaysia face another slowdown?

The decision to abandon capital control at this point in time is analogous to soldiers throwing away their weapons just before a battle because of their lack of faith in its effectiveness. The truth is the so-called 'Malaysian formula' never was a formula in the first place.

Instead, the response of the government when the crisis began in 1997 showed that it was at best itself unsure, at worst simply erratic in its responses. Some of the measures taken were in fact contradictory.

Many of us can still recall how towards the end of 1997 our prime minister was basically promising that the crisis would be over soon.

Repeated assurances

During his Hari Raya speech in early 1998, he again reassured Malaysians that the crisis would be over soon; this time even volunteering the time period of three months.

Three months later, he was still assuring Malaysians that the crisis would be over in three months time.

The so-called 'Malaysian formula' advocated by Dr Mahathir Mohamad around the end of 1997 was to have the EPF dump its money into the KLSE to prop up the market's Composite Index (KLCI).

By early 1998, the PM was advocating that Asian countries pay for their trade in their respective national currencies. The rationale behind this idea was that this would help reduce our dependency on the US dollar.

Other countries never took this 'Malaysian formula' seriously because everyone was nervous of the fluctuations in the region's currencies. In September 1998, Mahathir took the opposite position by imposing capital control and pegging the ringgit to the US dollar.

By then, all talk of reducing dependency on the US dollar disappeared. In fact, the ringgit was now riding piggyback on the dollar. The value of the ringgit in relation to other currencies was now dependent on decisions made by the US Federal Reserve. So much for new colonialism!

Looking at all of these events, one cannot avoid but wonder whether the claim that the Barisan Nasional regime is a proven government and is necessary for the prosperity of the country is beginning to sound hollow.

Scary policies

Its erratic economic policies have scared away investors, as evidenced by the drop in foreign direct investment (FDI) coming into this country. An international survey of multinational corporations (MNCs) found that Malaysia is one of two Asian countries considered to be less attractive for investors in the next five years.

The government talks about making Malaysia a knowledge economy and yet the allocation for education in the Eighth Malaysia Plan (8MP) has been reduced. It builds fancy townships in Putrajaya and Cyberjaya but the facilities at public universities are in a sorry state.

In 1999, the Education Ministry instructed public universities to reduce the number of credit hours required so that students can graduate in three years. This year they've instructed that this decision, at least for professional degrees, be reversed so that it'll now take four years to graduate.

It is becoming more evident that the claim that Malaysia is governed by an able government really is a myth. Instead, it simply shows that this is a confused government unsure of itself. This can be seen in some of the steps taken to face the expected slowdown.

The government initially decided to reduce employee contribution to the Employees Provident Fund (EPF) to nine percent and then retracted the decision by making it optional.

Screw-up

Would you trust your future in the hands of such a bumbling regime? In fact, one can argue this regime is a liability to this country's future. By this, I'm talking about it being a liability to our children.

In the end, the so-called 'Malaysian formula', whatever it was in the first place, is really a massive blunder. One wonders what Country Heights will do if it was to come up with another advertisement of the 'Malaysian formula'.

Perhaps it will show a tombstone with the words "Herein lies all the junk we once called the Malaysian formula. July 1997-May 2001 ".

Dr Abu Munzir is an academician at a local university. His doctorate is in business management.