Former prime minister Dr Mahathir Mohamad brought in capital controls to shield his cronies from the 1997 Asian financial crisis, argued his ex-deputy Anwar Ibrahim.

In an e-mail interview with malaysiakini, Anwar who was also the finance minister before he was sacked by Mahathir in 1998, said that the differences between them were not so much their disagreement over the implementation of International Monetary Fund-type policies but the bailing out certain cronies.

"I think this is a major misconception that needs to be cleared up. The argument was not pro- or anti-IMF. It was about the reasons behind the facade of the currency restrictions and the closing of the Malaysian economy," he said.

"I could not and would not agree to the facade being used to refinance, bail out and further entrench a narrow circle of cronies to the detriment of the economy as a whole and the welfare of the most vulnerable in our society."

He argued that the accusation he had endorsed the measures proposed by IMF was a "smokescreen" to divert the public from the real issues.

Mahathir brought in capital controls policy, which pegs the ringgit at RM3.80 to US$1, on Sept 1, 1998, a day before he sacked Anwar from government.

The controls threw a lifeline to those companies which had borrowed heavily in US dollars by arresting the free-fall in the value of the ringgit.

Since the shock sacking of Anwar, the former finance czar had been severely criticised for seeking to implement IMF-type policies, which involved a fundamental restructuring of the economy and opening it to greater foreign investment and competition.

Austerity package

In the wake of the 1997 financial crisis, Anwar had instituted an austerity package by slashing government spending and deferring major mega-projects.

However, his detractors argued that such IMF policies could make worse an economy which was already reeling from the Asian financial crisis.

Anwar argued that his policies would correct the 'deformities' in our economy.

"We did not need the IMF to weather the storm of the Asian economic crisis. We needed creative destruction of the flaws we had built into the working of the Malaysian economy from which we continue to suffer.

"The creative destruction was not an endorsement of the wrongheaded 'one size fits all' strictures of the IMF prescription but of the corrupt, counter productive and unproductive defects that I believed then and now, deform the enterprise and prospects of the Malaysian economy for the vast majority of the Malaysian people."

While Anwar conceded that capital controls have helped stabilise the economy but they have long-term consequences.

"I acknowledge the strategic short-term benefits the policy (capital controls) has brought - but how have they been used? They were used to create a black hole in the heart of the Malaysia economy that we will be paying for and suffering from, for years to come. We have entrenched an economy that is good for the few not the many," said Anwar.

"I believed then and I believe now that the motives and action taken behind the facade were wrong and for the long-term health and growth prospects of the Malaysian economy."

He warned that Malaysians would suffer in the coming years if we do not implement the necessary reforms as our economy is "neither as prosperous nor competitive as we could and should be".

'Lone ranger'

Speaking on his failure to create significant reforms during his 16-year stint in the government, Anwar said as a "lone ranger" it was not easy to bring about change from within.

"I believe I have spent the last six years demonstrating the limits of what can be achieved by fighting from within the system. We have all seen how much naked power exists and how ruthless it can be."

He admitted to regrets but said he has had enough time to ponder on these to also acknowledge that there have been achievements of which he is proud.

As for his immediate plans upon his return from Munich next month Anwar said he is mulling all options.

However, he declined to comment on speculation that he would be heading the opposition parties - Parti Keadilan Rakyat (PKR), PAS and DAP - under one front.

"It is for the members of the opposition to choose their leader. It is not and cannot be my choice, where's the open democracy in that? Furthermore, each party already had leaders."

He expressed his confidence in his wife Dr Wan Azizah Wan Ismail's leadership of PKR.

"I must pay tribute to Wan Azizah for the work she had done in forming and leading Keadilan (now PKR). It was not a party formed about and for the purpose of one person, to be summoned and directed at the beck and call of one person - it was precisely to get away from such practices that it came unto being. It will not, I hope and sincerely believe, change course now."

Anwar also dismissed rumours that he had received special treatment as an inmate at the Sungai Buloh prison.

"I suggest you question the prison guards to establish the truth of these matters. I can honestly say I did not feel privileged to be an inmate of Sungai Buloh, though I was humbled and honoured by the human decency shown to me by inmates and prison guards alike," he said.

"I would not recommend the experience of being assaulted in solitary confinement and under 24-hour surveillance to anyone, however."


Note: Read full text of Q&A here