[ Laman Ehwal Semasa ReformIS ]
Date: 06 Aug 1999
Time: 01:18:17
Remote User: -
Why does Mahathir fear IMF?
By Kim Quek
Then why should Mahathir have feared and abhorred the possible presence of IMF in our financial and economic recovery process? The answer is Mahathir was deadly worried that his crony business empire would not have survived under an IMF rescue program. It is well known that the businesses of the relatives and cronies of the Mahathir-Daim clique have grown by leaps and bounds in an atmosphere of rampant crony capitalism under Mahathir's reign. The over-rapid expansion of these businesses, achieved mainly through Government fed contracts and politically engineered loans, had not been supported by commensurate entrepreneurship and management skills.
In a speech to 2,000 Government employees in Terengganu on July 29, 1999, prime minister Mahathir Mohamad instilled fear into the Malay audience of the frightening prospect of "loosing Malay rights" should UMNO loose power in the coming General Elections.
He claimed that he had rescued the Malays from this tragic fate by keeping IMF at bay, who otherwise would have scrapped the New Economic Policy, thus stripping Malays of their present status in society. This would have resulted in top Malay civil servants and Malay university professors loosing their jobs, Malay university students loosing their scholarships, Malay businessmen loosing their businesses, etc.
Mahathir's claims are serious issues that must be sorted out on this election eve. Was Mahathir speaking the truth or was he merely spreading false propaganda? The answer to this may swing many Malay votes to or from the Barisan Nasional.
Would IMF have scrapped the New Economic Policy (NEP), if it had come to Malaysia with its financial aids?
The answer is no. This is because Malay rights are enshrined in our Constitution. IMF would not have been so stupid as to force Malaysia to violate its own Constitution. There has been no precedent of such IMF interference in any country under the IMF rescue package, other than introducing bankruptcy legislation to improve investment climate.
Besides, there is no necessity to scrap the NEP, as the economic ills of the Country lies not in the NEP, but in the abuses of the NEP.
That NEP is not the main cause of our financial crisis is rendered support by the fact that our neighbours who practise no NEP are also found to suffer similar crisis. As the prime minister of Malaysia, Mahathir must be well aware of this fact.
Then why should Mahathir have feared and abhorred the possible presence of IMF in our financial and economic recovery process?
The answer is Mahathir was deadly worried that his crony business empire would not have survived under an IMF rescue program. It is well known that the businesses of the relatives and cronies of the Mahathir-Daim clique have grown by leaps and bounds in an atmosphere of rampant crony capitalism under Mahathir's reign. The over-rapid expansion of these businesses, achieved mainly through Government fed contracts and politically engineered loans, had not been supported by commensurate entrepreneurship and management skills. As a result, they might be big in size, but are structurally weak. They might have appeared to do well in an environment of fast economic expansion accompanied by spiraling asset values such as in a bubble economy, but they could not withstand the crunch of an economic reversal. This is exactly what happened in the present crisis. Many crony enterprises had suffered heavy losses and had become insolvent.
Mahathir knew that IMF would not have agreed to bail out grossly mismanaged and insolvent corporations, many of which are in the Mahathir-Daim camp.
What would IMF have done had it come into the Malaysian picture?
Before we go into details of this answer, we must recognise one fact: that IMF's rescue operations in Asia are controversial and represent mixed blessings to the recipient countries.
On the one hand it had prevented financial collapse and helped to restructure to the point of sustained economic recovery for these countries. On the other hand it has brought pains and sufferings, some of which are inevitable and necessary, but others are due to IMF's mistakes.
Due to lack of understanding of the local socio-economic conditions of the individual countries, IMF failed to exercise enough flexibility in its reform programs. This resulted in unnecessary sufferings, particularly in Indonesia, where drastic cut back in fuel and food subsidies caused so much hardship to the poor masses that it served as a catalyst to a political revolt that toppled Suharto.
Mistakes aside, IMF programmes are, by and large, based on sound economic principles. This is evident from the recovery process in South Korea and Thailand, where there has been genuine reforms, which are now paving the way for sustained growth.
As for Malaysia, we anticipate IMF would have imposed the following conditions among others, had it come to its financial aid then:
a. Stop the construction of major projects of dubious economic justification.
b. Insist on transparency and open and fair competition in the award of Government contracts including privatisation projects.
c. Stop political interference in the lending policy and activities of financial institutions. Step up the supervision and implementation of banking rules and regulations.
d. Remove over-protective tariff and non-tariff barriers to trade.
e. Dismantle grossly mismanaged and insolvent conglomerates.
The introduction of the above measures would have dealt with the root causes of the decay of Malaysia's financial and economic system, which can be traced to the widespread corruption and cronyism that is being practiced in the country.
If Malaysia had carried out the above reforms, with or without the IMF, we would have restructured our economy and laid a strong foundation for future growth. Under this restructured system, we would have seen the release of genuine entrepreneur energies, which had hitherto been locked up by the prevailing cronyistic system. Under the present system of monopoly of economic opportunity to only those who are favoured by the ruling clique, talents and enterprising spirits are stifled, bumiputra or non-bumiputra alike.
Much to the misfortune of Malaysia, Mahathir has carried out none of the above reforms. He has steadfastly denied any self-weakness and attributed all our miseries to "foreign conspirators". On this election eve, he has even used this foreign bogey to frighten voters into casting votes in his favour.
To enlightened observers, his lies and propaganda may appear laughable. However, to the vast majority of Malaysians, who are subjected to his daily dosage of repeated lies through the mass media, his voice may ring a bell of truth.
The greatest challenge to the Alternative front today is: How to carry the message of truth to the people with Mahathir monopolising the mass media?