Malaysian politics after 1997

Romée writes*

In 1997, the Asian financial crisis crippled most East Asian economies. The Malaysian ringgit lost about a third of its value, and GDP shrank by about 8%. The economic damage from the crisis is clear. However, poor crisis management or internal conflicts can also have severe political consequences for the ruling elite. This blogpost will delve into the Malaysian Reformasi movement in 1998, as a consequence of the Asian financial crisis.

The first question that should be answered is how the Malaysian government responded to the crisis. Prime Minister Mahathir refused “overly stringent” IMF assistance and implemented fixed exchange rates and capital controls (Lee 2004). The crisis also showed how political patronage and wealth creation among the elite would not help the middle class, especially because Barison Nasional (BN), the ruling coalition, seemed more focused on supporting the economic elite (Subramaniam 2001). Thus, the crisis exposed actual priorities and weaknesses in the ruling coalition.

The response to the crisis became particularly problematic when there were obvious internal disagreements. In the middle of creating responses to the financial crisis, Deputy Prime Minister Anwar Ibrahim wanted to limit social spending and open the economy up for market forces (Lee 2004). These goals, in line with IMF recommendations, directly conflicted with government policy. But besides questioning the specific policy responses, Anwar pushed the government where they were weakest: corruption, cronyism and nepotism (Subramaniam 2001). The response was the Reformasi movement, explicitly supported by Anwar. He was fired and charged with sexual misconduct in an attempt to destroy his character (Subramaniam 2001). The Reformasi movement did not stop, and Anwar’s imprisonment reminded citizens of entrenched corruption.

However, this movement was faced with a big challenge: BN governed with a race-based strategy, meaning that indigenous Malaysian people (Bumiputra) consistently benefitted from this New Economic Policy (NEP). The Reformasi movement and associated political parties challenged this with multiracial political discourse. However, for a majority of the people, the BN provided them with significant economic benefits, which made corruption an insufficient concern to change votes (Subramaniam 2001).

The Reformasi movement translated into other social movements and political parties. In 2018, an opposition coalition won the general election for the first time in Malaysian history. Even though this was seen as a victory and proof of the persistence of the Reformasi movement, Mahathir returned as Prime Minister. The movement has in this sense not lost its platform, but rather co-opted its initial opponent. Mahathir had split-off from his party, because he no longer wanted to be part of a corrupt party. So he joined the coalition of the People’s Justice Party, which was a product of the Reformasi movement (BBC 2018). Regardless of who was the Prime Minister, the fact that this opposition coalition was able to enter government shows the size of platform they have gathered.

Bottom line: The 1997 Asian financial crisis created an influential opposition movement in Malaysia, through poor crisis management and internal disagreements on patronage. This led to a protest movement, and subsequent political parties that oppose corruption and choose a multiracial approach.

* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).