Anwar and Malaysia’s Unfortunate Downturn

When has any potential success story fallen as far and as fast in recent years as Malaysia? Sure, Iceland’s economy has collapsed, after its banks made such risky loans they made American financial institutions look like paragons of virtue – but Iceland was a wealthy, developed nation before the crisis, and it will remain one afterwards. Greece faces a massive debt morass, but it was never viewed as some example of economic success – it has always struggled to match its more prosperous European neighbors. Thailand? Argentina? Mexico?

What about Malaysia? Unlike, say, Greece, Malaysia in the 1990s and early 2000s seemed like a real, model success story. A moderate Muslim nation with a sizable non-Muslim minority, it had created, if not some idyll of harmony, at least a place without the inter-religious violence of Egypt or Pakistan or India. Though its autocratic leader, Mahathir Mohamada, was criticized for his tolerance of graft and authoritarian political leanings, the country had built an impressive economic story, luring high-tech investment from companies like Intel while maintaining a strong foundation of natural resources exports. Malaysia had lapped former regional competitors like Thailand and the Philippines and seemed on the verge of entering the club of developed nations. It was building a high-tech corridor south of Kuala Lumpur designed to be Malaysia’s version of Silicon Valley.

This month, Malaysian opposition leader Anwar Ibrahim goes on trial on a charge of sodomy, which is illegal in the country. It’s a case so full of holes it’s embarrassing, seemingly trumped up by the ruling party to sideline Anwar – and it highlights Malaysia’s downfall from the 1990s. Unlike South Korea or Taiwan or even Thailand, Malaysia’s ruling party never made the critical leap, in its mind, to allowing a loyal opposition and, eventually, create a real democracy.

The political stasis is alienating young Malaysians, and the country suffers a massive outflow of its most talented future stars. In fact, I’ve never been to a relatively wealthy country where so many talented people were anxious to leave, even to go to neighboring Singapore, Malaysia’s longtime rival. And, absent real political change, the model of religious tolerance is starting to break down, too, since the ruling party now resorts to Malay Muslim chauvinism to keep voters; a recent spate of attacks on churches in Malaysia seems more out of the worst parts of India rather than the Malaysia of years past. More and more young Malays, too, go to university to get degrees in Islamic studies, which don’t help them in the modern workforce.

Even giant neighbor Indonesia, which has for years sent cheap guest workers to wealthy Malaysia, now looks better by comparison. Not only has Indonesia built a truly vibrant and inclusive democracy – its economy has continued to thrive through the global financial crisis. Malaysia, meanwhile, has gotten stuck. Losing talented workers, and without the open environment or the large domestic market that attracts technology innovation, it increasingly has lost out not only to China but also to regional neighbors. Inward investment cannot match the outflow of capital from Malaysia, and if the inter-religious environment becomes even more toxic, Chinese and Indian Malaysians, who control many of the most innovative firms, will pour even more of their money out of the country.

Anwar went on trial once before, in the late 1990s, for essentially the same trumped-up charge. He was found guilty, in a highly questionable case, and went to jail. At that time, some Malaysians hoped that, despite the farce of his trial, the country would move on and, eventually, achieve the type of political and economic stability that would make Anwar’s cases look like a bad memory. It hasn’t happened.