A Talk with Anwar Ibrahim

The once-jailed economic reformer is readying a political comeback, and thinks Malaysia must wake up to the challenges ahead.

In July, Asia will mark the 10th anniversary of a region-wide financial crisis that started in Thailand. Back then, Anwar Ibrahim served as Malaysian Deputy Prime Minister and Finance Minister and was considered one of the most promising and reform-minded leaders in Asia. A year later, Anwar challenged Malaysia's then-strong man, Prime Minister Mahathir Mohamed, to hasten reform—and was sacked, and then convicted on corruption and sodomy charges. (The sodomy charge was later overturned by Malaysia's Supreme Court.) He spent six years in jail for his efforts.

Since his release two years ago, Anwar has been on the global lecture circuit, but he intends to attempt a political comeback as an opposition leader in Malaysia's next general election, expected in 2009. At the moment, he has an uneasy but civil relationship with current Prime Minister Abdullah Ahmad Badawi. Anwar recently spoke to BusinessWeek's Assif Shameen about the changing economic dynamics in the region, the rise of China and India, and his own political ambitions. Edited excerpts from their conversation follow:

What are the lessons learned from the Asia Financial Crisis?

What went wrong 10 years ago was that our economic fundamentals in the region were very weak. There were huge and rising current account deficits, balance of payment issues, huge foreign debts, low level of foreign reserves.

Financial institutions in Asia were weak and not properly regulated. Banks were lending money to cronies of the owners or cronies of those in power, or making all sorts of government-directed policy loans. There was no risk management or assessment whether borrowers had the ability to pay. So the symptoms were all there. The crisis was waiting to happen. It was a question of when, not if.

Then the blame game started: It was all because of the speculators, or foreign agents, conspirators, or the Jews. In Malaysia, Dr. Mahathir blamed [billionaire hedge-fund manager] George Soros. Now he embraces Soros, says he wasn't to blame for the crisis. So who was to blame? The government leaders who built the corrupt system or perpetuated it basically were.

What's the situation now?

A lot has changed in Asia since the crisis. In some of the [crisis-hit] countries, the system has been overhauled, new processes have been put in place, regulations have been tightened. But for the most part—and I'm including Malaysia—not much has changed, and it's still business as usual. Have we learnt anything? I don't think so. There's still nepotism, corruption, shady backroom deals with cronies who are amassing wealth.

Are Southeast Asia and Malaysia losing critical foreign investment to China and India?

Singapore is still attracting foreign investments, and it's even smaller than Malaysia. The real reason we aren't attracting foreign investments is the lack of transparency, openness, corporate governance, [as well as the] inefficiencies and rampant corruption. Sure, there are investors who want to go to China and India because of their market size, but there are others who are still setting up in Singapore or Vietnam.

Really, whatever investments we're getting in Malaysia are because Southeast Asia is still viewed generally very positively by investors from Europe, North America, and Japan. The key is new investments in new areas that will allow us to move up the value chain. Unfortunately, we aren't getting those. What we need to do is to look at our policies and ask ourselves: What can we do better to make ourselves a better investment destination?

You have called for an end to Malaysia's affirmative-action policies. Isn't that political suicide in a country like yours?

I'm not against helping the poor, the marginalized, or the disadvantaged. But what we need to see is if 37 years later, the policy today is really helping the Malays (bumiputras) or indigenous ethinc groups or has become a license to rob most of the people in the name of affirmative action.

Source: BusinessWeek