The
reasons for Mahathir's actions most likely are rooted in his
reactions to the Asian economic crisis. He implemented policies
that contradicted not only Anwar's strong policies as Finance
Minister, but also the spirit of reforms recommended by the Asia
Pacific Economic Cooperation (APEC) forum. APEC's leaders have
committed to creating a free trade area by 2020, and progress
toward this goal is critical if Asia's economic decline is to be
reversed.
President Bill Clinton is scheduled to
attend the upcoming APEC summit in Malaysia on November 17. The
President and his administration should send a strong message to
Mahathir regarding both his political treatment of Anwar and his
economic policies that violate free-market ideals. They should seek
a change in venue for the summit and publicly speak out on Anwar's
situation.
APEC'S MALAYSIAN DISTRACTION
Prime Minister Mahathir is ill-suited to
host the upcoming APEC summit. He has long criticized free trade
and Western values, and his treatment of Anwar Ibrahim, who had
earned respect throughout Asia and in the United States for his
efforts, has upset many APEC members. In addition, Mahathir's
responses to the Asian economic crisis--which may cause Malaysia's
economy to contract by 5 percent this year--go against APEC's
goals.
When
the crisis began in Thailand last year, investors saw that Malaysia
suffered from many of the same policy woes that beset Thailand.
Sensing weakness, currency traders sold Malaysian ringgits, causing
the currency to plummet in value. At first, Mahathir blamed
currency traders like George Soros for the economic recession.
Anwar opposed the protectionist policies Mahathir wanted to put in
place, and was able to restore some economic confidence in
Malaysia. But his insistence on painful economic reforms to shore
up the weak financial sector threatened business interests that
were politically important to Mahathir. Just before firing Anwar as
Deputy Prime Minister in early September, Mahathir imposed
restrictions that prohibited trading the ringgit outside of
Malaysia. This had the effect of increasing the currency's value
without undertaking the more difficult reforms that would increase
financial-sector transparency.
After firing Anwar, Mahathir had him
arrested on what appear to be trumped-up charges of sexual
misconduct, which is a crime in predominantly Muslim Malaysia.
Unprecedented street demonstrations after the arrest were quickly
suppressed. Anwar's trial, scheduled to end just two days before
the beginning of the APEC meeting, will be a distraction for the
summit's participants if it is held in Malaysia.
APEC, MAHATHIR, AND THE ASIAN ECONOMIC
CRISIS
Mahathir's arrest of Anwar is part of a
larger Asian backlash against the kind of free-market policies
needed to resolve the Asian economic crisis. In 1994, the APEC
forum of 21 countries, which began in 1989 as an informal gathering
of Pacific Rim economic leaders, committed to the goal of creating
a Pacific-wide free trade and investment area by 2010 for developed
countries, and admitting less developed countries by 2020. Last
year, its leaders agreed to accelerate trade liberalization in 15
sectors. However, some countries, like Japan, are now balking at
committing to trade liberalization in all 15 sectors.
In
fact, an anti-reform trend highlighted by government intervention
and protection of collusive economic relationships is gaining
momentum, and Malaysia, counter to APEC goals, is helping to lead
this trend by imposing currency controls designed to avoid needed
reforms. Mahathir's role in promoting this trend does not set the
stage for a successful APEC summit in Malaysia.
U.S. LEADERSHIP FOR APEC
Beset by domestic distractions, the
Clinton Administration has not adequately protested the treatment
of Anwar Ibrahim or responded to Mahathir's challenge to America's
leadership role in APEC. In the midst of the most serious Asian
economic crisis since World War II, the United States and APEC
cannot afford to let their interests in Asia be threatened by
Mahathir's protectionist policies. The Asian crisis has contributed
to a decline in U.S. aircraft and agriculture exports to Asia, and
it could decrease U.S. economic growth next year by a full
percentage point.
American leadership is needed at the APEC
forum. To reassert its leadership role, the Clinton Administration
should:
- Seek to change the location of the APEC
summit. So far, the Administration has not supported this option.
The presidents of the Philippines and Indonesia reportedly
considered boycotting the summit to protest Mahathir's treatment of
Anwar. Changing the summit's venue would send a firm message to
Mahathir about his actions and allow Washington and APEC to focus
on advancing APEC's goals, such as lowering trade barriers.
- Make clear that the President will speak out
strongly at the summit against Mahathir's treatment of Anwar and
Malaysia's anti-market actions.
CONCLUSION
When
President Clinton attends the APEC summit in November, he should
not ignore either the brutal treatment of former Deputy Prime
Minister Anwar Ibrahim or Prime Minister Mahathir's challenges to
APEC goals and the U.S. leadership role. To emphasize U.S. concerns
and increase pressure on Mahathir to rethink his policies, the
President should seek a new location for the summit. APEC's success
in decreasing barriers to trade is important to reviving Asia's
moribund economies and preventing the crisis from spreading even
further. A Malaysian distraction during the summit would be both
unfortunate and counterproductive.