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Role Models
By Michael Alan Hamlin
August 13, 2001
President Gloria Macapagal-Arroyo says that Malaysian
prime minister Mahathir Mohamad is her role model as a leader. That's
a fearfully frightful admission, about as likely to inspire confidence
in the Philippines as the president's stubborn refusal to rule out
the prospect for instituting currency controls a la Mahathir to
protect the country's beleaguered currency.
Malaysia, in fact, is having its own problems attracting
investors to its cash-starved economy. And ironically, the bulk
of investment is actually reinvestment by existing investors who
decided to stay in the country precisely because the ringgit depreciated
before controls were put in place. That depreciation made reinvestment
an attractive alternative to pulling up stakes and moving to Vietnam
or China. But the country has largely failed to attract new investors
and as a result foreign direct investment (FDI) remains substantially
below pre-crisis levels. Mr. Mahathir's controls have also kept
its stock market in a protracted funk.
Worse, Mr. Mahathir's currency peg has caused Malaysia's
exports to become increasingly uncompetitive as other regional currencies
have continued to depreciate. Mr. Mahathir succeeded in keeping
his currency belatedly stable at the cost of national competitiveness.
Currency controls therefore failed to protect the ringgit, scared
off new investors, and eroded competitiveness. What in that equation
seems attractive to Ms. Arroyo?
What else does Ms. Arroyo see in Mr. Mahathir? Hopefully
it's not his penchant for locking up the opposition using a British-era
act called the Internal Security Act (ISA). Mr. Mahathir's former
protégé Anwar Ibrahim was arrested, thrown into jail,
and beaten under the ISA about the time Mr. Mahathir instituted
currency controls. Opposition politicians have continued to be arrested
under the act, which the Malaysian Human Rights Commission recently
said should be appealed, and other laws on political gatherings
overhauled. One of the most recent arrests under the ISA was of
a schoolteacher who asked students to take part in an elocution
contest on the topic, "Justice is eroding and lacking in the
judicial system in Malaysia." He risks three years in jail,
if convicted.
While Ms. Arroyo doesn't have the clout to start throwing
school teachers in jail, her administration has used warrantless
arrests to deal with its opponents, first following the May 1 siege
of Malacañang Palace, and more recently in Basilan in an
attempt to neutralize supporters of the Abu Sayyaf, the kidnap gang
that styles itself as a band of revolutionaries. And it is using
military intelligence to go after controversial neophyte senator
and prospective 2004 presidential candidate Panfilo "Ping"
Lacson, Jr., accusing him of amassing extraordinary sums from kidnapping
and trafficking in illegal drugs.
It's not hard to understand the temptation to use such
strong-arm tactics, at least in Ms. Arroyo's case. But it's a temptation
that should be avoided. Using them, rather than suggesting strength,
signals investors and observers alike that her unelected administration
lacks the moral authority and operational credibility to deal with
the challenges it faces. So instead of strengthening Ms. Arroyo's
hand, such measures weaken her, as her role model in Malaysia is
finding out.
Mr. Mahathir's government is also known for its aversion
to criticism, legitimate or otherwise. Despite the trend toward
increasing press freedom in Asia, for example, evident in Thailand,
Indonesia, Taiwan, and the Philippines, the Malaysian government
tightly controls media, which must annually renew licenses to publish.
Although Mr. Mahathir has repeatedly promised not to place limitations
on electronic media, signs are emerging that new controls are not
far off.
Ms. Arroyo's government so far hasn't tried to limit
press freedoms, but it has begun to appoint media personalities
to high-paying board seats on government corporations, and her chief
publicist, Dante Ang, has acquired the historic Manila Times and
publishes a wildly profitable, and racy, tabloid. Mr. Ang, apparently
straight-faced, says that the appointments aren't meant to influence
the way the appointees report. But if the appointees were to voluntarily
stop writing and reporting on the administration in the interest
of transparency (which they should), the administration would have
succeeded in silencing some of its critics (if the appointments
themselves don't do the trick). If they don't, there's an unthinkably
obvious conflict of interest.
Although Ms. Arroyo argues that she is a champion of
free markets, her role model is almost single-handedly - so far,
at least - responsible for the flaccid performance of regional governments
under the terms of the Asean Free Trade Agreement, which was meant
to make Asia a unified market. Malaysian protectionism, most notable
in defense of its costly national car program, inhibits the emergence
of competitive enterprises by insulating inefficient companies from
real-world competition.
But they also enable a government to temporarily avoid
reforms and strengthen institutions, which helps perpetuate political
power. Weak institutions contributed mightily to allowing the excesses
that propelled Asia into crisis in 1997. And it is sad commentary
indeed that many of those responsible for those excesses are protégés
of Mr. Mahathir or another once-favored deputy, Daim Zainuddin,
who resigned earlier this year as finance minister. Just prior to
his resignation, Mr. Daim helped politically connected businessman
Tajudin Ramli extract himself from Malaysian Airline System at a
350 percent premium. That premium, of course, was paid by Malaysian
taxpayers. Mr. Mahathir did pressure Daim to resign following this
latest bailout, but only after public outrage provided no other
choice.
Ms. Arroyo's curious statements of admiration for Mr.
Mahathir were probably intended to soften the aging, cranky Malaysian
leader prior to and during her visit to Kuala Lumpur last week.
But casual references by presidents can cause unfortunate reverberations,
as Ms. Arroyo experienced last week when foreign investors fled
the stock market following her refusal to rule out capital controls
to protect the peso. Yes, Filipinos want a strong leader, but one
suited to new times and this country. Not one who intends to emulate
one of Asia's most embarrassing anachronisms.
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(Mr. Hamlin is managing director of the consultancy TeamAsia
and the author of two books on Asian economies and managing in Asia.
His latest book is The New Asian Corporation: Managing for the
Future in Post-Crisis Asia. His e-mail address is mahamlin@teamasia.com.ph.)
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