Intimate Enemies
How Malaysia's Rulers
Devoured Each Other
And Much They Built
Mahathir Saw His Heir As Smart, Headstrong, Then a Direct Threat

'A Brutus in the Party'

By LAN JOHNSON
Staff Reporter of the Wall Street Journal
 
KUALA LUMPUR, Malaysia-As a crimson sunset gave wav to night. Malaysian Prime Minister Mahathir Mohamad prepared for an evening he enjoys each year during the Muslim holiday ot Ramadan-a casual gathering of his family with the family of Anwar Ibrahim, his deputy prime minister and longtime protege.
For nearly three decades, Mr. Anwar has been tethered to Dr. Mahathir as a disciple, supporter, adversary,   wayward pupil and, finally,  headstrong heir. The 72-yeat- old Dr. Mahathir, who has ruled this country of 22 million for 1" years, is aloof and  pinched,  a tough political tactician with few close friends,- his 51-year- old deputy is loquacious and charming, an anabashed globalist well suited to the modern world of markets and media.
As Mr. Anwar's young children slipped off to bed, the two men relaxed with their wives, chatting amiably over tea and cookies, according to someone at the gathering. Amid the smiles, they gently sidestepped what both knew: that each had just set in motion plans to crush the other.
Soon, the two factions slipped into political struggle - a collision that has  -~ since torn apart this dynamo, once one of the brightest performers among Southeast Asia's so called Tiger Economies; Mr. Anwar has been jailed on sensational charges, including sodomy - which is a crime in this Muslim country-and various acts of corruption. Dr. Mahathir, meanwhile, consolidates power amid a crescendo of street protests and international-opprobrium for arresting Mr Anwar and implementing what critics charge are backward-Looking economic policies.
After September arrest, Mr. Anwar goes on trial (text unclear - fax message) . The case will be interrupted later in the month when Asian leaders and President Clinton converge on. Kuala Lumpur for their annual Asian Pacific Economic Council meeting. Many, including Mr. Clinton, say they will attend the summit but - in a show of disappointment - will skip any state functions in the country.
The twists of the two men's 29-year relationship oddly match the bumpy ascent of Malaysia, displaying how the country arrived at this juncture of economic and social unrest and the delicate challenges going forward. After gaining independence from in 1957,  Malaysia was a political and ethnic  battlefield. The indigenous Malay population struggled  against the economic advantages  enjoyed by the ethnic Chinese and Indian minorities. The Chinese, in particular, controlled many of the rubber plantations, tin mines and commerce that produced much of Malaysia's wealth.
In 1969 elections showed surging political strength for the ethnic Chinese. The resulting Malay backlash culminated in two weeks of rioting.
The country's ruling party dominated  by an aristocracy drawn from Malaysia's traditional feudal classes - moved swiftly to stifle debate on race, a move that infuriated a 42-year-old country doctor and party member. Mahathir Mohamad.
Dr. Mahathir clashed with the country’s leaders. saying that a haughty unwillingness to promote Malay interests had made Malays weak, poor, backward - and ripe for demagogues pinning the blame on Chinese. His ideas were rejected by the party as demeaning to Malaysians and their culture, and his party membership  was revoked. Unbowed, Dr. Mahathir wrote a book, The Malay Dilemma," that called for pro-Malay affirmative action to prevent ethnic riots from recurring. It was quickly banned, but became immensely popular, especially among college students.
One of those was another outsider, a young firebrand named Anwar Ibrahirn, who had used his rhetorical and organizational skills to become student leader at the University of Malaya, then Malaysia’s main university. A longtime friend - now wanted by police for allying himself with Mr. Anwar - says Mr. Anwar's dormitory room was filled with copies of '-The Malay Dilemma."
"He liked to hand out the book to friends and organize its sale," the friend  recalls. It was all terribly illegal, but he liked to say that this Mahathir was the only person with a vision of how to run Malaysia.
The two men soon found each other. At that time, students in Malaysia were greatly influential. if Mr. Anwar could make Dr. Mahathir into a student favorite, that would help show Dr. Mahathir's party bosses that he wasn't such a radical-that pro-Malay affirmative action had support among the country's intellectuals.
Mr. Anwar agreed to help Dr. Mahathir. When Dr. Mahathir gave a speech at the university, which had but 2,000 students, hundreds showed up to hear him. Buoyed by that support, Dr. Mahathir was allowed back in the party and asked to serve as education minister, one of the most powerful posts in a country that was swiftly realizing the economic value of education.
Just as that first encounter planted the seeds of cooperation between the two men, it also hinted at future friction. After joining the cabinet, Dr. Mahathir signed off on a law stripping students and teachers of the right to participate in politics. when Mr. Anwar was detained for 22 months without trial in 1974 for organizing political opposition groups, one of the accusations against him was that he had distributed Dr. Mahathir's book, which was still banned. 'Arrest the author, not the distributor," quipped Mr. Anwar to his interrogators.

Cold Comfort
Dr. Mahathir later chided Mr. Anwar for being such a radical. During one meeting, Dr. Mahathir hinted that he knew of Mr. Anwar's other, more pragmatic side: "Anwar, you are so idealistic," Dr. Mahathir said from behind his desk to the group of visiting student leaders, one of them recalled. "Wait until you sit in this seat."
Few could have imagined it possible. If anything, the devout Mr. Anwar seemed poised for leadership in Malaysia's small Islamic opposition Instead of its secular ruling party. But for all of the country's growing economic prowess, it was stunted politically. The ruling party was essentially unopposed. The ambitious Mr. Anwar realized that for him to be more than a vocal outsider, he would have to join. So when Dr. Mahathir became prime minister in 1981 he and Mr. Anwar started secret talks that resulted in Mr. Anwar's switching sides-giving him the chance to make policy and Dr. Mahathir a chance to shore up his support among Muslims.
The switch shocked the two men's friends. "It was an unnatural alliance," says Kadir Jasin, an old acquaintance of Dr. Mahatilir and now editor of the pro government New Straits Times newspaper. "The two men were completely different."
The two men, however, were delighted. Mr. Anwar, with his student-activist credentials, swiftly took control of the ruling party's youth wing, a position that immediately made him one of Dr. Mahathir's five lieutenants. While other party leaders were piqued, Dr. Mahathir was bemused, say his close associates, seeing in Mr. Anwar the sort of ambitious, capable outsider he once was. A series of cabinet positions followed. Mr. Anwar became education minister and, in 1991, finance minister.

Marching, Arm in Arm
By then, Malaysia was no longer a post- colonial backwater. More than 20 years of investment in education and infrastructure had turned it into a manufacturing powerhouse, able to build automobiles in- stead of just rubber tires, and high-tech computers instead of transistor radios.
Major companies such as Intel Corp. had huge investments in the country', and Malaysia became a key global supplier of semiconductors and disk drives. While its rain forests were still dotted with rubber plantations and palm oil was still harvested in the countryside, they had become secondary to an economy rooted to vibrant trade and free flows of capital.
Key to his country's success, Dr. Mahathir felt, was a network of huge Malay-run conglomerates dominated by his confidant, Daim Zainuddin, a former finance minister who had become the nation's most powerful businessman. The companies were laced into coalitions backing various top leaders. Every leader-even Mr. Anwar-had a coterie of big businessmen able to back costly election campaigns. After a victory, they would collect lucrative contracts to build ports, highways and hospitals-or snap up privatized government assets at discounted prices. Dr. Mahathir and Mr. Daim refused through their representatives to be interviewed for this article. Mr. Anwar couldn't be reached for comment.
Even while the country' grew swiftly, Mr. Anwar reached beyond traditional political circles to bulid a particularly broad power base. He surrounded himself with political operatives drawn from the various youth organizations he had run.

Impatient Youth
Together they were a cabinet in waiting, a group of young Malays who expected one day soon to take over from Dr. Mahathir, who had heart surgery' in 1989. Mr. Anwar also bonded with powerful global finance ministers and investors who were key to Malaysia's economic rise.
By 1993, Mr. Anwar decided to test his muscle. That year, Dr. Mahathir had commanded that no party member should challenge any top incumbents, a directive aimed at Mr. Anwar, who was planning to run for the party's vice-presidency. A victory' would also make him deputy prime minister. Mr. Anwar ignored Dr. Mahathir's mandate. Using overwhelmingly positive media coverage and deft lobbying of younger party stalwarts, Mr. Anwar forced the incumbent deputy prime minister to choose between resignation or certain defeat. He resigned, and Mr. Anwar ran unopposed for the job.
Dr. Mahathir, acquaintances say, was shocked. A day after Mr. Anwar took office, Dr. Mahathir delivered a little jab to his new No.2: "No more horseback riding, Anwar," Dr. Mahathir said, ending his practice of going on weekend rides with the younger man. "It would be a security risk for us to be together." Another friend remembers Dr. Mahathir making a more pointed comment in private: "He said something to the effect that we might have a Brutus in the party."
With the two men now straddling Malaysian politics, the difference in their views became more stark. Dr. Mahathir pushed for a grandiose "Vision 2020" that would see Malaysia join the ranks of developed countries by that year, announcing a series of grand projects, such as the world's highest office block, longest building and tallest flagpole. Mr. Anwar scoffed at such ambitions, privately calling them a waste of money and preferring instead to talk of fiscal responsibility and helping the poor. While Dr. Mahathir remained popular for his unabashed "Malay-first" patriotism, Mr. Anwar was maintaining the support of devout Malay Muslims In the countryside but also winning the backing of the urban elite who were slightly embarrassed by Dr, Mahathir's bigger-is-better chauvinism.

Mistakes Were Made
After becoming deputy prime minister in 1993, Mr. Anwar met Dr. Mahathir every' morning for a half-hour briefing-a meet-mg, he boasted openly, that helped the prime minister avoid making more mistakes. The two men started to argue long and loud about policy. Mr. Anwar began correcting his boss behind his back, portraying Dr. Mahathir as a well-meaning but foolish old uncle whose days were numbered. One of Mr. Anwar's political advisers recalls him emerging from a meeting with Dr. Mahathir about plans for the country's 88-story Petronas Towers, shaking his head. "He said the PM was unmovable on the project despite his best efforts," the friend says.
Still, it was widely understood that a clear, certain succession from one capable leader to the next was central to Malaysia's economic attractiveness to foreign investment-and that Mr. Anwar remained the natural heir. As late as May of last year, Dr. Mahathir felt confident enough in Mr. Anwar to go on vacation and leave his deputy in charge for two months.
That unusual break by Dr. Mahathir was a crucial turning point. One problem was- an anticorruption bill that Mr. Anwar had pushed through in Dr. Mahathir's absence, a measure aimed at curbing the power of the big Malay conglomerates that largely backed Dr. Mahathir.
 
 

Vacation Spending
While Dr. Mahathir was away, currency speculators had forced Thailand to devalue its currency. The Malaysian ringgit was one of the next currencies on the traders' hit list, and by the tirne Dr. Mahathir returned, it was down 10%. The stock market began to tumble, cutting into the government-backed mutual funds that guaranteed ethnic Malays a tidy profit each year. Growth began to slow, making it hard for Malaysia's highly leveraged companies to make debt payments. while Mr. Anwar tended to take a laissez-faire view, seeing the downturn as a natural weeding out of inefficient companies, Dr. Mahathir smelled a Western plot to rain Malaysia's economy, stymie his "Vision 2020" and wreck the Malay conglomerates so dear to his heart.
Dr. Mahathir sent a warning to Mr. Anwar to keep his internationalist approach- his respect for global market efficiencies- in check. The prime minister then held a press conference and revealed the existence of a letter alleging that ~. Anwar was a homosexual, frequented female prostitutes and had committed treason.
Mr. Anwar was undeterred. Rather than backing off, he treated the poison-pen letter as a simple case of libel that he pursued In the courts. Instead of coming around to Dr. Mahathir's views on the need to reinflate, not squeeze, the economy, he argued daily with him throughout the autumn of 1997 to drop his criticisms of foreign currency speculators and adopt International Monetary' Fund-style policies of tight spending and high interest rates. That way, he argued, Malaysia's ringgit would strengthen and inefficient companies would be forced out of business.
"They sometimes argued for far longer than the usual 30-minute meeting," says a close policy adviser to Mr. Anwar. "Mahathir understood economics quite well, but Anwar was a tenacious debater, and he had all the facts at his fingertips from the central bank and the Finance Ministry'. It was hard for Mahathir to win these arguments."

Collision Course
Finally, at a cabinet meeting in late November, Dr. Mahathir acquiesced to a "virtual IMF" plan, accepting all the IMF's policies without the national disgrace of having the IMF then approve the plan, a step the fiercely nationalistic Dr. Mahathir couldn't stomach. Immediately, in December, shortly before the start of Ramadan, Mr. Anwar slashed spending 18% and allowed interest rates to rise. Most companies, which had been securing working- capital loans for 8% Interest, soon found themselves paying twice that.
Dr.  Mahathir's  business  backers screamed for relief. At this point, a collision was Inevitable.
The country' "was going into an abyss," says Francis Yeoh, head of the powerful YTL Corp. infrastructure company and a longtime acquaintance of both men. "Much more of that, and we would have shut our doors."
Dr. Mahathir began to examine ways to artfully sever their relationship. Deter- mined not to be outgunned intellectually by Mr. Anwar anymore, he formed the National Economic Advisory' Council, headed by himself and Mr. Anwar-but controlled by Mr. Daim, the former finance minister and Dr. Mahathir's close ally. "If Anwar takes over, Daim's business empire would have been finished," says an Anwar policy adviser. "Daim clearly wasn't going to allow this."
Superficially, Mr. Anwar and Dr. Mahathir continued as before. The daily meetings continued, as did the annual Ramadan visit each January'. "It appeared they were as close as ever," says Mr. An- war 5 wife, Wan Azizah Wan Ismail.
But by then, the new council under Mr. Daim was already establishing itself as an alternative power center to Mr. Anwar's economic ministry', while Mr. Anwar continued to undercut Dr. Mahathir's corporations by blocking one bailout scheme after the other. The two men were on a collision course, each figuring the other would be easy to knock aside.
Mr. Anwar looked for signs of Dr. Mahathir's weakness. At a closed meeting in April of high-level officials of the ruling party, Dr. Mahathir was greeted by delegates with stony silence. Coming on top of the demise that same month in Indonesia of President Suharto, the silence convinced Mr. Anwar that Dr. Mahathir, too, was finished. "He told me [after the meeting] that Mahathir was on the ropes," says a 30-year friend of Mr. Anwar's. "He was wrong."
Mr. Anwar wasn't alone in being wrong; in fact, he was surrounded by bad advice. Few among his group understood the Byzantine world of Malaysia's ruling party. Mr. Anwar's allies offered simple advice: Do in Dr. Mahathir now.

Not So Fast
By early June, Dr. Mahathir had become invisible, except for a cryptic comment picked up in the local papers where- this time publicly-he warned against a Brutus in the party. Meanwhile, Mr. An- war's allies were pounding home their message that cronyism and corruption had to end. Mr. Anwar's friends predicted early victory'. Then, at 11 p.m. on June 15, they were proved wrong.
Sitting at home in the same room where he had entertained Dr. Mahathir during Ramadan six months earlier, Mr. Anwar and a small group of allies pored over a speech to be delivered four days later at the start of the party conference. They weren't sure if the speech would dethrone Dr. Mahathir during the meeting, but were confident that they would at least give him a stiff warning to step back and let Mr. Anwar run things until next year's party election, when Dr. Mahathir was expected to step down gracefully.
But as they fine tuned the speech over glasses of sugary lemon tea, an ally from a publishing house called: Dr. Mahathir, he said, had launched a devastating counter- strike, tacitly authorizing publication of a book based on the poison-pen letter of the previous year. Set out in graphic, if not so well documented, detail were sexual liaisons Mr. Anwar was alleged to have had with a parade of call girls, wives of friends and men. Like Mr. Anwar's speech, the book was meant to be unveiled at the conference later that week, a political blitzkrieg designed to cause shocked delegates to oust Mr. Anwar in a quick, emotional vote.
But now, with both men forewarned, the chance of a neat, inner-party putsch evaporated. The next day, Mr. Anwar secured a court injunction temporarily baring the book's publication. The book still appeared in delegates' greeting bags when they arrived in Kuala Lumpur, but both men appeared to pull their punches. Mr. Anwar dropped the corruption theme, and Dr. Mahathir contented himself with releasing a list of top government officials, Mr. Anwar' included, whose friends or relatives benefited from government contracts.
With Mr. Anwar's prospects dashed for a quick victory', Dr. Mahathir's overwhelming advantage as top leader in an intensely hierarchical culture rapidly became apparent. As the summer raced by, Dr. Mahathir scored one victory' after the other: Mr. Daim was awarded a cabinet position in charge of "special affairs"; editors loyal to Mr. Anwar were forced out of their jobs at government-controlled news- papers; and the head of the central bank, which fell directly under Mr. Anwar's control, was forced to resign.

Nowhere to Hide
In late August, sensing the growing tide against him, Mr. Anwar appealed to Dr. Mahathir directly. "He told us not to worry', a policy adviser to Mr. Anwar said later, "because in the end, the PM wouldn't fire him." Mr. Anwar wrote two private letters to Dr. Mahathir, begging for a modicum of support. "We go back a long way in a common struggle and we trust each other," he wrote in an Aug.25 letter. "We have together faced so many political challenges. You were the one who brought me into active work in [the party], nurturing and guiding me, and opening up for me opportunities for advancement until I have come to occupy my current position. I am not one who would easily forget kindness.. My loyalty is intact."
The letters came too late. On Sept. 1, Dr. Mahathir imposed currency controls and instructed his staff to roll back Mr. Anwar's austerity measures. The next day, Mr. Anwar was asked to resign. He refused and was fired. A day after that, court documents were released that repeated the sexual allegations in the poison-pen letter. The stakes, suddenly, were mortal-not just for Mr. Anwar, but for Malaysia. Returning to his roots as student activist, Mr. Anwar traveled around the country', leading huge rallies In support of "Reformasi." Regardless that for 17 years he had been 'a loyal establishment figure, his call for reform and an end to nepotism resonated broadly throughout the country.
Dr. Mahathir acted swiftly. On Sept.20, after leading as many as 50,000 peaceful protesters  through  downtown  Kuala Lumpur, Mr. Anwar was detained without trial for disturbing public order. later, more than a dozen of his supporters were likewise detained. Soon after, he was. brought to court, his eye blackened, for arraignment on five charges of having "unnatural" sex and on five charges of corruption for blocking police Investigation into the sex charges while he was deputy prime minister. Under Malaysian law, conviction on any count can keep Mr. Anwar barred from political activity for five years.

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