MALAYSIA: A NEW ACTIVIST LEADERSHIP

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP04T00367R000301740001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: April 1, 2010
• Sequence Number: 1
• Publication Date: August 27, 1984
• Content Type: REPORT

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Central Intelligence Agency
DI RECTO} 'i' "?45P050tNTELLIGENCE
27 August 1984
Malaysia: A New Activist Leadership
Summary
The triennial election for the leadership of
the United Malays National Organization (UMNO) ended
28 May 'with a resounding victory for Prime Minister
Mahathir Mohamad. Almost without exception, those
who had been critical of the Prime Minister over the
past year lost their positions, including six
cabinet members, two state chief ministers, and
three deputy ministers. Mahathir's new government,
we believe, will strongly support his activist
leadership, an approach that will continue to
emphasize ties with other East Asian nations. While
this policy is likely to produce occasional
frictions with the US, we expect Malaysia to
continue to look to Washington to counterbalanc
Soviet and Chinese influence in Southeast Asia counterbalanc
opposing his proposal to limit the powers of the king.
guard" last fall tried to challenge Mahathir's leadership by
From Rough Seas to Smooth Sailing
Only six months before the election, Mahathir was under
strong criticism from the traditional wing of the party. Already
unhappy with Mahathir's blunt, outspoken style, his departure
from the traditional Malay practice of consensus rule, and his
support of young, well-educated party members, the party's "old
This memorandum was prepared by
Southeast Asia Division, Office of East Asian
directed to Chief, Southeast Asia Division, OEA
its preparation. Comments and queries are welcome and may be
Analysis. Information available as of 27 August 1984 was used in
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Under the constitution, Malaysia's king--chosen every five
years from the country's nine sultans--is granted authority to:
-- Veto parliamentary-legislation.
-- Declare an emergency without consulting the Prime
Minister.
-- Refuse to dissolve Parliament even if the Prime Minister
recommends i t .
-- Appoint a prime minister of his own choosing.
Mahathir's amendment would have ended the need for royal assent
on legislation and required the king to obtain cabinet consent
before declaring an emergency. The sultans advised the king to
oppose the amendment, and the old guard took the side of the
sultans. After four months of controversy, Mahathir was forced
to compromise. In return for a modified amendment that allowed
for a two-thirds vote of Parliament to override a royal veto on,a
bill, Mahathir dropped the other provisions.
The constitutional controversy more sharply divided the
party into "old versus new" factions.* The old guard renewed its
complaints that Mahathir was not looking out for the interests of
ethnic Malays (bumiputras). Austerity measures he instituted to
curb the budget deficit and the rapid growth of the foreign debt,
for example, slowed progress under the New Economic Policy
(NEP)--a program aimed at increasing the bumiputra share of
corporate ownership. Mahathir also came under fire for initially
resisting investigation of a scandal concerning a subsidiary of
Bank Bumiputra, which was set up to further the interests of
ethnic Malays. And, according to press reports, he was heavily
criticized for defying tradition by identifying one of his strong
supporters, Musa Hitam, as his choice for the elected post of
party deputy president.
But Mahathir weathered the storms. The bank scandal became
more of a political liability to Finance Minister Razaleigh
Hamzah, a spokesman of the old guard, who had close ties to many
of the banking and Finance Ministry officials implicated. At the
same time, Mahathir went on the offensive to weaken the
conservatives' claims that he had ignored Islam and ethnic Malay
rights. He supported a new agricultural policy designed to
benefit the small landholders, a predominently bumiputra sector,
and increased pressure on commercial banks to issue government-
directed loans to bumiputra small traders. Mahathir also
advocated a policy of population increase to give Malaysia a
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sufficient consumer base on which to build industry, but which,
if successful, would also strengthen the ethnic Malay population
relative to other ethnic communities.
An Election Mandate
Candidates aligned with Mahathir were swept along with his
rising popularity. Incumbent Musa defeated Razaleigh in a bitter
campaign for the deputy presidency--a race termed by the press as
one of the fiercest and most divisive in UMNO's 38-year
history. Abdullah Badawi, a protege of Musa, was elected to a
vice presidential post, and Anwar Ibrahim, who was persuaded by
Mahathir to join mainstream Malaysian politics in 1982, was re-
elected as an ex-officio vice president.
Mahathir's victory within UMNO's 20-member Supreme Council
was almost unanimous. The US Embassy reports that the Council,
with 10 new members voted in, now has only one member who is not
closely associated with either Mahathir or Musa. Moreover, the
council membership is, on average, six and a half years younger.
than its predecessor, with only three members over age 45, a
change political commentators see as a resounding vote against
the "patriarchal" old guard and the Malay royalty.
Cabinet Shuffle Echoes the Election Results
To cement the shift from the old to the new, Mahathir
shuffled his cabinet on 14 July.* But although he moved his
opponents to less influential positions, for the most part he did
not force them out of the government. This olive branch extended
to the UMNO traditionalist wing, according to the US Embassy,
will ensure that disaffection from that quarter will not shift
support from hotly contested districts to opposition parties.
For example, former Finance Minister Razaleigh--who wrested
political control of Kelantan State from the opposition Parti
Islam Sa-Malaysia in 1978--was given the less influential Trade
and Industry Ministry although he was not reappointed to the
Supreme Council. Foreign Minister Ghazali is out of the cabinet
but has been given the status of "special envoy" for handling ad
hoc assignments.
Both Mahathir and Musa retained their cabinet portfolios,
Defense and Home Affairs, respectively, and other cabinet posts
went to their proteges. The reshuffle thus puts Mahathir firmly
in control of the key portfolios. While Rithauddeen will head
the important Foreign Affairs Ministry, his lack of standing
within UMNO will stifle his ability to challenge Mahathir's
leadership or policies. Razaleigh's demotion to the Trade and
*UMNO cabinet posts are traditionally held by upper echelon
party members. namely vice presidents and Supreme Council
members.
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Industry Ministry and the hint of scandal concerning the bank
affair, we believe, will sharply curtail his influence within the
cabinet.
Mahathir's Activist Policies Continue
We expect the new leaders to bring a fresh activism to
Mahathir's domestic and foreign policy as he forges ahead--with
party and government leadership solidly backing him--on his plan
for Malaysia. Speaking to newsmen after the elections, Musa
stated that the government will now concentrate on economic
development programs, emphasizing heavy industy, resource-based
development, government financial assistance and joint ventures
in sectors where private business appears reluctant to invest.
Mahathir advocates greater control of national resources and
has taken several steps to enable local businesses to become more
actively involved in oil production and exploration. An
exploration and production-sharing agreement signed with French-
owned Elf Aquitaine?in 1982 required that company to take on
Petronas Carigali, the exploration arm of the state oil company,
as a joint partner along with two private Malaysian firms. Kuala
Lumpur has also acquired majority interest in a number of
foreign-owned corporations doing business in Malaysia through the
Malay National Trust, which was created under the NEP to hold
equity for ethnic Malays. To date most of the government's
targets have been British firms controlling large reserves of
rubber and palm oil.
We expect to see a greater government role in other
industries as well. According to US Embassy officials, Mahathir
believes capital-intensive development based on import
substitution is the best course of development for Malaysia in an
era of labor shortages, rising protectionism in industrialized
countries, and increasing demands by local activists to develop
economically depressed regions within Malaysia. In the past
year, government officials have begun to refer to the nation's
heavy industrial strategy as "Malaysia, Incorporated," which we
believe reflects their feeling that the government has a major
role to play in the predominantly private enterprise economy.
According to government officials, the approach is to include
streamlining the state enterprise sector through the divestiture
of inefficient firms and establishing joint ventur with private
companies in high-priority sectors of the economy.
That same activism spills over into Malaysia's international
and regional relationships. Since he took power in 1981,
Mahathir has been restructuring foreign policy, giving it a
nationalistic and Eastward-looking cast. He has loosened
traditional Western ties in favor of ones with East Asia, which
Mahathir sees as more relevant to Malaysian interests. In mid-
July, Malaysia assumed the chairmanship of ASEAN's standing
committee, and we expect Mahathir to use that position to support
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the approach he calls his "Look East" policy. In recent months,
for example, he has advocated the establishment of a Western
Pacific Basin Economic Community to encourage closer economic 25X1
integration between ASEAN, Australia, and Japan--a plan Mahal
hopes would lessen Malaysia's trade dependence on the West.
Mahathir may also look to his ties to the Islamic world to
quell domestic criticism that he lacks concern for Islamic
issues. A member of the Organization of the Islamic Conference,
Malaysia has been involved in the efforts of the Islamic Peace
Committee to mediate the conflict between Iran and Iraq, and
Kuala Lumpur has been vehemently opposed to any relocation of the
US Embassy in Israel to Jerusalem. Mahathir may also see the
late July visit of PLO Leader Yassir Arafat as cementin
Malaysia's position as a staunch supporter of the PLO. 25X1
Implications for the US
This activism will continue to result in occasional strains
in US-Malaysian relations. In the past, Mahathir has never
hesitated to criticize the US on policies that he felt were
detrimental to Malaysian or Third World interests. These
disputes have included the sale of US Government tin stockpile
reserves, the US resignation from UNESCO, and the US position on
the Palestinian question. More recently, during Secretary
Shultz's visit in June, Mahathir voiced his objections not only
to US arms sales to Beijing, but to an policy that advances
Chinese economic strength. 25X1
Washington and Kuala Lumpur may also come into conflict
during the coming UN General Assembly session over Malaysia's
proposal to establish a special committee to address the current
system of government over Antarctica. While agreeing with the
objectives of the Antarctica Treaty--continued peaceful use of
that region, its nonmilitarization and nonnuclearization,
protection of its environment and delicate ecosystems, and
promotion of scientific research--Malaysia believes Antarctica is
the "common heritage of mankind" and requires a truly universal
regime committed to servin the interests of the entire
international community. 25X1
Despite these areas of contention, Mahathir will continue to
work toward a good working relationship with the US, which he
sees as the only credible defense against Soviet and Vietnamese
ambition in Southeast Asia. Malaysia remains supportive of both
a US military presence in the region and closer security
cooperation. According to US Embassy reports, a US-Malaysian
military meeting held last July augurs well for the growth of a
military relationship that will include training assistance and
joint exercises. During his recent visit to New Zealand,
moreover, Mahathir expressed support for the ANZUS Defense
Treaty. Mahathir also will continue to look to the US for
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that sell locally manufactured products overseas.
investment funds, and he recently proposed liberalizing the
regulations that restrict foreign ownership in export companies
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Annex
Malaysia's National Front
The National Front (Barisan Nasional) is Malaysia's ruling
coalition, composed mainly of ethnic parties and dominated by the
United Malays National Organization. It was formed in 1974 by
grafting opposition parties on to the Alliance--the then ruling
coalition of the United Malays National Organization, the
Malaysian Chinese Association, and the Malaysian Indian
Congress. A multiracial coalition, it was established to provide
for the widest possible base in government. The National Front's
component parties are:
United Malays National Organization (UMNO)
Malaysian Chinese Association (MCA)
Malaysian Indian Congress (MIC)
Sarawak United People's Party (SUPP)
Partai Pesaka Bumiputera Bersatu (PPBB)
Sarawak National Party (SNAP)
United Sabah National Organization (USNO)
Berjaya
Berjasa
Gerakan Rakyat Malaysia
People's Progressive Party (PPP)
The main opposition parties to the National Front are:
Democratic Action Party (DAP)
Parti Islam Sa-Malaysia (PAS)
Socialist Democratic Party (SDP)
In the 1982 General Election, the National Front won 132 of
the 154 parliamentary seats. The party breakdown for these seats
was: UMNO 70, MCA 24, MIC 4, Gerakan 5, Berjaya 10, SUPP 5, SNAP
6 and PPBB 8.
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Annex
Malaysia's Cabinet Shuffle, July 1984
Defense
Home Affairs
Foreign Affairs
Finance
Trade & Industry
Agriculture
Education
Previous
Cabinet
Mahathir Mohamad
Musa Hitam
Ghazali Shafie
Razaleigh Hamzah
Ahmad Rithauddeen
Manan Othman
Sulaiman Daud
Culture Youth & Sports Anwar Ibrahim
Land & Regional
Development
Current
Cabinet
Mahathir Mohamad
Musa Hitam
Ahmad Rithauddeen
Daim Zainuddin
Razaleigh Hamzah
Anwar Ibrahim
Abdullah Badawi
Sulaiman Daud
Adib Adam
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SUBJECT: Malaysia: A New Activist Leadership
Distribution:
Original - OEA/SEA/ITM
1 - Alan Kitchens, State
1 - Joe Winder, State
1 - Corazon Foley, State
1 - Paula Causey, State
1 - Lt. Col. William Wise, Pentagon
1 -
1 -
1
1 - Richard Childress, NSC
1 - Lt. Col. Richard Rice, Pentagon
1 Lt. Col. Denny Lane, Pentagon
1 - OEA SEAD
1 - OEA/SEA/IB
1 - OEA/NEA
1 - OEA/CH
1 - D/OEAA
1 - OEA/Research Director
1 - C/NIC
1 - NIO/EA
1 - DDI
1 - Executive Director
5 - CPAS/IMD/CB
1 - C/PES/DDI
1 -OCR./ISG
1 -
1 -
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