(Bloomberg) -- He ran Malaysia with an iron fist for more than two decades, played political king maker after leaving power, then came storming out of retirement at the age of 92 to dethrone Prime Minister Najib Razak in a stunning political upset.
Such is the stuff of Mahathir Mohamad, the country’s longest-serving prime minister, a doctor, and force behind Malaysia’s transformation into a leading Southeast Asian economy. He now faces the daunting challenge of governing a disparate group of opposition parties that scored a surprise election win over Najib’s ruling Barisan Nasional coalition, ending a six-decade run in power.
The election win was, in part, a repudiation of Najib over a goods-and-services tax that boosted prices and a money laundering scandal involving hundreds of millions of dollars allegedly siphoned from state investment firm 1MDB. While Najib denied wrongdoing, Mahathir lambasted him as a “thief” on the campaign trail.
Fifteen years after he stepped down as leader, Mahathir is keen to show he’s listened to critics and has pledged to serve only as interim prime minister for the Pakatan Harapan alliance until opposition leader Anwar Ibrahim’s expected pardon and release from prison in June.
Mahathir’s comeback is full of interesting plot twists. Najib’s rise to power in 2009 owes much to the elder statesman, who orchestrated a campaign to push out Abdullah Ahmad Badawi, his successor in the long-ruling coalition anchored by the United Malays National Organisation, the country’s biggest party. Then, angered by Najib’s economic policies and the 1MDB scandal, Mahathir bolted from Najib’s party in 2016 and joined forces with the opposition.
That defection required a tenuous rapprochement between Mahathir and Anwar, who had served as his deputy in the late 1990s during the Asian financial crisis. After Mahathir fired Anwar in 1998, Anwar spent the next six years in prison on convictions for abuse of power and sodomy. Wan Azizah Wan Ismail, opposition chief in parliament and Anwar’s wife, has been named as a candidate for deputy prime minister.
“It wasn’t easy for me to join a movement that was not happy with me in the past, but the effort to topple Najib is greater than my feelings,” Mahathir said in a speech after his nomination. “Therefore, I am willing to cooperate and listen to the criticism toward my old party.”
Mahathir’s first 100 days promise to be eventful. There will be pressure on the new government to eliminate the six percent goods-and-services tax that was so unpopular with voters.
"While good for the new government’s popularity, this will have a significant fiscal impact that can affect Malaysia’s risk ratings," Francis Hutchinson, coordinator of the Malaysian program at the Institute for Southeast Asian Studies in Singapore, said in an email.
"Mahathir’s immediate tasks will focus on consolidating his hold on government and maintaining unity in his coalition," Hutchinson said. "While Mahathir has said that Pakatan Harapan is not out for revenge, there will be substantial pressure on the new administration to investigate the 1MDB scandal. This will be very important for the country’s institutional integrity."
While Mahathir’s victory represents a remarkable shift in a nation long defined by racial politics that hasn’t seen a transfer of power since independence in 1957, some analysts warned those divides remain entrenched in Malaysian society.
"As far as religion and ethnic identity goes, it will still be the main rallying point for most Malaysians when it comes to their vote," Badrul Hisham Ismail, program director at Iman Research, a Malaysian think-tank focusing on the role of religion in Malaysian politics, said in a telephone interview.
"There is already a huge push against race-based affirmative action, and the smart thing to do is not simply abolish it, but to focus more on the economic needs of Malaysians across racial and ethnic lines," Badrul said. If Mahathir sticks to his campaign promises, he will do that, he said.
Beyond that, Pakatan Harapan has promised in its policy manifesto to reduce corruption, remove the "prime minister’s power to manipulate important national institutions," and increase petroleum royalties to oil-producing states to 20 percent or equivalent.
It also wants to give a mandate to the central bank to return the ringgit to its actual potential within 3 years, as well as introduce mandatory 90-day maternity leave and set the minimum age for marriage at 18 years old.
Financial market participants will be watching the return of Mahathir closely. He’s well-known for his distrust for currency traders -- who drove Malaysia’s economy to the brink 20 years ago. In an interview with Bloomberg on April 6, he warned that he’s willing to implement a peg on the ringgit to ward off “currency manipulators”.
“When a currency weakens, the country loses money, the people lose money and costs of imports go up and generally the economy can’t do well,” Mahathir said. “Capital control would become necessary in unusual situations.”
In 1997, the Malaysian ringgit plummeted 35 percent, reserves dwindled and the stock market crashed and lost half its value. While other countries such as Thailand scrapped a dollar peg with its currency, Malaysia adopted one in late 1998. Mahathir’s heavy-handed approach worked: Malaysia recovered from the crisis to establish itself as a commodities juggernaut.
One of his persistent criticisms of Najib is that his administration had overburdened the economy by borrowing beyond its means. “The current government has borrowed too much money,” Mahathir said. “When you cannot repay your debts, countries -- like Greece -- can go bankrupt.”
"Mahathir at the helm should, with his experience and stature among civil servants, provide greater focus at the day-to-day level in Putrajaya than if it were led by anyone else at this time of overwhelming feelings and uncertainty," Ooi Kee Beng, executive director of the Penang Institute, a Malaysia think-tank, said in an email Thursday.
During his 22 years in office, Mahathir worked hard to put Malaysia on the world map with ambitious projects such as the world’s tallest office building, the world’s longest building, one of the world’s largest dams, and Southeast Asia’s largest airport.
He’s set to create a new world record when he’s sworn in, supplanting former Indian Prime Minister Morarji Ranchhodji Desai as the oldest prime minister ever appointed.
Asked in January how he stays in shape, Mahathir outlined a routine that includes walking, pumping iron, cycling and horse riding.
Rising every day at 6.30 a.m., Mahathir said in an emailed response to questions that he has gone into the office “every working day since I began work as a doctor in 1954” and “cannot imagine not working.” He had this advice: “Read and write. Exercise your brain."
Mahathir said last May he isn’t concerned about his legacy. “I don’t care much whether people remember me or not,” he said. “If people remember, well and good. If they don’t remember, it’s alright, I’m dead anyway.”
Given his stunning political comeback so late in life, it’s safe to assume Mahathir has secured his place in the history books.
©2018 Bloomberg L.P.