“Malaysia is much better positioned than its ASEAN neighbours to handle this financial crisis triggered by international currency traders,” the expert on CNBC quipped while I took bites from my breakfast roll and changed into a powder-blue colour suit.
I agreed. Malaysia had PM Mahathir and Deputy PM and Finance Minister, Anwar Ibrahim. They had a clear succession plan -- that’s something I had not seen before in any non-Western nation. The Emirs and ruler’s blood relation or spouse successors didn’t count in my book. I was so glad to be in Malaysia, even during a time when finance was not going the sunny side way.
Having a succession plan further helped push Malaysia higher in the rank in various tables regarding good governance and ease of doing business.
In May 1997, Anwar was acting PM while Mahathir took a two-month holiday. It only affirmed public perception that Anwar is being groomed for his future role by Mahathir who indeed was a unique exemplary leader for Asian and Muslim countries.
Little did we know, in Mahathir's absence, Anwar had independently taken radical steps, which directly conflicted with Mahathir's policies, to change the country's governing mechanisms.
On August 11, 1997 the IMF stepped in with a rescue package for Thailand, and over the weeks and months extended packages to South Korea and Indonesia. Though Malaysia didn’t sign-up with the IMF, Anwar’s actions were in-line with its plan. He instituted an austerity package that cut government spending by 18%, cut ministerial salaries and deferred the “Mega projects.”
Earlier, Mahathir blamed global financier George Soros for the currency crisis and called him “a moron.” Anwar declared: "There is no question of any bailout [for the bankrupt companies]. The banks will be allowed to protect themselves and the government will not interfere."
Mahathir’s comments pleased the masses as it is easier to blame an “outsider” for a nation’s problem. Whereas Anwar’s focus on financial accountability and strengthening free-market mechanisms was the sound approach to fixing the loopholes. During the last few years, the weaknesses of the financial sector were masked by rapid growth and accentuated by large capital inflows, encouraged by pegged exchange rates.
“This is a good cop-bad cop approach,” I thought. “Grandpa Mahathir is saying the big bad wolf blew up the front door, while Uncle Anwar is giving a serious talk to negligent adults who didn’t use good wood to build the door.”
I gave credence to Mahathir and Anwar’s astute sense and their respect for what I assumed were established political and administrative norms.
In November 1997, I wrote-up my final report for the Indonesian television channel. My concluded recommendation for the private equity (PE) fund was not to purchase 20% ownership. Even though Suharto was comfortable in power and working with the IMF, I just didn’t feel comfortable that the television operator’s financial forecasts would achieve the dollar denominated returns required by the PE fund.
The Managing Director of the PE fund wasn’t pleased with my conclusions as he wanted to make an investment in the sector and in Indonesia, but he didn’t cajole me or even call up my partner to ask for a review of the report. Good that he didn’t because on December 21, Moody’s downgraded Indonesia's ratings to Ba1/Ba3 “Non-investment Grade Speculative” (also called “junk”). By year-end 1997, the rupiah had dropped more than 50%.
Moody’s only downgraded Malaysia’s foreign currency bonds one notch from A1 to A2 keeping within the “Upper Medium Grade.” The December 21 note stated “the A2 debt ceiling reflects sound fiscal management and a relatively low level of external debt.”
Moody’s confirmed my thoughts. Malaysia was going to do fine. 1998 was not going to be smooth sailing easy money like the years gone by, but a year of fiscal prudence and financial accountability.
For Indonesia, IMF’s December 21 comments were, “Corporate sector financial difficulties also are likely to create substantial strains in the banking system. Moody’s believes that Indonesia's access to multilateral and bilateral funds totaling $34 billion or more and centred on a three-year IMF program will be adequate unless there is a further deterioration in confidence resulting from either political factors or negative events elsewhere in Asia.”
In January 1998, Indonesian university students began protesting. It instantly reminded me of all the university student protests in Dhaka. I wasn’t in Dhaka for the most important protests -- December 1990 which led to the resignation of President Ershad. I was a student at Smith College and only read about it from letters written by my on-the-ground friends, who boycotted their classes at the universities and colleges which were on the forefront of these unprecedented protests leading to the first ever peaceful removal -- without guns -- of an autocratic leader in Bangladesh.
In February 1998, President Suharto sacked the incumbent Bank Indonesia governor. The senior advertising executive and the CFO of the television company had been right about the old man and his family. At a dinner gathering in Hong Kong, the corporate lawyer friend of my director’s wife winked and said, Suharto’s family and associates were being spared the most stringent requirements of the IMF reform process.
“In Rome you act like the Romans,” he said as he drank his San Miguel beer.
“And that will be the last political statement. The Queen is coming to KL for the Commonwealth Games so I’ve now got a project code for the time I have to spend getting clients the C&L seats,” said my director.
“Oh those aren’t good seats at all. I’d rather go to the seats Suharto’s son has,” said his wife and the lawyer, while I laughed politely and looked at my director’s hopeless face as the conversation stayed on the juicier topic.
Foreign bankers, lawyers, and consultants like us were still going to Jakarta for projects while the protests were going on in other parts of the country. Again not too unusual from how life was in Dhaka.
In March 1998, Suharto was unanimously voted in for another five-year term. His eldest daughter Tutut became Minister of Social Affairs, a new addition to a cabinet full of his friends and business associates. The cabinet agreed to a 1998 austerity budget which would shave off some of their excesses and preserve their privileges.
When the Kuala Lumpur International Airport in Sepang was officially opened in June 1998, that impacted us. We all did at least two round trip flights a month, and sometimes one each week, so the new airport was an essential component to our work life.
The British lawyer hadn’t leaked any confidential secrets. Most Indonesians not connected to Suharto’s circle realized they were bearing the brunt of the IMF austerity package for a banking crisis created by Suharto’s circle. Once the government increased the fuel prices further by 70% in May 1998, that set off the spark in the tinder box of riots, and police gunned down four students. The unthinkable happened on my television set: Suharto resigned.
Well, he didn’t just immediately resign. He offered to resign in 2003 and to reshuffle his cabinet, but his own political allies deserted him by refusing to join the proposed new cabinet.
Timing is everything -- you can’t speak out against the hand that feeds you too early and sign your death warrant. You also shouldn’t hang on to a sinking ship for too long either. For once, you look out of your tinted Mercedes window and the pseudo baroque curtains of the ministerial palace, and gauge “public opinion.” Obviously, you need to have the men with the guns on your side, and then you summon your God of choice, and push off on the lifeboat that will spare you from plunging with the autocrat.
The Suharoto regime’s fall was unexpected and welcomed, very similar to Ershad’s one. Western regimes go through a more orderly change process. On July 1, 1998 Coopers & Lybrand merged with one of its main competitors, Price Waterhouse. After spending a quarter or half-million dollars of all our billable hours, the public relations firm unveiled our new name: PriceWaterhouseCoopers.
Mergers have expected consequences: Jakarta and Bangkok management staff was reduced. The FMCG partners in the ASEAN all walked over to rival KPMG with their practice staff. That was the “unexpected” part of the orderly merger. I was assured my job was secure and given the choice to move to Singapore or Hong Kong office. I also got a competing job offer in Singapore from that PE firm.
Anwar Ibrahim didn’t get choices like I did. On September 2, he was fired from Mahathir’s cabinet and expelled from their party, UMNO. Charges were brought about Anwar's personal character. Experts knew it was because Anwar’s “Reformasi” included pointing out some of the larger corruptions. His wing in the UMNO Youth group wanted to discuss “cronyism & nepotism” at the General Assembly.
The discussion didn’t happen, but a booklet on “50 Reasons Why Anwar Can’t Be PM” was circulated. Sydney Morning Herald’s called it a “blatantly political fix-up.” Mahathir did not care about international opinions and let the Malaysian tabloids and judiciary tell the tale about his former second-in-command.
My friends in Malaysia had made my life enjoyable and I was going to miss them. However, the case against Anwar really opened my eyes to another side of Malaysia and Mahathir. It no longer felt like a unique progressive democratic Muslim nation. I was leaving Malaysia with a more jaded view.
In September, Malaysia fixed the US Dollar to 3.8 ringgit as at one point it had gone below 4.7. Mahathir imposed various types of capital controls to stem the flow of money out of the country, made offshore trading of ringgit invalid thereby combatting the speculators, and even placed restrictions on foreigners' funds from short term trading of stocks. Overall, the GDP plunged 6.2% in 1998. Newsweek magazine named Anwar “Asian of the Year” as he awaited trial.
1998 ended with Suharto placed highest on Transparency International's list of corrupt leaders with alleged misappropriation of between $15-35bn during his 32-year presidency.
By 2000, Malaysia regained its 1997-level real GDP and various external economists agreed the national economy was not too adversely impacted by rejecting IMF assistance. Suharto didn’t have to undergo trials and was allowed to live in his home with police protection and later shielded from corruption case court appearances due to his declining health.
Now in Dhaka, the two-year activity of the 18th floor office building next to my mom’s house has melted into the background, and already been topped by another one in-between the cracks of the sky and road behind us.
It is heartening to sit at the 4th Fintech Summit and hear Kamal Qadar, the founder of bKash, speak enthusiastically about financial inclusion rather than mention he is the founder CEO of the first Bangladeshi startup which has achieved valuation of $1bn -- the lauded “unicorn status.” I see the working mom on her smartphone, ordering groceries online and reminding the maid to have her child ready for swim lessons in between sessions.
Maybe I’m just thinking of my twenties when I see a group of male and female coworkers/friends having lunch, as I enjoy mine at a table with my nephews. Even Dhaka teenagers know how quickly the taka has plunged at the money changing shops.
On the way to the airport, we were stuck in the “jam.” Before we knew it, we were on the elevated expressway! I quickly took photos and shared them on my WhatsApp: Dhaka looks good from above.
The expected and unexpected are not as common or uncommon as one thinks.
Out of habit, I look at the stats on non-performing loans and articles on the decline of the dollar reserve in the official coffers rather than the entertainment section of Dhaka Tribune as I wait for my friend at Oro Bakery.
The combination of things or just something here reminds me of Kuala Lumpur or probably Jakarta in 1997-1998.
Lubna Kabir has over 25 years of experience leading US and international projects in first line of defense risk management, integrated internal audit, strategy, and financial analysis.
