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Malaysia, under Mahathir, joined new emerging economies such as South Korea, Taiwan, Hong Kong and Singapore (the East Asian Tigers), which rode the booming world economy in high tech and electronic manufacturing goods, and embarked on producing its own national car, the Proton. Mahathir’s economic policies upgraded

214 Foreign Affairs Malaysia, March 1985, p.21.

Malaysia to become one of the Newly Industrialized Countries (NICs)²¹⁵ by the middle of the 1990s. The Malaysian economy grew steadily between 1987 and 1996, which resulted in rising living standards and a lifting of its per capita income from

$1850 to $4425 (Athukorala, 1999: 28).

However, to Mahathir, going global did not necessarily mean opening Malaysian borders extravagantly without any limit. Mahathir’s agenda of uplifting the Malays from poverty and targeting 30 per cent from the national economic equity remained the backbone of his economic programmes. In other words, Malaysia needed foreign direct investment and capital to flow in, but without jeopardising the economic wellbeing of local partners²¹⁶.

Mahathir hoped that trade-based foreign policy would hopefully turn Malaysia into a major trade and economy centre for the region (Hamzah, 1990:469). However, Mahathir imposed strict guidelines and criteria for foreign companies investing in Malaysia such as the restriction of the number of foreign workers and the allowed foreign equity hold in these businesses²¹⁷. These steps were being taken to safeguard local partners and businesses and avoid the risk of losing huge sources of investments should the foreign companies wish to extract their money abruptly. Nevertheless, such

215 NICs are characterised as countries undergoing rapid economic growth, a switch from agricultural to industrial economies, especially in the manufacturing sector, strong capital investment from foreign countries, an increasingly open-market economy, allowing free trade with other nations in the world, and increased social freedom and civil rights and having strong leaders. For more information, refer to Bożyk, Paweł (2006). "Newly Industrialised Countries", Globalisation and the Transformation of Foreign Economic Policy. Ashgate Publishing, Ltd.., London.

216 Malaysia encourages direct foreign investment, particularly in export-oriented manufacturing and high-tech industries, but retains considerable discretionary authority over individual investments.

Especially in the case of investments aimed at the domestic market, it has used this authority to restrict foreign equity (normally to 30 per cent) and requires foreign firms to enter into joint ventures with local partners. Malaysia also restricts the number of expatiate workers working in the factories in order to safeguard local job markets. For example, manufacturing companies with a foreign paid-up capital of at least $ 2 million receive automatic approval for up to 10 expatriate posts.

217 http://www.ustr.gov/assets/Document_Library/Reports_Publications/2004/.

stringent policies were relaxed and eventually lifted in the wake of the 1998 economic downturn²¹⁸ .

Foreign companies were also required to enter into joint ventures with local partners and develop local intellectual capacity through technology and ‘know-how’ transfer.

Mahathir’s hope was that, in time, Malaysia would have the numbers of skilled workers to become a fully industrialised country by the year 2020. Nevertheless, whether such a transfer did really occur is debatable in view of the strict and over-protective policies that these international companies imposed on such operations²¹⁹.

Mahathir realised that Malaysia did not have any significant standing on the international stage. Much like his ‘Look East Policy’, Mahathir turned his attention towards smaller nations to bolster the Malaysian image. He started giving aid and making trips to countries of less or no significance to Malaysia in a bid to give the Malaysia Inc. brand international exposure. Some saw development aid to Samoa, Fiji, Mali, Papua New Guinea, Tonga and the Maldives as falling into this category (Hamzah, 1999:469). During the 1997/1998 Economic Crisis, Mahathir offered a RM1 billion economic aid package to Indonesia as a sign of solidarity and to show that not only was Malaysia able to resist the IMF money, but also would even be able

218 Effective from 31 July 1998, the Malaysian government has liberalised the equity policy for the manufacturing sector in respect of new investments, expansion or diversification. Foreign investors can now hold 100% equity, irrespective of the level of exports. Please refer to http://www.aseansec.org/6527.htm.

219 It has been argued that not much knowledge has been transferred by international companies to their Malaysian counterparts for the simple reason of intellectual properties and safeguarding corporate assets. Please refer to J. Jegathesan, A. Gunasekaran, S. Muthaly, (1997) ‘Technology Development and Transfer: Experiences from Malaysia’ International Journal of Technology Management 1997 - Vol. 13, No.2 pp. 196-214.

to help other countries in need. Eventually, only half of the pledged aid was disbursed due to Indonesian ineffectiveness in dispensing the aid²²⁰.

Even during its early administrative years, Malaysia was involved in distributing aid to small countries and trying helping them with long-term economic solutions. For instance, in 1981/82, Malaysia contributed rice and technical aid to Mali to help alleviate the food shortages and raise production levels²²¹. As Malaysia itself was a rice producing country, such aid did not involve huge monetary repercussions, and the channelling of the existing expertise would be beneficial for both sides.

Mahathir also saw that the establishment of the Organization of the Islamic Conference (OIC) was not purely to promote good relationships with fellow Muslim;

rather, he spotted the opportunity for economic and trade relations as well. The OIC could also be the vehicle to promote and enhance trade between member countries and provide economic assistance to members in need. To the frustration of Mahathir, Muslim countries, especially the rich gulf nations, tended to invest their oil money in the U.S. and the Europe rather than other Muslim countries, which were competent like Malaysia. Nevertheless, some of his efforts did bear fruit.

Among them was the implementation and operation of the Islamic Development Bank (IDB) under OIC after his ten-day visit to the Gulf States and Jeddah, the capital city

220 At the height of the Asian economic crisis, two countries, namely Malaysia and Singapore, offered monetary aid to Indonesia to buffer its downturn and as a contagion effort. Singapore offered a soft loan of $5 billion to buy back the Rupiah and Malaysia offered another RM1 billion to stabilise the Indonesian economy. However, after the alleged misuse of funds, both countries withdrew their offers halfway through the process and Indonesia agreed to the IMF economy aid package.

221 Economic Report 1981/82, Vol. 11, Ministry of Finance, Government of Malaysia, Kuala Lumpur.

of the OIC in 1982 ²²². To date, the IDB has implemented more that 5,500 projects including giving technical assistance and financial capital to its fifty-six member countries²²³. The IDB currently operates in eighteen countries, as well as from its headquarters in Jeddah. Malaysia, among other countries, has benefited extensively from the IDB Trust Fund, especially in educational projects²²⁴. According to Mr.

Ahmed Hariri, Regional Director of the IDB based in Kuala Lumpur, through 2002, the bank approved 106 projects in Malaysia with a total value of US$ 512 million. In 2003, the IDB approved three new projects in Malaysia with a total value of US$ 96.8 million (Hariri, 2003:2).

Mahathir was also an ardent supporter of the Gold Dinar-based trade and financial system compared to the conventional floating financial system. Mahathir argued that the Gold Dinar system, which was pegged at the price of gold, was more reliable and stable compared to the then current conventional system²²⁵. OIC countries that had special arrangements with each other could use the gold or the equivalent to pay for business.

222 The Islamic Development Bank (IDB) is an international financial institution established in pursuance of the Declaration of Intent issued by the Conference of Finance Ministers of Muslim Countries held in Jeddah in Dhul Q'adah 1393H, corresponding to December 1973. The Inaugural Meeting of the Board of Governors took place in Rajab 1395H, corresponding to July 1975, and the bank was formally opened on 15 Shawwal 1395H corresponding to 20 October 1975. The purpose of the bank is to foster the economic development and social progress of member countries and Muslim communities individually as well as jointly in accordance with the principles of Shari'ah, i.e. Islamic Law. For more information, please visit http://www.isdb.org.

223 Thirty-four Years In the Service of Development’, May 2008, Economic Policy and Statistic Department, Islamic Development Bank at

http://www.isdb.org/irj/go/km/docs/documents/IDBDevelopments/Internet /English/IDB/CM/Publications/34YearsService.pdf.

224 In the case of Malaysia, the IDB helped to finance the construction of the University of Malaysia, Sabah (UMS) under the installment sale scheme. The total cost of the UMS project was US$ 44.11 million, of which the IDB contributed about US$ 20.16 million.

225 The price of Gold Dinar is determined by the price of gold. One Gold Dinar is equivalent to one ounce of gold. For more information, please refer to ‘Gold Dinar Seminar Talking Points’ by Mahathir Mohamad, 26 March 2002, Kuala Lumpur, at http://www.scribd.com/doc/7794565/Gold-Dinar-Dr-Mahathir.