By IPS Correspondents
PENANG, Malaysia, Sep 3 1998 (IPS)

Malaysia’s independence day parade a few days ago did not bring so much as a smile from Anwar Ibrahim, the once powerful deputy premier and political heir to Prime Minister Mahathir Mohamad.

His political star dramatically fading with Malaysia’s economic meltdown, Anwar perhaps he knew that his days were numbered: On Wednesday evening, he was fired by Mahathir.

Anwar’s ouster comes a day after the Malaysian government announced currency controls, signaling a shift away from the more free-market policies previously pursued by Anwar, who was also finance minister.

Anwar lost out in a power struggle with Mahathir and his camp, which increasingly saw the deputy as a rival to the premier.

And while Anwar’s ouster is as much about politics, Mahathir’s victory also signals the primacy of his thinking that it is time for drastic measures to prevent the further deterioration of an economy in recession for the first time in 13 years.

“It will strengthen Mahathir’s position,” said media analyst Zaharom Nain. “If we assume there were policy differences between them, with Anwar out of the way, Mahathir can go ahead with his economic programme with minimum distraction.”

That programme includes a stop to all trading or deposit of ringgit outside the country, the repatriation of all Malaysian currency abroad by Oct 1, limits on funds people can take out of the country and requiring foreign investors to keep their funds in the country for a year.

In a shrewdly calculated move, Mahathir on Wednesday fixed the ringgit’s exchange rate at 3.80 to the U.S. dollar, a defensible level, just hours before the announcement of Anwar’s sacking.

The fixed rate prevented the news of Anwar’s ouster — after he defied Mahathir’r demand that he announce his resignation — from undermining the value of the ringgit Thursday.

It also allowed the central bank, Bank Negara, to cut its three- month interbank rate from 9.5 percent to 8 per cent Thursday — its fourth reduction in the past month — without jeopardising the ringgit.

The overall aim of these recent changes is to insulate the economy, which has contracted by 6.6 percent, from the ups and downs of the market and a possible global economic crisis, officials say.

But while Mahathir is clearly in charge, Anwar’s sacking has fueled uncertainty among Malaysians and investors worried that instability would hurt the economy further.

Likewise, Mahathir’s high-stakes gamble has brought some respite to Malaysia’s battered financial markets, but emotions among Anwar’s supporters are running high.

“Anwar’s sacking has introduced some degree of political tension into the country,” said Penang-based analyst Khoo Boo Teik, author of the book ‘Paradoxes of Mahathirism’. “One of the most pressing questions is how Anwar and his supporters will react to the sacking and the ending of his political career.”

At a news conference Thursday, Anwar said he was prepared to face court action for the accusations used to explain his ouster, including sexual misconduct and implication in a criminal case involving a friend accused of illegal possession of cartridges for a handgun.

Report say Mahathir got a free hand to fire him after a party meeting on Tuesday night that discussed supposed evidence against Anwar. “I was not ready to resign because I have repeatedly said that there was a conspiracy at the highest level to see my downfall,” Anwar said.

Till recently, Anwar was the premier’s heir apparent, the young outspoken Islamic social critic that Mahathir had hand-picked 16 years ago and then groomed as his successor. When Mahathir took a working holiday abroad last year, he left the running of the country to Anwar.

But a year is a long, long time in politics. “It’s a total reversal of fortunes for Anwar,” said Nain.

He pins Anwar’s downfall on three factors: economic policy differences with Mahathir, allegations of sexual impropriety published in a widely circulated book, and the almost open revolt by his allies against Mahathir at the last general assembly of the ruling United Malays Nationalist Organisation (UMNO).

The differences over economic policy had been festering for months. Mahathir was the abrasive nationalist, railing against rogue currency for capital outflows that plunged Asian economies into deep recession.

Anwar, on the other hand, was the suave, soothing reformist pursuing open-market policies. He was the darling of the international business community, setting into a motion an austerity programme similar to what the International Monetary Fund (IMF) itself would have prescribed.

In December, Anwar started implementing IMF-style measures — a squeeze on credit, higher interest rates and wide-ranging cuts in government spending.

Along with the two top central bank officials who quit last week over policy differences with Mahathir, Anwar favoured tight monetary policy. But Mahathir wanted lower interest rates to boost business activity and increase public spending to jumpstart the economy.

Political pundits say Anwar was given six months to try his formula. His time, it is believed, expired in June with the economy slipping further into gloom.

That month too, Anwar allies lashed out the leadership of the ruling UMNO in a thinly veiled attack on Mahathir on issues such as corruption, cronyism and nepotism, in what was seen as impatience to see Mahathir hand power to his successor and plans to challenge the premier in party polls next year.

Mahathir retaliated quickly against Anwar, the party’s deputy president. Days later, Mahathir pushed him aside by appointing former finance minister Daim Zainuddin as special minister responsible for reviving the economy.

Meantime, speculation is rife that Anwar, who had been held under the Internal Security Act as a student activist in the seventies, may be arrested, detained without trial or charged with alleged sexual misdemeanours or other alleged conspiracies.

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