By MARK BAKER
Monday 19 March 2001

Across the gentle hills and wide valleys that stretch to the south-east of Kuala Lumpur, the dream dies hard. In the place where a people were preparing to proclaim their arrival in the company of developed nations, the clamor of construction is falling silent, grand edifices lie unfinished or abandoned and the winds of change carry the chill whisper of recession.

Here is the Multimedia Super Corridor, the bold vision of Dr Mahathir Mohamad to transform Malaysia into the high-tech envy of Asia; a hot-wired, cyber-savvy showcase of innovation, research and manufacturing excellence, a place where the biggest players in the new economy would come with their money and expertise to help fast-track the modernisation of Malaysia.

For almost a decade, the $20 billion project took shape along a 60-kilometre by 15-kilometre swath of old plantations and virgin jungle: vast new housing and industrial estates, shopping malls and theme parks, and a labyrinth of super highways and express rail networks to connect the new administrative capital, Putrajaya, and its tech twin city, Cyberjaya, to central Kuala Lumpur.

Now the vision is on hold, wounded by the economic crisis that swept through South-East Asia in late 1997 and facing an even graver threat from the signs of an economic downturn in the United States, which is likely not only to dry up investment in technology industries but also to wreak havoc on the electronics manufacturing sector that is the backbone of Malaysia's recent expansion.

Today the two most glittering jewels in Mahathir's grand design stand not in affirmation of his ambition but in mocking contradiction. In the heart of Kuala Lumpur, the soaring twin towers of the Petronas building - Malaysia's claim to the world's tallest structure - are largely empty, barely half the vast office space believed to be let amid a commercial property glut. Nearby, the concrete shells of abandoned hotel and office towers gather decay while construction of a skytrain network remains suspended.

At the opposite end of the super corridor, the new $5 billion Kuala Lumpur International Airport - built an absurd 70 kilometres from the city centre in boastful challenge to the regional aviation hubs of Singapore and Bangkok - is in financial trouble and operating well below capacity as a succession of international carriers take a one-way ticket out. Qantas and Lufthansa left last year, British Airways and All Nippon Airways depart next month.

A decade ago, Malaysia was recording heroic rates of growth but, like the rest of the region, was hit hard by the crash of late 1997. After rallying in 1999 on the back of a surge in exports, the economy is again in sharp decline. While the government refuses to downgrade its growth forecast of 7 per cent this year, most security houses reckon the country will be lucky to achieve 4 per cent.

At the same time, there's a rapid decline in foreign investment. From a boom-time high of $A8.5 billion in the early 1990s, new investment shrank to just $A4.5 billion in 1999, and analysts believe the downward trend is accelerating. The medium-term outlook appears even bleaker, with a spreading global slump in electronics and depressed markets for rubber and palm oil, Malaysia's commodity staples. A US recession could be devastating for a country that draws 35per cent of its GDP from trade with America.

But the grim economic outlook is only part of a deeper malaise that is now gnawing at Malaysian society and which many Malaysians - including prominent members of his government - believe spells the beginning of the end of Mahathir's 20-year reign as prime minister.

And it is not just the redoubtable Mahathir who is seen as vulnerable. For the first time, there are indications that his United Malays National Organisation, which has held unbroken power since Malaysia won independence from Britain in 1957, is on a path towards defeat.

At general elections a little over a year ago UMNO retained power with an almost two-third majority of national seats, but saw a sharp drop in its vote and big gains for the opposition alliance and particularly the Islamic party, PAS, which wrested control of a second state government by a handsome margin and consolidated its position across the country.

Several by-elections over the past year have confirmed a further erosion in support for UMNO, culminating in a humiliating defeat in November in Mahathir's home state of Kedah - a seat in which the ruling party had never before been seriously challenged.

It is estimated that support for UMNO among Malays has dwindled to between 40 and 45 per cent, an extraordinary reversal of fortunes for a party that has been the standard-bearer of Malay nationalism from colonial times. While UMNO is not about to lose office - the next general elections are not due for almost four years - the writing is on the wall.

"I think the party has lost it," says a prominent Malaysian businessman and senior UMNO member. "My prediction is a Barisan Alternatif (opposition alliance) victory in 2004. The party has alienated its constituency and it seems incapable of fixing the problem."

Steven Gan, editor-in-chief of the rapidly growing web newspaper, Malaysiakini, says: "I think we are looking at the end of the Mahathir era. He is weakened and for the first time he is feeling vulnerable. People are fed up with money politics and UMNO is becoming increasingly factionalised. A lot of people now think the opposition can win the next election."

The decline in Mahathir's fortunes can be traced directly to the sacking three years ago of his deputy and anointed successor, Anwar Ibrahim. Anwar is now serving a 15-year prison sentence for alleged corruption and sodomy - charges denounced as politically engineered by the United States and other Western governments. The urbane former deputy prime minister's real crime was to challenge the autocratic style of Mahathir and the spreading corruption in UMNO.

"What happened to Anwar shocked a lot of people," says Dr Hatta Ramli, political secretary to PAS president Fadzil Mohamad Noor. "The rot in UMNO was exposed and people have become very disenchanted with the extent of corruption and cronyism in the government. A lot of people are leaving the party and we're now getting 45,000 new members a month, many of them from UMNO."

A popular backlash against so-called "money politics" - the extent to which prominent political figures and their cronies have enriched themselves on the back of Malaysia's rapid growth - has gathered momentum despite the blue-sky boosterism still propagated by the government-run media. In the most recent of a series of scandals over the past year, it was revealed that the government had bought back a 30per cent private stake in Malaysian Airlines from its chairman, the tycoon Tajudin Ramli, for almost $A1billion in cash - more than double the market price of shares in the debt-ridden national carrier.

"The party organisation has been corrupted by its success," says one vocal internal critic. "The period up to 1997 was such a time of wealth, prosperity and great exuberance, such confidence in the ability of Malaysia to come out in the new world. We were global, we were being wooed by the world, we were a model country. That's when UMNO leaders found politics paid and UMNO fell into the new environment of money, power and position."

Now 75 and the last man standing in a generation of Asian autocrats, Mahathir shows little outward sign of the crisis unfolding around his leadership. He continues to talk up his nation and its prospects, to deny the economic alarm bells and to flag big-ticket projects - the latest a monstrous 6300-room hotel in the highlands north of Kuala Lumpur and a revival of the environmentally disastrous Bakun Dam in the forests of Sarawak. But the talk has an increasingly hollow ring.

While Mahathir still maintains a prodigious workload and appears in good health despite his age, those who deal regularly with him see a new sourness and irritability creeping into his demeanor. In an interview with Asiaweek magazine in January, he came across as tired and despairing of the mounting criticism of him from within and without UMNO ranks.

"Maybe I regret going into politics," he said. "I should have stayed a doctor. When I was practising, I was very popular. People loved me."

When asked what he thought he would be remembered for, his reply was curt: "I don't care."

Mahathir's direct response to the rising tide of unflattering international and domestic scrutiny has been to retaliate. Officials have suspended distribution of recent issues of both Asiaweek and the Far Eastern Economic Review as part of a general crackdown on opposition activists and the media. Dozens of opposition leaders have been arrested during a recent spate of protest rallies and there has been increasing harassment of independent Malaysian websites, including Malaysiakini - a clear contradiction of Mahathir's pledge not to interfere with the Internet in the age of the super corridor.

At the same time, Mahathir has mounted an increasingly desperate effort to win back the hearts and votes of Malays. He has proposed "Malay unity" talks with PAS in a obvious strategy to try to blunt that party's growing popularity among both young urban professionals and rural communities and to be seen as restoring concern for traditional values.

But the strategy carries real dangers in the long-fragile environment of relations between Malays, who comprise two-thirds of Malaysia's 22million population, and the smaller Chinese and Indian communities. Race riots in 1969 left more than 200 dead, and parallels are being drawn with the violent clashes in recent days between Malays and Indians in a poor neighborhood of Kuala Lumpur in which at least six people were killed.

In attempting to reinforce its Malay credentials, UMNO also risks further alienating the Chinese and Indians whose support has been vital in sustaining Mahathir's coalition government over the past two decades.

Many in Malaysia now see Mahathir as at once a core symptom of UMNO's problems, the one person capable of solving them and yet the person least able to re-invent himself politically to save the day - a paradox that could leave the party locked on a course to eventual defeat, especially if the economy hits heavy weather over the next couple of years.

"The fundamental problem is that Mahathir refuses to accept the fact that the party has lost its way and is losing the respect and support of the people," says one independent political analyst. "He has always been a fighter, his instincts will not be to resign and, ultimately, he'd probably prefer to go down with the ship than admit that he might be wrong."