Mahathir Mohamad
Economic development to financial crisis (1990–1998)

The expiry of the Malaysian New Economic Policy (NEP) in 1990 allowed Mahathir to outline his economic vision for Malaysia. In 1991, he announced Vision 2020, under which Malaysia would aim to become a fully developed country within 30 years. The target would require average economic growth of approximately seven per cent of gross domestic product per annum. One of Vision 2020's features would be to gradually break down ethnic barriers. Vision 2020 was accompanied by the NEP's replacement, the National Development Policy (NDP), under which some government programs designed to benefit the bumiputera exclusively were opened up to other ethnicities.

The NDP achieved one of its main aims — poverty reduction. By 1995, less than nine per cent of Malaysians lived in poverty, and income inequality had narrowed. Mahathir also introduced the Bangsa Malaysia policy, which aimed to facilitate greater representation of non-Malay ethnicities in Malaysia. Mahathir's government cut corporate taxes and liberalised financial regulations to attract foreign investment. The economy grew by over nine per cent per annum until 1997, prompting other developing countries to emulate Mahathir's policies. Much credit for Malaysia's economic development in the 1990s went to Anwar Ibrahim, appointed by Mahathir as finance minister in 1991. The government rode the economic wave and won the 1995 election with an increased majority.

Mahathir initiated a series of major infrastructure projects in the 1990s. One of the largest was the Multimedia Super Corridor, a new information technology district south of Kuala Lumpur modelled after Silicon Valley. Other Mahathir projects included the development of Putrajaya as the home of Malaysia's public service and bringing a Formula One Grand Prix to Sepang. One of the most controversial developments was the Bakun Dam in Sarawak. The ambitious hydro-electric project was intended to carry electricity across the South China Sea to satisfy electricity demand in peninsular Malaysia. Work on the dam was eventually suspended due to the Asian financial crisis. The 1997 Southeast Asian haze, the worst haze event in history caused by Indonesian forest fires, was a major air pollution crisis for the country; Mahathir launched a cross-border firefighting operation in response.

In 1997, the Asian financial crisis threatened to devastate Malaysia's economy. The value of the ringgit plummeted due to currency speculation, foreign investment fled, and the main stock exchange index fell by over 75 per cent. At the urging of the International Monetary Fund (IMF), the government cut government spending. It raised interest rates, which only served to exacerbate the economic situation. In 1998, Mahathir went against the advice of IMF and Anwar by increasing government spending and fixing the ringgit to the US dollar. The result confounded his international critics and the IMF – Malaysia recovered from the crisis faster than its Southeast Asian neighbours. In the domestic sphere, it was a political triumph. Amidst the economic events of 1998, Mahathir had dismissed Anwar as finance minister and deputy prime minister, taking credit for the economy's recovery despite Anwar's policies. Anwar led the reformasi movement against Mahathir's government in response.

In the 1990s, Mahathir found himself at odds with Malaysian royalty over conflicting economic interests. In response to conflicts between Malaysian royals and prospective business leaders, Mahathir's government passed a resolution on royal activities. In the 1992 Gomez Incident, Sultan Iskandar's son, a representative field hockey player, was suspended from competition for five years for assaulting an opponent. Iskandar retaliated by pulling all Johor hockey teams out of national competitions. When a local coach criticised his decision, Iskandar ordered him to his palace and beat him. The federal parliament unanimously censured Iskandar, and Mahathir took the opportunity to remove the constitutional immunity of the sultans from civil and criminal suits. The press backed Mahathir and, in an unprecedented development, started airing allegations of misconduct by members of Malaysia's royal families.

As the press revealed examples of the rulers' extravagant wealth, Mahathir resolved to cut financial support to royal households. With the press and the government pitted against them, the sultans capitulated to the government's proposals. Their powers to deny assent to bills were limited by further constitutional amendments passed in 1994. With the status and powers of the Malaysian royalty diminished, Wain writes that by the mid-1990s, Mahathir had become the country's "uncrowned king". His policies during his first premiership were later described as " authoritarian " by the BBC.
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