The recurring refrain from Kuala Lumpur these days is that there will be no major shifts in policies with Prime Minister Mahathir Mohamad's retirement in October 2003. This refrain is meant to reassure foreigners and natives alike. However, I feel anything but reassured by the government's clinging to the status quo.

After 23 years of dominant and often domineering leadership, Mahathir's departure calls for a much-needed reappraisal of his policies. Insofar as the policies have been effective, the nation has changed and we therefore need a different approach to reflect the new reality. On the other hand, if policies have failed, then there is all the more reason to jettison them.

To suggest that a major reassessment is unnecessary is a cop-out, an abrogation of responsibility. It also demonstrates an inability to escape Mahathir's authoritarian presence even after his stepping down.

Mahathir has truly been, to use James McGregor Burns' terminology, a transforming leader. The country's physical transformation is obvious upon landing at the gleaming new international airport, driving along the smooth undulating freeways, or viewing the capital city's impressive skyline. Such achievements are even more remarkable when one considers the generally sorry state of many plural societies, such as Northern Ireland and Sri Lanka.

While Mahathir's admirers may run out of superlatives to describe his achievements, his detractors do not lack for ammunition either. The judiciary, once the envy of the region, is today a mere shadow of its former glory. It has been a long time since any chief justice left the bench with reputation intact, let alone enhanced.

Similarly, schools are a disgrace. In the 1970s, Mahathir was hailed as a visionary when he replaced English with Malay in the schools. Now he is desperately trying to reverse that move, the folly of which has become obvious. Perversely, in an Orwellian twist, he is again hailed a hero for his U-turn. He would prefer that we do not recall his earlier zeal.

I will examine Mahathir's legacy from the perspective of "what might have been". Such a perspective will point to where a post-Mahathir leadership should direct itself. This article will examine how Mahathir's promise was not realised. Just as bright students - not average ones - disappoint a teacher the most, by not reaching their potential, so it is with national leaders. Great leaders who do not achieve great heights are the most disappointing.

Mahathir is the most effective leader in Malaysian history, though he had some illustrious predecessors. Yet there he was, on the 20th anniversary of his rule, tearfully lamenting having failed at what he considered his most important mission - to change the mental and cultural attitudes of Malays.

We could argue that the man may be too hard on himself, as is common among high achievers. Nonetheless, in that public confession, the pathos was real. I venture that he has a keen sense of "what might have been". I will explore four areas: his leadership style; his views on race; his attitude towards the West, and his relationship with the Islamists.

Leadership style

When Mahathir became prime minister in 1981, his "clean, trustworthy, and efficient" administration took the country by storm. He made a big show of wearing a nametag and signing in for work every morning - always early, of course. This was highly symbolic, for in Malaysia only peons and janitors wore nametags. A more cynical view would be that he had effectively reduced the chief executive position to a nine-to-five timecard job.

He buckled down to serious business immediately, barking out "initiatives a million a minute", to quote Musa Hitam, his deputy at the time. He had a Pentium V chip compared to his predecessor's 286.

Mahathir's style is often described as autocratic and dictatorial. To me, it was more a one-man show. He succeeded in turning the whole nation into his echo chamber, where his every utterance gets reverberated and amplified, drowning all others. And therein lies the problem.

One consequence is that everything he says goes, and nothing gets done without his approval. He centralised decision-making under the pretext of efficiency. The result was a command and control structure that even the old Soviet system could envy.

Such tight control spills into the private sector. In the United States, an entrepreneur with a promising product or idea first tests it in the marketplace. In Malaysia, you seek an audience with Mahathir. If you can sell it to him, then the doors are wide open. Banks will readily finance you, and you become the government's favoured vendor.

Budding entrepreneurs learn quickly that to succeed they do not need to pay attention to clients or customers but must rather suck up to the politically powerful. The road to riches is not through creating and building, but through getting the right contacts and contracts. This is true anywhere, but especially pervasive in Mahathir's Malaysia. Mahathir created a class not of builders and creators, but of rent collectors and parasites.

A measure of this pernicious influence is that during the economic crisis of 1997, the top 10 borrowers hogged a staggering US$36 billion of the non-performing loans, with the top two bagging a whopping US$20 billion. Those borrowers were the fortunate few who had Mahathir's imprimatur.

I have observed that the more effective a leader is, the less well-known he is abroad. Conversely, the most incompetent and corrupt leaders regularly make the headlines. Saddam Hussein is only the latest example. Few in the world could name the leaders of Taiwan or South Korea; yet they have done immense good for their citizens. The West hardly noticed Mahathir during the first half of his tenure. I'm sure that this was fine with him, for Malaysia thrived under his stewardship. In the less effective second half of his rule, however, just about everyone abroad heard of him, in keeping with my observation.

Mahathir's defiance of the International Monetary Fund (IMF) following the 1997 economic crisis, once ridiculed, is now widely viewed as particularly prescient. To be praised by economists must gratify him greatly. But lost amidst the laudatory praises is the basic question: How did Malaysia end up in the mess in the first place?

Mahathir reminds me of a surgeon whose patient first suffers a setback before being salvaged skillfully. Everyone is in awe - until someone asks the basic question: "Doctor, what brought on the setback?" How could a mere currency speculator cripple Malaysia's economy?

Another consequence of this powerful one-man show is the "big oak" effect, which overshadows new growth. Mahathir once quipped that he would like to be succeeded by his clone. Alas, there is no young Mahathir out there. This, more than anything else, is the most glaring failure of his leadership. Take a look at Mahathir's cabinet. The three most senior members have served collectively 70 years.

To some, this situation reflects solid experience; to me, sclerosis and inertia. More tellingly, these same three have less than seven years private-sector experience between them, all at very low levels. When Abdullah Ahmad Badawi (Mahathir's successor-to-be) was outside the government in 1990, the best he could do was to become a travel agent in his sister-in-law's company! This was the market valuation of his talent and experience, despite having served as education, foreign, and defense minister.

The legacy of a father is his children; a leader, his successor. For Mahathir, that legacy is Badawi.

While his party Umno is starved of talent and remains stuck to its tradition-bound feudal ways, Mahathir ironically has successfully transformed the greater Malaysian society. Nowhere is this change more dramatically demonstrated than in their attitude towards their leaders, much to Mahathir's chagrin.

Three decades ago, when the prime minister struggled to cope with the aftermath of the 1969 race riots, few dared to call for his resignation. The exception? One young Mahathir, who did it in the deferential and oblique manner befitting a peasant confronting his feudal lord.

Today, reflecting the success of Mahathir's policies, communications between ruler and ruled are neither formal nor deferential. A few years ago, when Malaysians were outraged over Mahathir's treatment of his erstwhile deputy, Anwar Ibrahim, they were not in the least restrained in expressing their displeasure. A young Mahathir would no doubt approve this new assertiveness, but an elder Mahathir feels otherwise.

Race relations

Who would have thought that Mahathir, once tagged an ultra (as in "ultra-chauvinist") for uncompromisingly championing Malay rights, would today count on non-Malays as his staunchest and most reliable supporters?

Malaysia is a plural nation. This reality could be leveraged into an asset, or by default it becomes a liability. And what a liability! Rwanda and the Balkans are ghastly reminders. But if we could tap the richness in the diversity of cultures and languages, then Malaysians would be at a significant competitive advantage in this increasingly globalised world. Malaysians abroad for example, adapt remarkably well simply because they are used to cultural diversity at home.

Two generations after independence, a common Malaysian identity still eludes the nation. Three factors contribute to this lack of identity: 1) racially segregated schools, 2) race-based political parties, and 3) affirmative action.

Malaysian schools today are much more segregated than during British rule. In colonial times, segregation was imposed, part of a strategy of "divide and conquer". Today, however, Malaysians choose to remain apart. The increasing emphasis on Islamic studies in the national stream since the 1980s drove away non-Muslim students. Far from bringing the young together, today's schools reinforce ethnic identity.

Malaysia's race-based parties have been remarkably successful in ensuring that no group is politically marginalised. This contributes immensely to racial harmony. The success of the Malaysian formula is attributable to strong bonds between senior leaders formed during their school and college days. Such bonds ease political and other differences. However, younger leaders - products of today's segregated schools - are strangers to each other. These leaders aggravate racial polarisation by blatantly pandering to the prejudices of their most chauvinistic followers.

Malaysia's preferential policy also contributes to divisiveness in society. Few would argue with its noble intent of reducing inequities, or quibble that it is a drag on the economy. Besides, such inefficiencies were a necessary price for social stability. The 1969 riot was a rude awakening. Moreover, some economists have now shown that gross inequities can impede economic growth.

Yet after a generation of preferential treatment, Malays - the primary beneficiaries - feel no more competitive. Mahathir himself has declared his dissatisfaction with the programme. To be fair, it has many successes, especially in education, but even these successes have led to problems. For example, a generation ago any Malay scholarship recipient was almost certainly a poor villager, the first in his family to go to college. Today that probability has dropped significantly.

Unmodified, special privileges risk degenerating into a massive entitlement programme instead of reaching the population they were designed for.

Initially, non-Malays supported - or at least resignedly accepted - preferential policies. Today, they resent such programmes, which make them feel less Malaysian. Many, especially the highly talented, have emigrated. Their loss is only now being realised.

The challenge is how to enhance the competitiveness of all Malaysians, Malays especially. Today affirmative action is not the solution; it is the problem. Had the billions squandered on creaky government corporations in the name of helping Malays been used to improve schools and universities, Malays and Malaysia would definitely be better off. And so too would Mahathir's legacy.

Tomorrow: Pak Lah, a preview

The above article first appeared in Woodrow Wilson Center Asia Program's Special Report

on Malaysia.