Capital control measures introduced by Prime Minister Dr Mahathir Mohamad in September 1998 at the height of the economic slowdown have been abused for cronyism and nepotism, said an economist today.

Prof KS Jomo said today Malaysians who previously appreciated the measures were now cynical that the window of opportunity offered by the measures had been undone by the practice of bailouts.

He said the bailouts by the government highlighted the abuse of the government policy as well as exposing that the government's privatisation policy as a "colossal failure" due to crony abuse.

Jomo, economics professor at Universiti Malaya in an interview with malaysiakini , said that cronies were at fault for the stuttered recovery of the economy.

"The stock market's slide in recent months despite continued recovery of the real economy and the decline in reserves despite strong exports point to capital flight led by cronies," he said.

PM to blame

Jomo said Mahathir had criticised Chinese lobby group Suqiu and had exaggerated the Chinese threat in his various speeches to distract from a series of crony bailouts at the end of last year.

Recently, the government has bought back a number of failed privatisation projects to the tune of almost RM8 billion including national carrier Malaysia Airlines System and the Light Rail Transit project.

"His recent appeal for Malay unity is widely seen as hollow and insincere. After all, many say, 'Who is primarily responsible for the current Malay malaise?'," he said.

Jomo added that many Malays, especially those below the retirement age, are cynical about Mahathir.

He added that Mahathir has also lost support in the government administration as well as in the intelligentsia.

"But most importantly, it is clear he has lost much (support) of the party rank and file."

In private conversation, ministers and others discuss exit options and some elected party leaders are now in almost open revolt, said Jomo.

Jomo said that it was apparent that "Mahathir's days are numbered, and the speculation is over timing, sequencing and scenario."

But he was quick to add that Mahathir is a shrewd political survivor who has made important contributions to the nation.

Political vendettas

Jomo also said that Mahathir's exit scenario will depend on his "ability to strike a win-win compromises" with the opposition front (Barisan Alternatif) to ensure that the future of the nation.

He expressed confidence that the BA will rise above the temptation to pursue political vendettas.

"But I am not sure the PM will recognise that this is the best deal on offer," he added.

He said that if Mahathir agrees to the "deal", then much of the damage of the past few years can be undone.

The nation can become stronger and Mahathir's place in national history will be salvaged, added Jomo.

He warned that the alternative picture was unpleasant, taking Malaysia backwards through a protracted stalemate.

New book

Jomo also said that he has been busy publishing his new book, Malaysian Eclipse , which is on the recent economic crisis and recovery.

The book, he said, offered a "nuance" perspective with no real heroes.

However, he said the current controversy in the book is over the "Acknowledgements" in the book where he had saluted jailed Anwar Ibrahim for his courage in taking a stand instead of the easier exit options he was offered.

Jomo also said that he found that much of the local media was wary of talking to him. This, he said was due to the fact that he was "someone who has ben sued for defamation for RM250 million", referring to the suit he was facing for writing an article entitled "Malaysia Props Up Crony Capitalists" in the Dec 21, 1998 issue of Asian Wall Street Journal and on the Internet.

Law suit

The suit was filed by Berjaya Group chief Vincent Tan who claimed that he was defamed in the article concerning him in the way of his business and in relation to his conduct

Tan also named the publisher of AWSJ , Dow Jones Publishing Company (Asia) Inc, its editor, Reginald Chua, the publisher and its executive editor, Urban C Lehner, and Dow Jones & Company Inc, as the other defendants.

In his statement of defence, Jomo denied that he had published or caused to be published the said defamatory words or that he had authorised the publication of the article in the journal.

Jomo said alternatively, the said words were true in substance and in fact and they meant that Tan, who he claimed to be politically well-connected and influential, had agreed with the government to build a monorail in return for various rights in relation to a project entitled Linear City.