How Mahathir Wrecked His Tech Dream

It wasn't long ago that the world's high-tech CEOs believed in Malaysia--and in the vision of its Prime Minister Mahathir Mohamad. Mahathir, eager to leave a legacy as the father of modern Malaysia, planned Asia's version of Silicon Valley, a 50-kilometer-long stretch through the old palm-oil plantations south of Kuala Lumpur. It would take persistence, pluck, and lot of foreign investment to make a small developing country a real player in the global economy. But Mahathir, a consummate politician, had these and more. When he traveled around the globe in 1997 to promote his vision for a Multimedia Super Corridor (MSC), he persuaded Microsoft Chairman Bill Gates and 40 other high-tech titans to pledge their support, investment, and advice.

That was before the Asia crisis, of course. After it hit, Mahathir made what looked like a 180-degree turn to foreign investors. He launched a war of words with investor George Soros, blamed Jewish conspirators for Malaysia's recession, imposed currency controls that cut off his economy from the rest of the world, and arrested his one-time protege and deputy premier, Anwar Ibrahim. Amid the political and economic turmoil that followed, investors began curtailing their plans for the MSC. They simply didn't trust him anymore.

Now it's unclear whether the MSC can be completed at all. Pledged investments are just one-fourth of what Mahathir expected, and even that amount may be too optimistic. Malaysia is likely to end up with just a few token companies doing modest mid-level technology projects, while the talented software developers and high-tech researchers of the world go elsewhere in Asia. After all, rigid countries that repress dissent cannot foster the kind of open atmosphere needed to attract talent and cultivate creativity. As the futurist writer Alvin Toffler has pointed out in strongly worded letters of protest to Mahathir, Silicon Valley was not built on fiber-optic cables alone, but on the creative drive fostered by political freedoms.

A visit to Asia by Gates himself in early March is telling. He bypassed Malaysia and signed deals in Hong Kong and China--which are also vying, like Singapore, to become high-tech hubs. When asked which Asian country would win the race, Gates said "there is enough demand here that Malaysia, Singapore, Hong Kong could all be successful in being great software-development centers. This is not a zero-sum game." Maybe. New high-tech investments that might have gone to the MSC are already going to other countries in Asia. Even with a leadership change and a recovery of Malaysia's economy, the trend will be difficult to reverse.

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