Online Extra: Behind Malaysia's Economic Miracle

In 1980, the year before Mahathir Mohamad became Prime Minister, Malaysia's gross domestic product was just $12 billion. By last year, it had grown to $210 billion, and per capita income stood at $3,540, the third-highest in Southeast Asia. Hal Hill, professor of Southeast Asian Economies at Australian National University in Canberra, Australia, explains how Malaysia managed that remarkable growth. Following are edited excerpts from his conversation with Michael Shari, BusinessWeek's Singapore bureau chief.

Q: What can we say has been achieved during Mahathir's rule?

A:

Malaysia has been one of the most successful economies in the Third World. There are fairly straightforward reasons. It's one of the most open economies in the world. There are a few trade barriers but not very many. It's very open to foreign investment. Of course, [after the 1997-98 Asian crisis] there were capital controls on short-term flow. But that didn't affect foreign investment.