Malaysia - Domestic policy

Mahathir's economic policies have been both successful and popular. He has consistently taken a nationalistic approach to the economy, encouraging Malaysian self-reliance and blaming foreign powers and institutions for the nation's problems. Under his leadership, the New Economic Policy goal of increasing Malaysian ownership of the nation's enterprises has been achieved, and a majority of Malaysian industry is now domestically owned. Malaysia has become less dependent on income from traditional resources as manufactured goods have accounted for a rising share of all exports. When the country fell into recession following the Asian economic crisis of 1997, Mahathir overturned austerity measures and financial reforms introduced by deputy minister Anwar Ibrahim and imposed currency controls. The nation's recession was officially declared over by August 1999, but in November 2001 Mahathir admitted the country was once again in a recession.

Economic growth was extremely healthy in 2000, when the country saw an 8.5% increase in the GDP. Corporate debt, however, continued to be a major problem that was ignored until 2001, when the regional economy experienced negative growth. Mahathir, deciding companies needed to rid themselves of debt in order to be stronger competitors in the global market, took initiatives to restructure businesses. A new chief executive officer (CEO) was hired for the government's Corporate Debt Restructuring Committee to insure companies make efforts to pay down their debt. In his budget for 2003, Mahathir stressed support for local businesses over foreign investment, cut corporate taxes, and continued to encourage development in the high technology and biotechnology sectors.

While credited with much of the nation's economic progress over the past two decades, Mahathir has been widely criticized for the authoritarian grip with which he has kept his UMNO party in power. During his tenure in office, Prime Minister Mahathir has cracked down on political opposition both inside and outside the party and government by closing newspapers, arresting or detaining opposition leaders, and seeking to make the judiciary more dependent on the government. On his advice, Parliament has enacted laws restricting the interpretive powers of the courts. In 1988 he persuaded the former king, Sultan Mahmood, to endorse a tribunal, which then dismissed the lord president and two justices of the Supreme Court.

In the 1990s, after undergoing heart surgery, Mahathir became concerned with the future leadership of UMNO ( Baru ) and named first Ghafar Baba and then, in 1993, Anwar Ibrahim as his chosen successor, under the title of UMNO deputy president. By 1998, however, Mahathir's relations with Anwar became strained when the two men disagreed on economic policy in the wake of the Asian economic crisis that had begun the previous year. In addition to removing Anwar from his post, Mahathir had him arrested and charged with corruption and sexual misconduct. In 1999, Anwar was sentenced to six years in prison while Mahathir's National Front coalition retained its parliamentary majority in national elections. Malaysia's strict Internal Security laws have been credited by Mahathir for keeping the country free of terrorism and ethnic strife. In late 2002, it was announced that he would strengthen the laws, which allow detention without charges or trials. Opponents claimed that these domestic laws stifled dissent and violated human rights.

In June 2002, Mahathir suddenly announced that he would step down in October 2003, causing dismay in UMNO. Deputy prime minister Abdullah Badawi was tapped to take over the office at that time. A glimpse of "life after Mahathir" was apparent during Mahathir's two-month vacation in March–April 2003, during which Badawi assumed charge. Badawi is seen as a moderate conciliator, somewhat in contrast to Mahathir's aggressive style. Opposition to UMNO from Anwar Ibrahim's Keadilan party weakened as its leader endured his jail sentence. However, the opposition Parti Islam se-Malaysia (PAS) increased its strength, with the Islamist party just narrowly losing to UMNO in Kedah State elections in July 2002.