Both the people and Mahathir Mohamad's party will decide his future

By Assif Shameen and Sangwon Suh

OUTSIDE A FIVE-STAR hotel in downtown Kuala Lumpur, 20 or so hotel workers are holding a small demonstration. "Down with the management," read their placards. "Justice for hotel workers," "Stop the mistreatment of workers." On the adjacent thoroughfare, cars slow as they pass the demonstrators. Many drivers honk, others stick their heads out and shout: "Reformasi, reformasi!" (reforms, reforms!). Still others call: "Mahathir, resign!" One luxury-car driver waves at protesters and shouts, "Bye bye, Mahathir!" which elicits louder honks and more cries of "reformasi" from other motorists.

In normal times, a localized industrial dispute like this would go unnoticed, and in the evening rush hour motorists would be more concerned about beating the traffic than about taking a closer look at a group of disgruntled hotel employees. But these aren't normal times in Malaysia. "We are very encouraged by the support of the people and the guests," says one protester. "If it weren't for the political situation, we wouldn't have so much support."

The "political situation" is a euphemism for the ongoing struggle between Prime Minister Mahathir Mohamad, the man who has led Malaysia for 17 years, and his former deputy Anwar Ibrahim, who is currently on trial for four of the 10 counts of corruption and sexual misconduct he has been charged with. And it is precisely this "political situation" that has proved to be a major headache for Mahathir. First, there has been the domestic unrest: Anwar's sacking and arrest triggered waves of protest calling for a reform of the political system. "Mahathir has vastly underestimated the support for reforms," says political analyst Chandra Muzaffar. Often now the protests are solely demonstrations against Mahathir, rather than for Anwar. Then there has been the diplomatic cold shoulder: on the eve of the Asia-Pacific Economic Cooperation summit meeting in Kuala Lumpur, a number of visiting leaders sympathetic to Anwar have said they will not meet Mahathir one-on-one.

Adding to Mahathir's woes is the economic recession - a factor that gave rise to the political crisis in the first place. (Despite official denials, it is widely believed that Anwar's ouster came about at least partly because he and Mahathir clashed over economic-recovery policy.) After a decade of robust growth, the Malaysian economy is likely to contract by nearly 6% this year, with another 1% or 2% drop forecast for next year.

Mahathir has not been without his successes. He recently met with Singapore counterpart Goh Chok Tong to smooth out the two countries' often strained relations. The capital controls that Mahathir has instituted - to the condemnation of free-market proponents - appear to be bringing some short-term relief and are no longer dismissed out of hand as economic heresy. Still, Mahathir remains on precarious ground and his toughest battles may well lie ahead.

Perhaps ironically, his immediate concern is probably not Anwar or the reformasi movement but members of his own party, the United Malays National Organization. The main group in the ruling Barisan Nasional coalition, UMNO has traditionally dominated Malaysian politics, but now that grip is becoming less sure. UMNO members admit that the Anwar issue has deeply divided not just the majority Malay population, from which UMNO derives most of its support, but the party itself. The matter, they say, has brought to the fore some long-simmering discontent in the party against its leader. "There is a lot of frustration with the PM," says an UMNO MP aligned with Mahathir.

The grumbling is being fueled by the sense that Mahathir may well become a liability for the party. In an interview with Time magazine, Anwar attacked Mahathir as being "drunk with power," which may be a predictable outburst from an arch-foe. But the grassroots have also not been immune to the feeling that the PM is an autocrat presiding over an unjust system. "People in my constituency talk about the bailout of [the PM's son] Mirzan, the wealth accumulated by Daim [Zainuddin, a Mahathir ally] and the gap between rich and poor," says the pro-Mahathir MP.

For UMNO, such sentiments can only mean one thing: lost votes in the next general elections (due by April 2000). A senior UMNO leader admits: "The ground is pretty bad for us." Party leaders have long expected to lose in two states - Kelantan, currently held by the opposition Islamic Party of Malaysia, and Sabah - but many are now openly conceding that Barisan may not be able to hold on to the conservative Islamic belt states of Trengganu and Perlis in the north, as well as the Chinese-majority state of Penang. Some say the ground is shaky even in Mahathir's home state of Kedah. "I believe Barisan can win if elections are held sometime next year," says a young UMNO MP. "But I think we will lose a lot of seats." Those most vulnerable to defeat are directing their disenchantment at Mahathir. The message, says one UMNO leader from Kedah, is clear: the "old man" must go, if the party is to be saved.

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MANY FOREIGN-MEDIA OUTFITS describe UMNO as Malaysia's "ruling party." It isn't, though it's easy to see how the mistake is made. Malaysia is actually governed by a 12-member coalition called Barisan Nasional (National Front). But UMNO - being Barisan's overwhelmingly dominant party - calls the shots. Those who run UMNO hold all the important government portfolios, which is why the party's leadership stakes are always high - and often hotly contested:

UMNO president: Mahathir Mohamad, who is also prime minister.

UMNO deputy president: Vacant. Position formerly occupied by Anwar Ibrahim, who was deputy PM and finance minister too. Mahathir has kept the deputy PM job open, but has taken finance himself, in addition to the home affairs portfolio he has long held.

UMNO's three vice presidents: Najib Tun Razak, Abdullah Badawi, with the third slot vacant. Najib holds the influential education portfolio, while Abdullah is foreign minister.

UMNO treasurer: Daim Zainuddin, Anwar's predecessor at finance and now back in the government as special functions minister in charge of economic coordination.

UMNO office-bearers also hold other vital portfolios like trade and defense.