Bilateral Relations during the Clinton Presidency
In general, since Malaysia's independence in 1957, the United States and Malaysia have enjoyed cordial relations in trade, investment, defence, narcotics control, and cultural and educational exchanges. (1) Both nations also adhere to shared core values, such as the belief in democracy, in free enterprise, and in religious tolerance. Over the years, cooperation between them has outweighed tension. Briefly, past tensions have included the tin and rubber stockpile disposal plans, the Vietnamese refugee problem, the palm oil issue, the fears over America's withdrawal of its General System of Preferences (GSP) privileges for Malaysia, and differing perceptions on the Gulf War. During the first Clinton administration (1992-96), the relationship began very well. For example, on the political front, Clinton's first term saw an end to the Vietnamese refugee problem as all the remaining refugees in Malaysia were, by 1996, repatriated to Vietnam with U.S. assistance.
Clinton's second term (1996-2000) saw increasing bilateral tensions over several issues, making the closing years of the Clinton administration a very difficult period in U.S.-Malaysian relations, perhaps the most difficult to date. First, there was trouble over the 1997 Asian financial crisis, with a clash of views on its causes. To Mahathir, the crisis was due to the actions of currency speculators like George Soros, while to U.S. policymakers it was due to the lack of transparency in business dealings, the collusion between government and business, structural weaknesses in the Asian economies, and to other reasons like over-speculation, corruption, and cronyism. (2)
The two countries also held differing views on how to handle the financial crisis. Mahathir chose to use controversial currency controls which pegged the Malaysian ringgit to the U.S. dollar, required all ringgit to be sent back to Malaysia, and prevented the ringgit from being taken out of Malaysia for at least a year to stabilize the stock market and protect Malaysia from destabilizing short-term outflows of foreign capital. He also believed in priming the pump to jumpstart the Malaysian economy. His policies, however, meant going against International Monetary Fund (IMF) and World Bank prescriptions for the stricken Southeast Asian nations, such as fiscal restraint and the cutting of subsidies. Mahathir was criticized at the time for his currency controls but he has since been vindicated as the controls did work for Malaysia whereas some IMF and World Bank policies further weakened countries like Indonesia? Yet another source of irritation in 1997 was the U.S. attempt to investigate the Petronas gas deal in Iran. In protesting this move, the Malaysian government pointed out that it did not accept extra-territorial applications of Washington's Iran-Libya Sanctions Act of 1996 and that Malaysian companies would continue to do business in Iran and Libya. (4)
On top of these differences was growing disagreement with U.S. policy towards the Middle East, especially over what was perceived as America's pro-Israel stance, which was at odds with Malaysia's support for the Palestinian cause. Bilateral tensions were further exacerbated when, in September 1998, Mahathir sacked his deputy prime minister and finance minister, Anwar Ibrahim. Mahathir also expelled him from the ruling party and humiliated him with charges of corruption and sexual misconduct.
Tensions increased when Vice President AI Gore made some remarks supporting pro-Anwar demonstrators in a speech at the Asia-Pacific Economic Cooperation (APEC) meeting in Kuala Lumpur in November 1998. In that speech, Gore had hailed "the brave people of Malaysia" for seeking reformasi or reform in Malaysia. Relations deteriorated further when Anwar's second trial on sodomy charges ended with a guilty verdict in August 2000 and he was sentenced to another nine years in prison. …