(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01058R000201550001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: January 12, 2017
• Document Release Date: April 26, 2010
• Sequence Number: 1
• Publication Date: June 10, 1985
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85T01058R000201550001-3
Central Intelligence Agency
Washington, D. C 20505
DIRECTORATE OF INTELLIGENCE
10 June 1985
Malaysian Chinese Politics in Disarray:
Trouble for Mahathir
Summary
An agreement reached in mid-May ends--rat least
temporarily--abitter leadership crisis in the
Malaysian Chinese Association (MCA), the top Chinese
party in the National Front which is Prime Minister
Mahathir's governing coalition. Factional
infighting seems certain to continue, however, and
will delay national elections which we believe
Mahathir originally planned to call early next
year. The MCA must hold its long-delayed party
elections first and Mahathir will have to allow time
for wounds from the party infighting to heal. In
our judgment, this will push back a national
election until at least the latter half of 1986.
This memorandum was prepared byl (Southeast Asia
Division, Office of East Asian Analysis. Research was completed
on 10 June 1985. Comments and questions are welcome and should
be addressed to Chief, Southeast Asia Division, OEA,
25X1
25X1
25X1;;
25X1
25X1:
25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85T01058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
4
Crisis in the MCA
The struggle for leadership of the,Malaysian Chinese
Association (MCA) began over a year ago when the party's acting
President Neo Yee Pan expelled his rival, Vice President Tan Koon
Swan, and 13 of Tan's supporters. The expulsions came after the
embarrassing revelation that Neo had been padding the party's
membership rolls in order to secure his victory in the upcoming
party elections. The battle went to the courts as Tan's
supporters sued the party to readmit them and institute
reforms. Although both factions sought his backing, Prime
Minister Mahathir steadfastly refused to take sides and instead,
after the crisis had dragged on for 10-months, brokered a
compromise. This soon fell apart, however, when Tan learned of
Neo's continued m ni lation of the voter rolls, according to the
US Embassy. 25X1
We believe renewed pressure from high government officials
resulted in a new agreement last month to end the crisis by
creating an ad hoc committee chaired by the National Front
Secretary General empowered to rectify the party's membership
roster and supervise party elections. In contrast to the first
agreement, it gives Tan the option of directly contesting Neo for
the post of party president. Before holding the national party
election, however, both sides must agree on a membership list and
branch and divisional elections must be held. In late May, the
committee appointed an international accounting firm to help in
the membership verification process,
probably not be held before October.
The Political Fallout
party elections will
The dispute, we believe, has delayed Mahathir's plan for an
early national election. According to the US Embassy, Mahathir
wanted to call elections no later than April 1986, a year before
he must dissolve Parliament and turn to the voters for a new
five-year mandate. The Prime Minister, however, will almost
certainly defer elections until the MCA's political wounds are
healed and he is reasonably certain the MCA can deliver its
vote. Even if MCA party elections are held sometime this fall,
the party will probably need at least a year to reorganize and
unify itself, thereby pushing a national election to sometime
after mid-1986 or early 1987.
But we believe problems in the MCA make the National Front
increasingly less attractive to the Chinese. The bitter
infighting, the worst in the MCA's 35-year history, has tarnished
its image as the top Chinese party. The inability of the MCA to
resolve the dispute on its own has added to the political
disaffection of many bright young Chinese, who already see little
future in politics because of the circumscribed political role of
2.5X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
the Chinese in Malaysia, according ?to the'US Embassy. The
squabble also comes at a time when the Chinese community is
disgruntled with the Mahathir administration's mishandling of
several issues, particularly the "Bukit Cina"* controversy, in
which the government sought to, develop land where a Chinese
cemetery is located. The Chinese are also concerned that the
government may put more economic restrictions on them in an
attempt to meet the targets of the nro-Malay New Economic Policy
by the 1990 deadline.
Meanwhile, several other members of the National Front face
growing challenges so that the 11-party coalition can ill afford
to lose the support of the Chinese community. Mahathir's United
Malays National Organization (UMNO) party has over the past year
become embroiled in a confrontation with the opposition Islamic
party, Parti Islam Sa-Malaysia (PAS), UMNO's only serious
competition for the Malay vote. In addition, the coalition's
Berjaya Party, which governed Malaysia's Sabah state for the past
nine years, was -trounced in state elections in April by a
recently formed opposition party. The upset victory by the
Christian and ethnic Chinese-based party reflects badly on
Mahathir, who campaigned heavily for Berjaya.
Hazards Ahead
It is by no means certain that the latest agreement signals
an end to the MCA crisis. Even if the agreement holds, a
showdown between Neo and Tan in the party's presidential campaign
could factionalize the party further and, we believe, all but end
prospects for party unity.
Neo, moreover, will
fight hard to prevent Tan, who reportedly has the support of a
majority of the MCA rank and file, from getting control of the
party machinery because he has more to lose than Tan. If Neo
loses the MCA presidency, the former university professor would
almost certainly lose his minister's post in the 'net
and would probably be finished politically.**
A permanent split in the MCA would be particularly
troublesome for Mahathir because an MCA failure to deliver the
* "Bukit Cina"--literally China Hill and reportedly the
location of the largest Chinese cemetery outside China--is
located in the heart of Malacca. Kuala Lumpur eventually backed
down on its development plan under heated protest from the
Chinese community.
** On the other hand, Tan is a successful businessman and
throughout the crisis has retained his position as Managing
of Multi-Purpose. Holdings, the MCA's investment arm.
25X1
25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
Chinese vote to UMNO' i n Mal ay-dominated 'constituencies would`
'
probably improve the electoral performance of PAS, thereby
reducing the Front's two-thirds majority in Parliament. We 25X1
believe a swing of votes away from the MCA would also benefit the
Chinese-based opposition party, the Democ Artinn y
(DAP), which has 10 seats in Parliament.
We believe that Mahathir is concerned enough about the
potential growth of PAS that he may be willing to intervene
personally if the MCA squabbling resumes. Mahathir would most
likely back the Tan faction, primarily because of Tan's proven
ability in the past to deliver the Chinese vote. The US Embassy
reports that Tan supplied the Chinese vote in a byelection last
January that resulted in a large UMNO win over PAS.
Nevertheless, such action would carry the risk that Mahathir's
political image would be damaged by the charge he interfered in
the internal politics of the Chinese. The DAP, which is the
government's most vocal critic, would almost certainly use this
to criticize Mahathir and his administration. In any event,
while the MCA crisis sorts itself out, Mahathir hopes to bolster
the National Front's appeal to Chinese voters with his first trip
to China in November--a tactic used successfully by former Prime
Minister Razak in his 1974 election campaign. 25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
Appendix A
A Chronology of Crisis in the MCA
March 1983 -- President Lee San Choon resigns, naming Neo
Yee Pan to replace him. Vice President Tan Koon Swan, who
thought the position should have been his, begins to gather
support to challenge Neo in the party elections scheduled for
July 1984.
January 1984 - The rivalry between Neo and Tan escalates,
culminating in reports that Neo padded election rolls with up to
100,000 "phantom" members. Neo resists calls to investigate this
as Tan's faction petitions for an Extraordinary General Meeting
(EGM) to look into the matter.
March 1984 - Neo expels Tan and 13 others from the party.
.Two Deputy Ministers are forced to resign..
6 May 1985 - Tan's camp holds an EGM in which 60 percent of
the MCA's delegates call for:
-- Reinstatement of the 14 expelled members
-- Removal of "phantom" members
-- Amendment to the MCA constitution to prevent future
arbitrary expulsions
-- Free MCA elections in which any member can contest any
post.
May 1984 - After Neo rejects the proposals, Tan's faction
sues the party to force acceptance of the EGM resolutions and
stop party elections.
19 May 1984 - Elections scheduled for July are frozen by
court order.
July 1984 - At Prime Minister Mahathir's behest, National
Front Secretary General (and UMNO Vice President) Ghafar Baba
begins mediation effort between opposing factions. This effort
stalls and starts over the followin months, largely due to Neo's
uncompromising stance. 25X1
15 December 1984 - Acting Prime Minister Musa Hitam advises
the MCA to get its house in order or pull out of the National
Front coalition. 25X1-
21 December 1984 - Mahathir returns from abroad and
negotiations begin anew.
25X1
25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
30 January 1985 - Compromise agreement signed in Kuala
Lumpur. The nine-point agreement includes the provision to hold
party elections before 31 May 1985 and commits both sides to
support a concensus slate of can headed by Neo and
including Tan. as a vice-presidential candidate'. In addition, the
withdrawal of all court cases is stipulated on the agreement by
both factions on the party's membership rolls.
25X1
25X1
February 1985 - Following review of party rolls, Tan faction
drops lawsuit. 25X1
21 Mar h 1985 - Mahathir reappoints two deputy ministers.
April 1985 - Tan faction accuses Neo of deleting Tan's
supporters from the party membership lists and obtains new court
injunctions to stop branch elections. Compromise agreement
unravels. Tan calls for a new EGM, set for 12 May.
10 May - The two sides work-out a new pact wherein all
disputes are to be referred to a newly formed ad hoc committee
chaired by Ghafar Baba and including three representatives from
12 May - Tan q M held and new ad hoc committee proposal
endorsed.
27 May - Ad hoc committee appoints the international
accounting firm of Peat, Marwick, Mitchell and Company to assist
the committee in determining which MCA members had paid
membership fees through 31 December 1983.
25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
Appendix.B
The Chinese Political Dilemma
The Chinese political voice in Malaysia, which has
traditionally been muted, declined further after serious race
riots in 1969. Since then, UMNO has had a stranglehold on
politics, made easier by divisiveness within the Chinese
community which prevents it from forming a united Chinese-based
party with which to counter the monolithic Malay voice in UMNO.
The MCA, the largest Chinese-based party with 350,000
members, represents--at least in form--the Chinese community in
Malaysia. In reality, however, the party does not have a
convincing mandate, according to the US Embassy. Many Chinese
question the MCA's ability to represent Chinese interests when it
is pressured by UMNO to deli.ver.-the Chinese vote. Also .
decreasing the effectiveness of the MCA is its constant tendency
to fracture into bickering factions. As evidence of its low
standing among the UMNO leadership, the party got no Cabinet
plums despite the MCA's credible showing in the 1982 general
election, and in fact has held no major Cabinet portfolio since
The other Chinese-based parties have even less clout.
-- Democratic Action Party: the largest Chinese opposition
party whose president, Lim Kit Siang, is leader of the
opposition in Parliament. The party's appeal, however,
is limited to poor and pnderDrivileaed Chinese, mainly in
depressed urban areas.
-- Gerakan Rakyat Malaysia: controls the state of Penang,
where US multinationals cluster, but has little political
influence elsewhere and has been plagued with perennial
factionalism. According to the US Embassy, moreover,
Gerakan's claim to the Penang chief ministership may be
subject to pressure from U'MNO, which already outnumbers
Gerakan in the gerrymandered state assembly.
-- Sarawak United People's Party: a member of the coalition
in the state of arawak as practically no impact at the
national level.
25X1
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
 Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3
SUBJECT: Malaysian: Chinese Politics,in Disarray:
Trouble for Mahathir
Distribution:
Original - OEA/SEA/ITM
1 - Richard Childress, NSC
1 - Alan Kitchens, INR/State
1 - Joe Winder, EAP/IMBS/State
1 - Corazon S. Foley, INR/EC/State
1 - Paula Causey, INR/EAP/State
1 - Byron Jackson, Commerce
1 - Douglas P. Mulholland, Treasury
1 - Greg Moulton, USTR
1 -
1 -
1 -
1 - Lt. Col. Richard ice, Dept. of Defense
1 - Mr. Donald Eirich, Dept. of Defense
1 -.Executive Director
1 - DDI
1 - D/OEA
1 - OEA Research Director
1 - NIO/EA
1 - PDB Staff
1 - C/NIC
CPAS/IMC/CB
1 - DDI/C/PES
1 - OCR/ISG
PAS/
1 - CDDO/C
1 - PAS
1 - OCR/EA/A
1 - NIC/Analytical Group
1 - Ch/NEA/OEA
1 - Ch/CH/OEA
1 - OEA/SEA/IB
1 - Ch/SEAD
1 - DCh/SEAD
1 -
1 -
1 -
1 - DDI Rep CINCPAC
Sanitized Copy Approved for Release 2011/06/29: CIA-RDP85TO1058R000201550001-3