He's The Boss
Prime Minister Mahathir sacks his deputy and effectively withdraws from the global economy. But who's going to invest in Malaysia now?
By ANTHONY SPAETH

The two landmark homes in Kuala Lumpur's upscale Daman-sara Heights section lie just a few hundred meters apart. One is the residence of Malaysian Prime Minister Mahathir Mohamad. The other, until last week, was the official home of Anwar Ibrahim, Mahathir's long-time deputy and heir apparent. For years, the cozy proximity symbolized the closeness of the two men: the Prime Minister trusted Anwar so much that he let him run Malaysia's government when he took a two-month vacation last year. Anwar, 51, fondly referred to Mahathir, 73, as "the Old Man."

Last week, that formerly placid neighborhood became symbolic of a country descending into economic turmoil and political instability. A police helicopter hovered threateningly over Anwar's house after the Deputy Prime Minister refused his boss' demand that he quit. Police blocked the road leading to both residences. Mahathir then sacked Anwar, shortly after thumbing his nose at the outside world by announcing currency controls and other measures to shield Malaysia from the vicissitudes of the global economy. Anwar packed his family off to his private residence and lashed out, saying he was the victim of a conspiracy "at the highest level" supported by corrupt political cronies and pampered relatives of the high and mighty, whom he compared to "worms under the sun." His party expelled him amid yet unproven but well-publicized allegations of treason, corruption, adultery, a homosexual dalliance and holding a suggestive phone conversation with the wife of a colleague.

Calm amid the chaos was the Old Man, triumphant as usual in a political battle and gracious enough not to gloat. "I wish it hadn't happened, not at this point," he was quoted as saying. "But these things have gone out of my control." Mahathir is now firmly in charge, but his victory was accomplished through heavy-handed and risky tactics. "They now have a currency crisis, a banking crisis, an economic crisis and a political crisis all at once," says Chia Yew Boon, research director of Santander Investment Securities in Singapore. "It's horrible." Adds Peter Tan, a Bangkok-based businessman: "One man with a chip on his shoulder and the country is screwed." Even friendly neighboring countries mourned Anwar's political evisceration and edged close to naming Mahathir the Captain Queeg of Asian politics. "People looked to Anwar as the voice of reason," says a sorrowful Foreign Ministry spokesman in Thailand. "It is very disappointing," sighs Burhan Usar, a parliamentarian in Indonesia, where Malaysia was seen as a model for orderly political succession, especially from one generation of leader to the next. Observes a Philippine cabinet secretary: "Any leader going downhill needs a scapegoat. Anwar happened to be the most convenient."

Cover: Photograph for TIME by Tara Sosrowardoyo

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R E L A T E D   S T O R I E S :

COVER STORY Prime Minister Mahathir Mohamad banishes Anwar
CRANKY OLD MAN The PM has a history of lashing out
VIEWPOINT Mahathir rails against financial orthodoxy
INTERVIEW Anwar explains what went wrong
OUT OF LINE Where does the ex-heir go from here?
POLL Does former Deputy Prime Minister Anwar Ibrahim have a future in Malaysian politics?
POLL Will the new currency controls help or hurt the Malaysian economy?