When the Asian economic crisis hit in 1997, one country chose to address the calamity in its own unique way. That country was Malaysia.

Rather than turn toward western countries and institutions for help, Malaysia, led by 75- year-old Prime Minister Mahathir Mohamad, chose to turn inward.

The Malaysian currency, the ringgit, was pegged which went against the tide in the region. Neighbouring Thailand, for example, floated its currency in July 1997. Malaysia went further and imposed capital controls to stop currency outflow. Most of these controls have since been relaxed with the exception of the currency peg.

The result of these actions spelled success for Malaysia. A year ago productivity returned to precrisis levels and Malaysia became the envy of its neighbours.

Since then, however, this nationalistic policy has been a bit overdone and as The Financial Times reports investors are losing faith in Malaysia.

"But the government balked at sales to overseas companies and used taxpayers' money to bail out debtors, leaving many investors downbeat about prospects for reform," reports Sheila McNulty of The Financial Times.

The troubles started in Malaysia in April of last year when Time Engineering prepared to sell a 20-per cent holding in TimedotCom, its telecommunications unit, to Singapore Telecommunications. The agreement would have shown that Malaysia was ready to accept outside technical expertise. The government blocked the deal on nationalistic grounds, according to The Financial Times.

As of this writing shares in TimedotCom have just begun to be offered to local investors. However, it is not expected that the subscription will be sold out.

Next Petronas, the wealthy

national oil company bought the national car manufacturer, Proton, from majority shareholder, Hicom Holdings. After that, Malaysia asked its Asean Free Trade Agreement neighbours, especially autoproducing Thailand, for a reprieve on tariff reduction in the automobile sector.

The final move came at year's end when the government raised the ceiling on foreign ownership in Malaysia Airlines. Anticipating this as a move to sell to a strategic partner, observers were excited. With the flick of an eyelash the government repurchased the airline.

With Prime Minister Mahathir continuing to use public speaking opportunities to lash out at "currency speculators" for causing Malaysia's troubles, it is a wonder that foreign investors have stayed involved with the country for such a long time.

However, the overtly nationalistic Malaysian policy appears to have taken its toll and investors are quite disenchanted with the economic stance of the country, according to The Financial Times

One country that may be adversely affected if it emulates Malaysia could be its northern neighbour, Thailand.

In its January 18th edition, the Bangkok Post reported that Harvard-educated Dr Surakiart Sathirathi, who is expected to become foreign minister in the new Thai government said: "Look at Malaysia. It implemented several anti-foreign policies but, eventually, foreign investors rushed there, while Thailand, having followed what the IMF said, was eventually downgraded by foreign credit rating agencies."

Indeed Dr Surakiart's statement is correct historically, but politics and economics change rapidly and the present investor outlook on Malaysia has substantially changed in a year's time, if the financial news reports can be relied upon.