In the aftermath of the 2008 financial tsunami, the new Prime Minister of Malaysia, Najib Razak, launched a series of reform initiatives to lessen economic regulation. Similarly, the former Prime Minister Mahatir Mohamad promoted economic liberalization after the severe economic crisis of 1985-1986. While both initiatives were launched after crises, Najib placed the emphasis on deregulation while Mahatir focused on privatization. In discussing these initiatives, this paper reaches two conclusions. First, crises give birth to liberalization because they disturb the delicate balance between the dual sectors in the Malaysian political economy and this can only be restored through liberalization and openness. Second, the different directions of the reforms are attributed to differences in the structure of political competition. Under pressure from the co-existence of inter-racial and intra-racial competition, Najib resorted to rule-building through deregulation so as to strike a balance among different political groups. Mahatir, however, only faced intra racial competition and could build up his personal network through privatization.