Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	TOKYO, JAPAN 
Tarikh/Date 	: 	24/01/83 
Tajuk/Title  	: 	TO THE JAPANESE 
			ECONOMIC ORGANISATIONS 




Mr. Chairman, I am very pleased to be here today to address such a
distinguished gathering of the leaders of the business community of the
world's second largest industrial power.

Those of us who are from the developing countries cannot help but admire
the fact that you and your predecessors, through sheer hardwork and
determination, helped to guide the first Asian nation from an island-based
agrarian society to become what is perhaps the most technologically
efficient economy in the world today. Japan accounts for 10 per cent of
world economic activity, although occupying only 0.3 per cent of the
world's land area and supporting about 3 per cent of the world's
population. The achievements of the Japanese economy has become a model of
inspiration for many newly industrialising economies. Indeed, your record
now is the envy of the industrial West. The developing economies, no
doubt, have much to learn from an economy that was able to achieve growth
rates of over 10 per cent for over two decades to the early 1970's, and
rates of up to 5+ per cent annually in the recent past, with moderate
inflation and practically no significant unemployment. Through the unique
ability of your researchers and businessmen to work in close co-operation
with your Government to take the long view, the Japanese economy has been
successful in taking the first bold steps towards advanced automation and
high technology to raise productivity that has astonished the world. I
gather that the Japanese car industry today produces 4 times as many cars
as it did a decade ago, with about the same work force of less than
670,000, or about the size of employment at General Motors. Also, Japanese
industry today accounts for about 70 per cent of the industrial robots
being used in the world. This drive towards the widespread use of high
technology and the growing reliance on the knowledge-based industry will,
I am sure, secure for the Japanese a comfortable competitive advantage in
the global market for consumer durables and industrial equipment for some
time to come. But, as you are all keenly aware, the process of adjustment
of the world economy, to a more energy efficient and an economically more
productive stage, is a slow and painful one. For many, the growth pangs
have proven too painful. The older industrial nations, attempting to
re-tool their aging machines and struggle to change the work attitudes of
their people, have been forced to face both social and political
upheavals.

2. However, in an interdependent world, even the most efficient of
economies cannot escape the vagaries of the international
recession. Despite the easing of monetary policies in the West, world
production and trade continue to remain sluggish, with unprecedented high
levels of unemployment. The economy of the United States is still in turn
out to be the longest, and a winding one at that. Even the Japanese
economy, the most buoyant of the industrial nations, has had to slow down
its growth performance to about 3 per cent last year, while the OECD
countries has since lowered the forecast of growth in 1983 for its
24-member club from 2.5 per cent previously to 1.5 per cent currently.

3. This backdrop of international recession has been used by some of the
largest industrial powers to bow to the mounting pressures for
protectionism, which I consider to be one of the most serious threats to
global well-being, and a real set-back for the early realisation of a new
world economic order. These are, of course, the countries which are most
seriously affected by the rising competitive edge of Japanese industry. It
is a pity really that of late, there has emerged a new school of what I
call "free-traders of convenience", who fanatically proclaim themselves to
be the standard bearers of free trade, except when it affects themselves
adversely. As rational men, the global benefits from free trade are not
hard to see. To achieve high living standards, the world needs to move
progressively towards greater liberalisation of trade. As a politician, I
know only too well how it feels not to make the politically popular
moves. But, politics is also moved by principles and ideas based on
long-term well-being. In the game of free trade, it is my view that those
most well placed to make accommodations must make the first move to
eliminate as many of the remaining barriers to trade as is realistic to
remove quotas and reduce tariffs and duties on as many imports, as well as
non-tariff barriers to trade, including the simplification of import
procedures, which have proved so difficult for many exporters. With each
action, there will be a reaction and response. Given goodwill, I see no
reason why we cannot make further progress towards freer trade, even in
recession.

4. In this context, I note that the Japanese industry has already taken
the right steps towards internationalising its activities by switching
progressively towards production based in strategic consumer countries,
instead of concentrating heavily on the direct export of finished goods
from Japan. The increasing number of joint-ventures between more and more
Japanese and selective "host-based" companies involving transfers of
technology and skills are also encouraging signs that Japanese industry is
indeed taking a more responsible role, befitting its status as the
foremost technological economy. It is with this in mind that I wish to
discuss with you today the course of Malaysian-Japanese relations, within
the broader perspective of ASEAN.

Gentlemen, 5. As some of you may be aware, Malaysia shares a number of
similarities with the Japanese economy of the not too distant past. We are
a small economy dependent on international trade, with a young but rapidly
growing work-force. We both share high levels of national investment and
savings, and have enjoyed relatively low rates of inflation. More
important, we share a common belief in monetary stability and financial
discipline as similarity ends. For Malaysia is basically still
agricultural-based, relying on production centred on our vast natural
resource base. Increasingly, as we develop our fledgling industrial base,
we will require more and more of the capital, know-how and experience that
Japan has to offer. As Japan moves further up the technological ladder,
you will be reducing the share of primary raw materials in your import
content. Increasingly, non-oil forms of energy and perhaps, finished
products presumably will take up a larger share of your purchases. At the
same time, you have been shifting your emphasis on to the faster growing
and highly export-oriented advance technology manufacturing industries
with very high value added, while restructuring your older and lower
technology industries in the world market place. As I see it, this
progressive upgrading of your economic structure complements, rather than
contradicts, the process of upgrading that is being implemented in
Malaysia and the other countries in ASEAN.

We have been major suppliers of energy and primary commodities for your
industries. At the same time, we are significant consumers of your
finished and semi-finished products. This symbiotic relationship, which is
based on the classical developed-developing economic dichotomy, is now
very much obsolete. Politically, such an arrangement can no longer be
accepted. Japan is ASEAN's most important trading partner and is
Malaysia's fastest growing major trading partner. ASEAN accounts for about
15 per cent of Japan's total imports and about 10 per cent of its
exports. ASEAN is the leading supplier of rubber, tin, palm oil, lumber,
copper and bauxite to your country, and although less than 20 per cent of
your crude oil comes from our region, virtually all your oil passes
through ASEAN waters.

6. Although it is fair to say that Japan's economic relationship with
ASEAN in general, and Malaysia in particular is excellent, this
conventional relationship in which you remain the dominant economic
partner cannot be carried further in view of the dynamics of your own
changes in economic structure and the radically transforming structure and
priorities of the ASEAN region. We, in the South, are now experiencing the
rapid rates of growth which you enjoyed a decade or so ago. As one of the
fastest growing regions in the world, ASEAN hopes to significantly narrow
the economic gap with the developed world in a matter of a decade or
two. Quite naturally, we would expect that our relationship will evolve
into a more equal and mutually reinforcing partnership. It is regrettable
that the high hopes, raised by the proposed implementation of the Fukuda
Doctrine in 1977, as a basis for a new relationship with ASEAN, whereby
practical economic co-operation would be intensified, have not been
realised. I believe that the many practical difficulties which ASEAN face
in gaining real access to the US$1 billion fund established to assist
ASEAN industrial projects will need to be resolved quickly, in order that
the framework of our relationship can be translated into concrete examples
of ASEAN-Japan co-operation, instead of them remaining as pending paper
proposals. What is vital is not merely a need for heart-to-heart
diplomacy, but mind-to-mind technology transfer and hand-in-hand
co-operation to build up the existing relationship into one that is
mutually beneficial and long lasting in terms of down-to-earth benefits
for our peoples.

7. Let me illustrate further by referring specifically to the
Malaysia-Japan economic relationship. Japan is our leading trading
partner, accounting for about one quarter of our international trade. In
recent years, the traditional trade surplus which we have enjoyed with you
has been reversed into a deficit, reflecting mainly our growing affluence
and rapidly expanding domestic investment programme, implemented largely
with Japanese capital equipment. In recent months, the continuing
deterioration in commodity prices has led to a significant decline in our
exports to Japan, having fallen by about 11 per cent in the 20 months
since January 1981. In contrast, imports from Japan increased by about 35
per cent over the same period. As a result, our trade deficit with Japan
has nearly doubled to US$350 million in the first eight months of 1982
alone. Including the trade in invisibles, the overall trade deficit with
Japan is estimated to be in the region of no less than US$600 million.

8. What is remarkable about our trade with Japan is that 60 per cent of
our imports from Japan represented plant and machinery, while over 90 per
cent of our exports are in the form of primary commodities, involving very
little processing or value added on our part. For example, Malaysia's
exports of sawn timber to Japan accounted for less than 2+ per cent of our
saw-log exports to you, which amounted to US$630 million in 1981 alone. In
the first eight months of 1982, the value of our major exports of rubber,
tin and crude oil to Japan in fact declined in absolute terms by 46, 34
and 20 per cent respectively.

9. This general lack of opportunity for Malaysia to sell, let alone
process its raw materials for export to Japan, will clearly retard our
aspirations to industrialize and diversify our economy. I do see that in
your efforts to restructure your older industries, such as steel,
petro-chemical, pulp and paper, timber and rubber processing, cement and
textiles, there will be opportunities to relocate some of them in Malaysia
as a complement to your own industrial strategy. We, on our part, are
vigorously seeking to upgrade our technology and skills, including access
to part of the markets which you can provide. This complementarity in
industrial development will not entail a large effort on your part, but
will certainly establish a solid basis for the development of our
fledgling industries for mutual benefit.

10. Lastly, I should conclude with a few remarks on a matter which I am
sure is of direct interest to you, namely, the question of Japanese
investment in Malaysia. Investment from Japan is already the second
largest source of foreign investment in Malaysia's manufacturing
sector. We are, of course, pleased that many of the most famous Japanese
companies are directly involved in our industrialization programme. At the
last count, over 600 Japanese companies have invested in Malaysia a total
of approximately US$650 million, of which nearly two-thirds were in the
manufacturing sector. A recent survey of these companies revealed that
nearly three-quarters of Japanese investment in Malaysia were in the
labour-intensive industries, namely textiles, electronics, and the
assembly of simple machinery and equipment. The study also showed that
Japanese investments have been profitable, which I must say did not
surprise me at all. What was particularly revealing is that while over 80
per cent of the companies surveyed referred to their contribution to
Malaysia in terms of the creation of new employment opportunities, only
one-half of them indicated that Malaysia had really benefitted
significantly in terms of technology transfer. Another 40 per cent of the
companies surveyed stated that their investments had contributed only some
degree of technology transfer, while the remainder provided very little or
no transfer of technology at all.

11. Looking ahead, we believe that foreign investments certainly bring a
good measure of monetary benefits to the investors. Otherwise, they will
seek their profits elsewhere. For the host country, the employment
generated by foreign investment is no longer a good enough
justification. Foreign investment must be accompanied by a decent dose of
technology transfer, without which the broad policy objective of foreign
investments will not be meaningful. We need skills and know-how. We do not
intend to be the robots for foreign industry. In exchange, investors reap
attractive returns on their investment and secure for themselves at the
same time, a reliable source of supply or an assured market share for
their exports, depending on the nature of the investment. It is important
to understand and appreciate the terms under which foreign investments are
welcome in Malaysia.

12. To pave the way, we in Malaysia have set in motion a national campaign
to prepare our work force to meet the challenges ahead. We are stressing
efficiency, self-discipline and dedication to work. These attitudes are
familiar to you. Our "Look East" policy, in essence, is a call to return
to the self-help philosophy of our earlier era: it re-emphasises the need
to pull ourselves up by our own hardwork, determination and initiative. I
believe that the work force must first be committed to a new lifestyle
that places a premium on dedication to work and work for the good of the
community, before we can effectively propel our society into the era of
modern technology. We have set for achieve "kodo seicho" (high speed
growth) through "seisanryoku kakuju" (increase in productive capacity),
"shokusan kogyo" (greater industrial production) and "yushutsu
shinko" (promotion of exports). In this, we share with you the same
determination to regain a greater control of our economic destiny. No
doubt, we will need to invest heavily in our human and natural resources,
and to mobilise vast sums of money to bring the dream into reality. The
Government is committed to this bold venture. Its main function will be to
provide the leadership and play the catalyst role, and to set in place
efficient infrastructural facilities, foster a stable monetary climate and
instill a political environment that promotes private initiative,
encourages innovation and judicious business risks. The picture is
complete only with the implementation of an aggressive policy to promote
the inflow of foreign capital and know-how, including the upgrading of
skills based on involves Malaysia in a transfer of technology to enrich
the lives of those whom it touches; and a partnership that strengthens the
moral fibre of the work force and its work ethics. In the final analysis,
what we are after is not dissimilar from the "uchiwa" (all in the
family) economic system of the Japanese. For those of you, who share our
aspirations and wish to be involved in a unique development experience,
Malaysia offers you a rare opportunity to share in our advantage to build
a modern nation.

Thank you.