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Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	:	THE PAN PACIFIC HOTEL KUALA LUMPUR 
Tarikh/Date 	: 	24/04/86 
Tajuk/Title  	: 	THE 9TH. JOINT ANNUAL CONFERENCE OF 
			MAJECA/JAMECA 





Y.M. Raja Tan Sri Mohar, President of MAJECA; Mr. Masami Ishii, President
of JAMECA; Ladies and Gentlemen, It gives me great pleasure to be invited
by YM Raja Tan Sri Mohar, the President of MAJECA, to the 9th Joint Annual
Conference of the Malaysia-Japan Economic Association (MAJECA) and the
Japan-Malaysia Economic Association (JAMECA). May I take the opportunity
on this aupicious occasion, to extend a very warm welcome to Mr. Masami
Ishii and other distinguished JAMECA delegates.

2. I consider it a privilege to address such a large gathering of
distinguished business leaders of both Japan and Malaysia. If I recall
correctly,this is my fifth address to you - twice in Japan when I was
Deputy Prime Minister and Minister of Trade and Industry and three times
here in Kuala Lumpur in my present capacity.

3. The MAJECA/JAMECA organisation have now become a model for Malaysian
and interested foreign businessmen to set up when they wish for a forum to
discuss commercial and other problems between them. The annual joint
meeting of MAJECA and JAMECA held alternately in each others country has
now become institutionalised. The viewpoints of the two countries are
aired at these meetings and much misunderstanding have been overcome. Of
course, the constant contact between businessmen of the two countries has
resulted in personal friendship and mutual respect which is good for
social and economic cooperation.

4. The Governments of both Malaysia and Japan have actively encouraged the
kind of relation that MAJECA/JAMECA promotes. It helps to put substance
into the friendly relations between our two countries. Malaysia's trade
with Japan makes up almost a quarter of its total world trade. The
relation should not therefore be merely commercial. It should also be
social and personal. We think that the MAJECA/JAMECA is achieveing just
this.

Ladies and Gentlemen.

5. The world must trade. No country can live in isolation no matter how
rich and self-sufficient. Every country must buy something from other
countries and sell something in order to earn the foreign exchange needed
to purchase goods from abroad. It is obvious that the more foreign
exchange a country earns, the more it can buy from abroad. Indeed, if a
country is lacking in foreign exchange earnings, it has to be given aid in
order to buy from abroad.

6. It follows that when a country buys from another country it is actually
helping the seller to buy more from abroad. In fact the end result of
purchasing goods from a country is often better sales by the purchaser
country to the former. What I am trying to say here is that a country will
not lose if it buys anything particularly from a poor country. You are
only creating a good customer.

7. Malaysia is going through a bad period when her export earnings have
been much reduced. Our imports have accordingly been much reduced. As our
biggest trading partner is Japan, it is natural that imports from Japan
have been reduced. Of course we are not the United States and our imports
are insignificant compared with those of the United States. But too much
export to the United States will create problems. Small countries like
Malaysia can buy and give out contracts with less problems.

8. However, if we are to sustain our imports we must be able to sell our
goods, whether commodities or manufactured products in order to have
sufficient foreign exchange. Japan can help us recover our purchasing
power by buying more and also by investing more in Malaysia.

9. Malaysian goods are cheaper now because of the depreciation of the
Ringgit against the Yen. Manufacturing in Malaysia is also cheaper
now. Indeed, it makes sense to manufacture in Malaysia for re-export to
Japan. Of course Made in Malaysia Japanese goods are now very competitive
world-wide.

10. Another problem that affects world trade is the imbalance in the
export and import between two countries. Because the American dollar was
over-valued, American imports from Europe and Japan continuously exceed
their exports. The countries of Europe together with Japan decided that in
order to balance the trade the value of the American dollar must be
reduced.

11. You did a good job and the American dollar has now depreciated
greatly. Unfortunately you did not consider the other countries of this
world. When the US dollar depreciated oil exporters like Malaysia lost
money. With the rapid drop in oil prices the loss is even greater.

12. In the meantime, the Malaysian Ringgit also depreciated against the
Yen and other European currencies. Not only must we now pay more for our
imports but the loans in Yen and other appreciated currencies have now
increased in value. The low interest rates that were charged are now
meaningless. We have to find, in some cases, 40% more ringgits in order to
pay off the loans which financed projects that have as yet given no
return. It would seem that countries like Malaysia are forced to pay for
the imbalance in trade between the giant economies of Japan, Europe and
America.

13. I should take this opportunity, once and for all, to put to rest -
should there still be any lingering uncertainty - doubts about the
Government's ability to meet its debt repayments. It is true,the economy
is going through a rough patch. That is why we are tightening our
belts. We have made real progress in tackling the "twin deficits" in the
Budget and the balance of payments. In the final analysis, we should
emerge leaner, but stronger and more resilient. Let me state categorically
that we intend to honour all our debts and on time. We shall pay both
interest and principal when they fall due.The Government has no plans to
reschedule any of its debts. Malaysia has demonstrated by our deeds that
we are a responsible borrower. This will not change, just because
commodity prices have fallen sharply. For the Federal Government,
principal repayments on its external debt in 1986 will amount to $863
million. The Central Bank's external reserves totalled $13.7 billion at
the end of March 1986. Earnings on these reserves alone would be more than
ample to meet the debt repayments. Bankers should have no doubt whatsoever
on the Malaysian Government's resolution to meet its debt obligations.

14. Malaysia has always maintained that we want trade, not aid. Even in
these hard times, we are not asking for aid. All we are asking for is fair
trade. The fall in commodity prices in not accidental. Nor is it part of a
cyclical phenomenon. The policies of the powerful economies and the
economic clout they wield have something to do with the present depressed
prices.

15. The idea of a New International Economic Order has been
abandoned. Nations are not moved by charity. Only self interest will
influence their actions. So I will not appeal for charity. I will appeal
for enlightened self-interest. It does not do any country any good to
impoverish potential customers. Manipulation of currency without regard
for the effect on the developing nations must eventually damage world
trade. In the good old days people go to war if they are deprived of world
trade. The small nations cannot go to war but they will be tempted to seek
other solutions, none of which will bring prosperity to human kind.

16. What would constitute enlightened self-interest for the rich
countries? Fear of losing a potentially rich market would. The market can
be lost not only through poverty but also if, through sheer necessity, the
market opts for membership of another camp. The market could, prior to
changing ideology, undergo traumatic experiences such as civil strife and
civil war. Or it could be just a change in the Government through the
power of the vote - a change from a friendly to a hostile Government. Some
of these possibilities are distant, but some are obviously possible. It
would be a pity indeed if an area noted for its stability and steady
progress should turn into an area of conflict and uncertainty. If we look
at the trouble spots in the world today, we cannot help but remember that
they were once among the most promising areas in the world. What could
happen there could happen elsewhere. Prevention is possible. Certainly it
is better than the painful process of an uncertain cure afterwards.

17. Malaysia is not going to go that way if it can help it. We are
determined to pull ourselves up by our bootstraps. It would help however
if we do not get pushed down everytime we try to rise.

18. Malaysia is a great admirer of Japan and the Japanese. We cannot
forget that you too were down and out once. But you did not give
up. Although the Marshall Plan did help, but it is your will and your
disciplined determination that lifted you up from the abyss and made you
the economic power that you are today. We would like to achieve the same
feat, now more than ever before. That is why we coined the slogan Look
East.

19. Although some people in Malaysia purposely misinterpreted the Look
East Policy as giving contracts to the Japanese, we are glad that the
Japanese Government and business people voluntarily responded. Since the
Look East Policy was adopted a lot of Malaysians have been train ed in
Japan, and Japanese business methods have been studied and
implemented. Some Malaysians have even managed to acquire and practice
Japanese work ethics.

20. Some Malaysians fear that we would become Japanese. There is not a
hope that anything like that would happen - certainly it will not happen
to the critics of the Look East Policy. Malaysians will remain Malaysians
even if they work harder, or they acquire team spirit or patriotism. These
qualities are not the monopoly of the Japanese.

21. We regard the Look East Policy as part of our effort to help
ourselves. If we look to Japan for guidance it is because it is better to
copy a tried and tested approach than to invent new ones. Japan's
willingness to facilitate our efforts is much appreciated. We hope that
the Japanese Government and the Japanese business community will continue
to provide training and educational facilities in order to enable Malaysia
to achieve the targets of the Look East Policy.

Ladies and Gentlemen.

22. Malaysia has just launched the Fifth Malaysia Development Plan.It is a
modest Plan compared to past plans. A growth of 5% is targetted.

23. The Plan calls for a total Federal Government allocation of M$40
billion for development of public sector programmes and projects, with
58.8% for the economic sector 22.5% for the social sector and 18.7% for
security and administration. Under the Fourth Malaysia Plan total net
Federal Government development expenditure amounted to $46.3 billion.

24. The growth scenario of the Malaysian economy during the second half of
the 1980s is set against a backdrop of a medium growth rate of about 3.0
to 3.5 per cent per annum for the industrialised countries. We anticipate
recovery of the world economy by 1989-90. Various markets should by then
be less protectionist and normal trade rather than barter should return.

25. Under our plan, the private sector is expected to play a crucial
role. The depreciation of the ringgit should level off and remain stable,
giving Malaysian manufacturers and foreign investors a distinct advantage
when exporting. Higher productivity which is being actively promoted by
the Government and the private sector should also improve the
competitiveness and export performance of all Malaysian produce including
manufactured goods. Already foreign investors manufacturing electronic
products in Malaysia are finding that sourcing from Malaysia is very
profitable. Export of these electronic products have picked up
tremendously of late.

26. As imports will become more costly due to depreciation in the
currency, the reduction in imports will help the balance of trade. As
Malaysians are fond of foreign products, the new exchange rates will
counter the usual large outflow of foreign exchange resulting from their
preference.

27. To ensure increased private sector investment the Government will
offer incentive packages to enable the private sector to be more active in
the economy. For instance, in agriculture, policies will be oriented to
encourage greater private sector participation in plantations. Policies on
land transfers and alienation including leasing arrangements will be
modified. Fiscal incentives will be provided to encourage the
corporatisation of the agricultural sector. These include an agricultural
development allowance for crops and agricultural activities not eligible
for pioneer status or investment tax credit. The equity requirements for
new projects will be liberalised to retain foreign and local interest in
the sector. Incentives for the tourism industry will be expanded. We
expect more investment in medium-cost accommodation facilities to increase
tourist flows into the country.

28. The administrative and regulatory requirements of the Industrial
Coordination Act (ICA) in respect of existing and new companies will be
relaxed. The raising of the exemption level will exempt more companies
from ICA. Greater flexibility will be introduced in regard to capacity
expansion e.g. automatic approval to export-oriented companies undertaking
capacity expansion. In addition companies which expand capacity can
continue to maintain the equity structure at the point of obtaining
approval.

29. Projects that export 51 - 79% of their production volume will be
allowed a foreign equity ownership of 51% while those exporting 80% or
more will be allowed an equity share of 80%. A higher percentage is
permissible depending on other factors, e.g. size of investment, location,
value-added and amount of local content as well as technology involved.

30. Our policy review on industrialisation has been completed. We now find
it necessary to re-orientate our industrial strategies. Our objective is
clear cut. We want to maximise the growth potential of the sector. We have
to
re-orientate our strategies because the favourable conditions of the past
15 years will not prevail. We have to be more outward-looking, just as
Japan has always been doing all these years.

Ladies and Gentlemen, 

31. The role of our trust agencies and public enterprises will be
reviewed. Certain Government enterprises or services which have potentials
for private participation or acquisition will be considered for
privatisation. If these enterprises or services can be managed more
efficiently by the private sector we will earmark them for
privatisation. In doing this we will promote domestic competition and
increase productivity.

32. Through the efforts of the private and public sectors, several
programmes and projects have been identified for further privatisation
involving mainly transport, communication and services. The private sector
is encouraged to further complement the Government's privatisation
proposals with the view to accelerating the pace and widening the scope of
privatisation.

33. The next five years will be most significant for Malaysians in
ensuring growth of the economy. Our basic development strategy is to
ensure growth with stability. We have taken full cognizance of the
continued uncertainties in the international economic environment and of
the emerging resource constraints. The public sector will no longer play
an expansionary role in spearheading economic growth.

34. Because of our small domestic market, we have to rely on export to
sustain our growth. Japan, being our major trading partner, will be one of
our target markets for our products, especially for our manufactures. We
note with optimism the decision of the Japanese Government in implementing
an action programme for improved market access. These market
liberalisation measures, we hope, will be beneficial to us too and not
just the developed trading partners of Japan. So far we see only the
elimination of tariff on processed palm oil. To us your trade practice as
a whole is a contentious point in our trade relations.

35. Our exports of manufactured goods into Japan continue to face strong
trade barriers. We see that your existing tariff structure favours imports
of raw materials rather than processed or finished products. We see logs,
for instance, entering Japan free of duty. We note also that our exports
of semi-finished tropical wood products are subject to a high tariff duty
of 17-20% whereas that of softwood is 15%. I hope JAMECA members will
understand and be sympathetic with our aspirations and our needs. I am
sure MAJECA has kept JAMECA members well-informed of these needs already.

36. I am fully aware of JAMECA's willingness to co-operate with MAJECA in
trying to find solutions to our bilateral problems. The existence of the
Japanese Chamber of Trade and Industry Malaysia (JACTIM) is an attestation
to this co-operative spirit. I understand that MAJECA and JAMECA through
JACTIM have formed various working groups whose task was to find solutions
to problems of trade and investment as well as tourism.

37. On this note, I have much pleasure in declaring the 9th Joint Annual
Conference of MAJECA/JAMECA open.

Thank you. 
 



 
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