Speechs in the year
Tarikh/Date 	: 	06/10/86 

Mr. Chairman; Your Excellencies; Distinguished Participants; Ladies and
Gentlemen; I am very pleased to be here this morning and I wish to thank
the American International Group and two of its subsidiaries in Malaysia,
the American International Assurance and the American International
Underwriters for promoting and organising this seminar and inviting me to
address it. I am aware of the extensive groundwork that has been done by
the Group in identifying the likely investors and I would like to
congratulate everyone concerned for the initiative and effort. To the
participants I extend a warm welcome to Malaysia, which I hope will be
your temporary home after your investment here. In case this is your first
visit and you may not have the opportunity again, please take time off to
see a bit of the country and its friendly people. It may help you to make
up your mind in the affirmative.

2. The United States is one of the top five major investors in Malaysia
but your total involvement is comparatively small. It is certainly not
commensurate with your status as the biggest economy in the
world. According to the latest survey of manufacturing companies in
production, US investments in Malaysia's manufacturing sector totalled a
mere US$128 million in terms of paid-up capital and US$358 million in
terms of fixed assets. Yet the annual exports from US to Malaysia amount
to 4676.4 million ringgit. Clearly you are getting maximum benefit from
your relatively small investments. That in itself should stimulate you to
invest more.

3. There may be many reasons to explain this relatively low profile of US
investments in Malaysia; low, with the exception of the electronics
industry. One of the reasons could be that Malaysia is a new country that
came into being without the usual big bang. Until 1963 we were known as
Malaya. Indeed some American writers still refer to us as Malaya. For us
it is logical to rename the country Malaysia when the states of Sarawak,
Sabah and Singapore joined the federation. But may be it is not so logical
to distant foreigners. After all Himalaya is in India. Couldn't Malaysia
be somewhere between China and India, or Africa which has Malawi and Mali.

4. We came into the world so quietly that nobody noticed. There was no
protracted war of national liberation or East-West proxy
fight. Consequently we cannot even be notorious like Vietnam. Newspeople
do not like countries that are calm and peaceful and attains economic
growth as a matter of course. Politically too there is not much to report
about Malaysia. Since independence in 1957 it has been ruled by coalition
Governments which, despite frequent admission of new members, keep and
practise consistent policies, particularly towards foreign
investors. Recently as you know the same coalition won with a 4/5
majority, which also means a mandate to continue with well-tried
policies. Like Holiday Inn, no surprises. No sudden 180o or even 90o

5. Yet these very qualities which are so irritating to newsman looking for
newsworthy media events should be attractive to investors, particularly
foreign investors. You will be dealing with the same people with
well-known curriculum vitae. There may be bad characteristics, but you
know them, and as good businessmen you will know how to handle
them. Malaysia and Malaysians are predictable. Dull, perhaps, but better
than dealing with mercurial people. Even bureaucratic delays and regular
assurances to do away with red tapes are predictable. All you need to do
is to make allowances for these delays and you will achieve your target
right on the dot.

6. The Malaysian problem is how to overcome this anonymity. We are
competing with ASEAN neighbours all of whom are well-known. Who has not
heard of Singapore or Indonesia or Thailand or the Phillippines. Only
Brunei is perhaps less known than Malaysia but that is being remedied. But
Malaysia still conjures up a blank. We have the Joe Clark syndrome. People
still say, "Malaysia! Now where on earth is that?" Obviously you cannot
invest in a place you don't even know the location of, or exists. We are
busy remedying all these short-comings. But we don't intend to attract
attention by being unstable or unpredictable. If you haven't known
Malaysia, not likely with AIA doing such a good job, I hope you will learn
much about this country on this occasion. We are sure you will love it for
the Tourist Development Corporation insists that "To know Malaysia is to
Love Malaysia".

Ladies and Gentlemen, 

7. Malaysia has for long relied on her primary sectors to achieve growth,
create employment, and generate income. The major impetus for Malaysia's
rapid growth over the last decade was the export of her natural resources,
such as rubber, timber, palm oil, tin and also petroleum. Together they
account for more than seventy percent of our exports. The share of
manufactured exports exceeded the twenty percent level only after 1980.

8. Today, it is no longer a question of "to industrialize or not to
industrialize". Malaysia's track record of economic progress based on her
primary commodities, and a successful import substitution and export
oriented industrialisation programme, is being emulated by other
developing countries who now have the advantage of cheaper and more
abundant labour. Malaysia's advantage has been maintained by the
efficiency, productivity and quality of our workforce and our overall
conducive industrial environment. However, in a matter of a decade or even
sooner, these countries will be catching up with Malaysia. In other words,
Malaysia has to turn her attention to increasing the sophistication of her
industrial environment or else be left behind.

Ladies and Gentlemen, 

9. The performance of our manufacturing sector during the Fourth Malaysia
Plan period, 1981 - 85, was encouraging. It demonstrated its relative
maturity with a steady share in Gross Domestic Product (GDP) of between
nineteen to twenty percent throughout that period, while the value of
manufactured exports almost doubled from US$ 2.4 billion in 1980 to US$
4.7 billion in 1985. Under the current Fifth Malaysian Plan, i.e. 1986 to
1990, the manufacturing sector is projected to contribute 20.5 percent to
GDP by 1990 while the share of agriculture is expected to shrink from its
present 20.3 percent to 18.1 percent. From this, you can see that Malaysia
is surely and steadily heading towards her goal of joining the breed of
Newly Industrialized Countries (NICs), all striving for their legitimate
share of the world's economic wealth.

10. You may be unaware of it, but Malaysia has indeed proven herself as a
viable base for export industries. Today, Malaysia is a leading exporter
of manufactured goods such as semi-conductor devices, room
air-conditioners, and natural rubber products, especially latex gloves and
catheters. Through the next decade, we intend to further accelerate the
development of other industries utilizing our natural resources of rubber,
timber, palm oil, tin, clay and silica.

11. We hope, in the near future, to be a leading exporter of items such as
tyres, precision and industrial rubber products, wood mouldings and
furniture . You may call this wishful thinking on the part of a small
nation. However, one hundred years ago, many must have also called it
wishful thinking when Malaysia or rather, Malaya, as it was then called,
harboured dreams of becoming a world leader in rubber and palm oil
exports. About one hundred years ago, the first rubber seedlings from
Brazil and the first palm oil seedling from Africa were brought into
Malaya to be cultivated. Today, these feats belong to the annals of
history. Malaysia is now the world's largest producer and exporter of
natural rubber and palm oil.

Ladies and Gentlemen, 

12. For the next decade, Malaysia's development emphasis will be on export
oriented industrialization, accelerating growth in priority industries
selected on the basis of world comparative advantage, manpower
development, and the acquiring of certain technological
capabilities. Indeed, we refuse to be grounded in the mediocrity of mere
assembly operations. We want our Malaysian workforce to improve their
skills for we believe that our future lies in the greater value-added
secondary and tertiary processing of our raw materials and in higher
technology industries.

13. Although our aspirations may appear immodest, we are modest enough to
recognise that we cannot achieve all these by ourselves. We recognise the
need for capital investments, technological capability, management
know-how and entree into world markets. For these, we need foreign
investors such as yourselves.

14. The Government and the people of Malaysia have always recognised the
key role that foreign investments must play as the engine of growth in our
economic development. This key role was acknowledged ever since
independence in 1957 and this was concretised in 1967 when the Malaysian
Industrial Development Authority (MIDA), a government agency, was formally
set up tasked with promoting and coordinating industrial development in
the country. Today, MIDA stands ready to assist you in every way possible
for the realization of your industrial project in Malaysia.

Ladies and Gentlemen, 

15. In this seminar, you will be informed of a number of measures taken by
the Government to provide an even more positive and conducive environment
for investment in Malaysia.

16. In May this year, the new Promotion of Investments Act (PIA) was
passed by the Malaysian Parliament, providing attractive tax incentives
for the manufacturing, agriculture and tourism sectors. Besides these, the
Government has launched the New Investment Fund (NIF) to channel funds at
preferential rates of interest for the financing of new productive
capacity in manufacturing, agriculture and tourism.

Ladies and Gentlemen, 

17. The Malaysian Government believes that it must work closely with the
private sector in order to facilitate business. We have coined the term
Malaysia Incorporated to describe this close relations. Admittedly it is
not very original but it has helped the bureaucracy and the business
community to change their attitudes toward each other. You can invoke this
concept should you find problems in dealing with the bureaucrats.

18. Apart from this we are trying our level best to deregulate. Of course
it is not possible to do away with regulations altogether. That can lead
to chaos and losses for everyone, including the investors. You need the
protection afforded by some well thought out regulations. But we will try
our best to do away with unnecessary bureaucratic processes and
regulations. For this we need continuous feed backs from you, indeed even
before you invest.

19. It is paradoxical that in order to deregulate we have to propose new
regulations. But I am sure you will like these regulations because they
are intended to reduce investor-official negotiations to the barest
minimum. Conditions that you will have to meet in order for you to get the
level of equity you want will be clearly spelt out in these
regulations. You can then decide for yourselves whether you want 100%
ownership or 51% or minority participation and then choose the kind of
industry you can go in, the capital required and the jobs you have to
create. If your equity matches the conditions, you should get your
approval within a given period of time. If there are delays you can appeal
to higher authority. If the delays become a regular affair then there must
be either something wrong with our conditions or something wrong with the
Department or officers you are dealing with. In both cases action will be
taken, pleasant or unpleasant.

20. One area that has been very vexatious to foreign investors is the
number of expatriates allowed. Long haggling over key personnels have
soured relations between investors and the Government. On the top of it
the expats are given limited visas and these visas may have to be renewed
by going abroad first in order to break your stay in the country.

21. When I was in New York last week, I had taken the opportunity to
announce new conditions for foreign equity and expatriate staff. These new
conditions are applicable to new foreign investments in industries whose
products will not compete with products presently being manufactured
locally for the domestic market. They also apply to expansions of
foreign-owned or partly foreign-owned industries which do not compete
against existing local industries.

22. These new rules apply only to investments during the period between
October 1st. 1986 and December 1990.

Investments during this period will not be required to restructure their
equity at any time.

23. As you might have read in the local papers, basically these are the
new conditions:- Firstly, a company that exports 50% or more of its
production is permitted to have up to 100% foreign equity. Secondly, a
company which sells 50% or more of its production to companies in the Free
Trade Zone (FTZ) or Licenced Manufacturing Warehouse (LMW) is permitted to
have whatever level of foreign equity up to 100%. Thirdly, a company which
employs 350 fulltime Malaysian workers is permitted to hold whatever level
of equity it applies for. Fourthly, where foreign equity is less than
100%, the balance to be taken up by Malaysians should conform to the New
Economic Policy rulings. Such rules will be applied without undue
rigidity. Fifthly, employment of Malaysians at all levels should reflect
approximately the racial proportion of the country. Lastly, any company
with foreign paid-up capital of US$2 million will be automatically allowed
five expatriate posts at whatever level. Changes of personnel will not
require fresh working permits. Visas will be given automatically during
the first ten years of the investment period. Additional expatriate posts
will be given when necessary upon request.

Ladies and Gentlemen, 

24. These regulations have been formulated because we in Malaysia are
pragmatic. The world is going through a bad period. Our commodities are
not fetching the prices we expect. Growth which has long been taken for
granted in Malaysia is not taking place. There is unemployment. Our
emphasis now is on wealth creation rather than wealth distribution. We are
sure we can manage our social engineering when the economy recovers. But
it will not be at the expense of those who come when they are most needed.

Ladies and Gentlemen, 

25. When the American Investment Group and MIDA first contacted you,
investment conditions in Malaysia were still comparatively
restrictive. Now that we have relaxed these conditions further, I expect
that you would not only go ahead with your plans but you would revise them
upwards. More, I expect you will inform your business friends about
little-known Malaysia.

26. The more prosperous Malaysia gets the better it is for
everyone. Malaysians have a voracious appetite for foreign goods. That
appetite can only be satisfied if we have the income to pay for them. In a
way when you invest in Malaysia you are helping American workers whose
products we can then afford to buy. The electronics industry illustrates
this well. We produce the chips in American own ed factories in Malaysia
and they eventually end up in American-made computers which we buy at a
fantastic rate so that Malaysia is now the third biggest user of computers
in the whole of Asia. It is short-sighted for some quarters to say that
Americans should invest at home only. Indeed it is short-sighted to say
that America should restrict imports. If you deprive other countries of
their foreign exchange earnings, how do they buy the products that you
must export however big your domestic market may be? How do they pay their
debts to American bankers? 

27. The world is getting more and more interdependent. Even in Malaysia we
realise that to sell palm oil to India, we must be prepared to import some
Indian produce. We can produce most of these imports ourselves. But then
we will have nothing to buy from our customers, and they in turn will have
less money to buy our palm oil, etc.

28. No country is an island. We cannot but be a part of the world economic
system. We have to trade with each other and we have to have a certain
amount of division of labour. If we do everything ourselves and hope
others will buy what we produce, then there will be balance of payment
problems, restrictions and currency instability. None of these things is
good for anyone.

29. And so, ladies and gentlemen, when you take the first step toward
investing in Malaysia, you are not just doing us a favour but you are
doing yourselves and the US a favour. In terms of total US trade and
industry, what you put in may be half a drop in the ocean. But little
things go a long way -- even in business.

30. I would like therefore to welcome you to Malaysia and I hope that this
Seminar will be successful and will result in your permanent involvement
in the economy of this country.

31. I would like to thank the American Investment Group for their
initiative and to MIDA for the arrangements that have been made.

32. Please do get to know Malaysia. You will love it, I am sure.

Thank you.