Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : PUSAT DAGANGAN DUNIA PUTRA
Tarikh/Date : 16/11/87
Tajuk/Title : MAJLIS 'MINISTERIAL BRIEFING'
Yang Berbahagia Raja Tan Sri Mohar,
Presiden Yayasan Pengurusan Malaysia;
Dif-Dif Kehormat;
Tuan-tuan dan puan-puan sekalian,
Saya mengucapkan terima kasih kepada Yayasan Pengurusan
Malaysia kerana menjemput saya untuk memberi ucapan di
Majlis 'Ministerial Briefing' ini. Saya berharap majlis ini
dapat memberi penerangan lanjut kepada ahli-ahli Yayasan
ini, serta para jemputan yang lain, mengenai usaha-usaha
Kerajaan untuk meningkatkan lagi ekonomi negara kita. Saya
juga berharap majlis ini akan dapat memberi beberapa idea
baru yang boleh dipertimbangkan oleh pihak Kerajaan dalam
usaha mengatasi beberapa masalah ekonomi yang kita hadapi.
Ladies and gentlemen,
2. I would like to congratulate MIM for their initiative
and splendid idea particularly in choosing a difficult
but most appropriate subject for deliberation today, that
is "National Economic Recovery -- Agenda For 1988 And
Beyond", a subject that is topical as well as of critical
importance to us now. There are many aspects of the economic
recovery that needs careful scrutiny -- its timing, strength
and durability being among them.
3. To visualize the future, we must look not only at where
we are, but also at where we have been. The world has gone
through a series of economic shocks. After a period of
prosperity following the end of World War II, the first jolt
was felt in 1970 when a recession took place in
industries. Then came the first oil shock of 1973.
Following this came the destabilization of exchange rates.
The value of money became unpredictable and international
trade became a gamble. Then followed the second oil shock
when petroleum prices rose so high that $70 U.S. per
barrel was being predicted. The value of the U.S. dollar
went up and so did American interest rates. Still the U.S.
economy suffered from trade imbalances with Japan and
Germany. The value of the dollar was then depressed with
damaging effect on Yen loans. Commodity prices collapsed
in late '85, and in 1987, the stock markets of the world
plunged right through the basement. Altogether the immediate
and relevant past has been tumulteous and completely
unpredictable. If we could not predict what has happened,
it is hardly likely that we are going to be more accurate
in predicting the future now. Nevertheless we have to try
for we cannot plan without making certain assumptions.
4. Our economy, being inextricably linked to the world's
economy, has not escaped the above-mentioned crises. We
have been as badly tossed and battered in the rough economic
seas as have most others in the free market world.
5. The most recent strain is the turbulence in the stock
markets. Once again we are reminded of our links to the
economy of the world,indeed that link is crudely underlined.
We cannot go it alone if we want rapid growth through
exports, the way chosen by Japan, Korea, Taiwan and other
countries. Alternatively we can opt out of the world free
trading system and export-led growth,but then we will have
to say goodbye to rapid growth and accept the stagnation
resulting from purely domestic economic stimulus. We have
enough examples of countries which chose to do this. And so,
despite the fact that mismanagement in the major economies
are likely to drag us down, we will still stay within the
free market system. We hope we have sufficient management
skill to navigate the rougher seas which may follow the
recent collapse of the world's stock markets and the
unstable exchange rates. This is where your meeting should
come in useful. We need to examine every possible idea on
how to manage towards National Economic Recovery.
6. Ever since the world foresook Bretton Woods and
deprived Governments of the authority to fix the value of
their own currencies, the focus of attention has switched
from the business of producing and selling goods and
services to the manipulation of currencies. As a corollary,
a greater deal of attention was refocussed on dealing in
stocks and shares. Acquisitions, mergers and share swops
became the order of the day and the best managerial brains
and energies were devoted to this game. Only the Japanese
and the Germans seem to cling to the old fashioned
production and sale of goods and services.
7. Dealing in currencies can yield huge profits. Billions
of dollars worth of money are bought and sold everyday.
Apparently demand, or the lack of it, determines the
relative values of individual currencies. Sovereign
Governments are completely powerless to legally determine
the value of their legal tender. A bank may devalue a
currency merely by offering for sale a particular currency
which it does not even possess. If a Government is rich
enough it may offer to buy or actually buy in order to
sustain or drive up the value. It may itself unload its own
currency in order to reduce the value. But it may no longer
fix the exchange rate of its own currency. In other words,
it is no longer sovereign as far as its money is concerned.
8. And so we witness today the devaluation of the American
dollar, and other currencies that are pegged to it. With
this fluctuation of the most important currency in the
world, debts skyrocket, earnings become erratic and
international trade becomes a gambling game. Trading in
futures become doubly risky and defies prediction. In other
words the economy of the world and nations are reduced to
extreme uncertainty, as men in neckties and shirtsleeves
sitting in innumerable trading rooms throughout the world
face computer consoles and hotline telephones, madly
screaming figures at each other. For 24 hours through 365
days in every year, the furious trading goes on. Seconds are
too precious to be wasted for the Yen or the dollar, or the
pound or the dinar might appreciate or depreciate by a
tenth or a percentage point if you blink.
9. Yet what is currency but so much scraps of paper. By
weight it is worth about the same as toilet paper. Money is
only worth something if it is backed in some way. It may be
gold or it may be the sound economy or the political
stability of a nation. But can one really say that the gold
in Fort Knox has been reduced by half to justify the halving
of the value of the U.S. dollar? Or can one really say that
the American economy is now worth half of what it was
before, or is the political stability of the U.S. only half
of what it was before its dollar was devalued?
10. It is obvious that none of these supporting assets
backing the American dollar has changed. What has happened
to the dollar is totally artificial. Currency traders,
greedy for profits, move the value up and down because
stable currencies or exchange rates do not benefit them.
11. The stock market receives the same kind of treatment.
Its original purpose of raising capital has been all but
forgotten. Even investments for dividends have been forced
to take a back seat. The only thing that matters is capital
gains. The value of shares used to go up because the
particular companies were well-run, pay good dividends and
increase their assets steadily. Today all these virtues are
irrelevant when determining prices. The important thing is
sentiment and the need to move prices up or down so that
purchase or sales can yield profits. And so the bulls are
chased up without caring for anything that is happening to
the company. Such are the bloated share prices that the
buyer can wait a hundred years with no hope of earning
enough dividends to service his debt. The total market value
of the shares could be three or four times the assets.
12. Then when the bull has had its run, the bears drag down
the shares. Suddenly billions are lost. Shareholders shoot
their brokers and then turn the gun on themselves. Banks
woke up to find millions has been lost in loans to purchase
shares. Property value collapses, reducing valuable
collaterals to next to nothing. Bankruptcy lists lengthen
each day. Shops lose their customers and close down.
Unemployment stared in the face of everyone. And so on
and so forth.
13. Still the world is not yet ready to control currency
speculation and share market binges. In the Malaysian quest
for economic recovery, we have to consider this environment
of financial instability. Wether we like it or not, all our
best laid plans are going to be subject to disruptions by
sudden and repeated changes in exchange rates, collapses and
booms in the worlds stock markets and arbitrary policies by
the economic powers as they struggle to stay on an even
keel.
14. What can the Government do to help recovery?. A whole
lot of people are ready to point at Government's policies as
the cause of the country's economic decline. But
then there are people who have been pointing at the
Government all the time as the cause of everything that is
bad. Even when times were good these people will blame the
Government for the economy not being better. They may be
economists, these people. But essentially they are
politicians and it is political ends that they serve.
15. The Government may be right, but certainly it can be
wrong. But the Government cannot be accused of deliberately
doing harm to the country's economy. Even the constraints
imposed by the New Economic Policy (NEP) are meant for the
general economic well-being of everyone. Of what use is a
liberal policy on commerce and industry if the country is
plagued by envy and jealousy between races which can
constantly destabilise the nation?
16. If there is going to be economic recovery in this
country, the first thing, the most essential thing in fact,
is for the business community to accept the sincerity of the
Government's intention to work for the economic prosperity
of this country. With that acceptance, Government-private
sector cooperation will become a reality. This Government
is one of the most accessible Governments in the region, if
not in the world.
Ladies and gentlemen,
17. Before talking about new ideas and approaches, let us
relook at our existing policies first. Have these policies
been given a chance to be properly implemented or are they
so bad that they have caused the present poor performance of
our economy? Do we discard them or do we continue with them
in order to revive our economy?
18. First the NEP. Without doubt it is a constraint on
rapid development of the economy. The job of pulling up the
bumiputeras to the level of the non-bumiputeras must absorb
much money, time and energy. Consequently we cannot fully
achieve our potential for economic growth.
19. So do we discard this policy? Do we say that it is too
bad if the Bumiputeras cannot make it under their own steam?
Do we say we cannot afford to wait for them? Do we say lets
forget them and get on with our recovery program unhindered?
20. But will this country be stable politically if we make
no effort to balance the development of the different races?
If recent events are anything to go by, the stability of
Malaysia is quite easily undermined. We have to constantly
work at it if we want to remain stable and the NEP is a
major instrument for achieving all-round stability. Without
political stability the economy cannot grow and expand.
The choice is really between a slightly slow economic
growth with the constraint of the NEP and an uncertain
growth underdistinctly unstable conditions. Malaysia has no
choice but to choose the NEP and try to manage the
constraints.
21. Recently the Government decided to soft-pedal the
equity aspect of the NEP in favour of jobs for the
unemployed. Jobs for the unemployed is part of the first
prong of the NEP, that is poverty eradication. We cannot
sacrifice jobs for the poor in favour of shares for the
well-to-do. Once the economic cake grows again, we can focus
on share distribution. The NEP should not now be a
hindrance towards economic recovery.
22. A foreign newsman recently remarked that Malaysia has
discarded the Look East Policy. As usual he assumed that
the policy meant giving contracts to and buying goods from
Japan and Korea. There is a blind spot here which is found
even among Malaysians. Despite innumerable clarification
that the Look East Policy means learning Japanese and Korean
or even Taiwanese work ethics and management methods, many
still insist it means giving contracts and buying goods from
the Japanese and the Koreans.
23. The Americans and the Europeans are all looking East
for better work ethics and management approach. But some
Malaysians feel that you can on learn only from the
infallible Mat Salleh. Actually it is the ethics of the Mat
Sallehs which is dragging us down even as our neighbours
race past us to achieve better growth.
24. I wish to reiterate here that the Government is still
committed to promoting the work ethics of the East among the
Malaysian work force, and the managers should learn from
Eastern management techniques. If we are to succeed, we
must be competitive. If we want to be competitive, we must
be productive. If we want to be productive, we must be
honest and work hard. Lazy workers or managers who shirk and
cheat will not help us recover. Whether we like to admit it
or not, it is our work ethics which is dragging us down. We
have to correct them. We must have the work ethics of the
successful. And the successful are out East.
Ladies and gentlemen,
24. Another major policy of the Government is privatisation
of Government agencies and projects. Since independence the
Government has allowed itself to be dragged deeper and
deeper into activities that are not of an administrative
character. Indeed, the Government has become deeply
involved in business. Most of these have led to inefficiency
in the services provided and massive losses. Additionally
the bureaucracy has grown enormously. Perhaps in the past
the Government may be excused for involving itself in these
activities as the private sector was not quite ready. Now
the private sector is both willing and able.
25. It is generally assumed that the private sector is more
efficient. This may not be neccessarily true but the losses
sustained by Government agencies and corporations show that,
relatively speaking, the Government is less efficient. When
an agency is privatised, the Government need not lose
everything. Should the company make a profit, Government
can still gain through income tax, etc. At the very least
the Government will no longer bear the burden of paying
salaries, carrying out maintenance and in many cases
injecting more capital. While private business try to
maintain itself or expand through earnings, Government
companies expect yearly injections of capital and subsidies
for running cost.
26. If the Government is relieved of the running cost and
subsidies, the fund can be used for more development which
help to stimulate the economy. Additionally the reduced
Government bureaucracy can be better paid by the Government.
27. Companies and facilities which have been privatised
have attained better returns besides giving better service.
There has been quite a few problems but these are bound
to occur considering the newness of the approach. It is
strange that when Government runs a facility, there were
innumerable complaints. But when the Government proposes to
privatise the facility, suddenly some people find so much
virtue in Government management.
28. These are some of the policies that the Government will
continue because they are basically sound. But to recover
the private sector must play a more dynamic role.
Ladies and gentlemen,
29. Malaysia is still very much an agricultural nation.
Rubber, palm-oil, cocoa and pepper will remain our principal
export earners. They will continue to be expanded. But we
are seeing the first steps towards a second diversification
in agriculture. Already asparagus, mangosteens, guava and
pisang emas have become export items. But star fruit,
pomelos, mangoes and rambutans all show potential.
30. The private sector must not forget that our success in
rubber, palm-oil and cocoa is due to our expertise in estate
management. If the new agricultural products are to be
produced by small farmers on small plots of land, we are not
going to be able to compete in the export market. There can
be smallholders but the packing, transport and
export marketing must be by the big estates or trading
companies.
31. One of the major problems of Malaysia is to be
equitable and accomodating. If licencing is required for any
business activity, licences are sure to be given to
individuals or to small one-man companies. Thus we have any
number of security companies, taxi operators, bus or truck
operators and fishing licences. The result is that economies
of scale are inachievable.
32. The idea of pooling resources to start a reasonably big
business is unthinkable. The partners invariably quarrel
and part company, each to form his own company. At one time
we had 80 film companies of which only 2 managed to produce
a film each.
33. The kind of management expertise found in the large
agricultural estates is unknown to most other Malaysian
business. As a result we have to endure high costs and
are uncompetitive. While the rest of the world see companies
merging and growing bigger, fragmentation is the order here.
It is about time we rethink this habit, if we are going to
recover.
Ladies and gentlemen,
34. Some of the fundamentals in terms of management for
growth of the Malaysian economy are already in place.
No doubt businessmen have more ideas. While the Government
welcome advice from the business community on what it
should do, it is worthwhile for business people to do some
rethinking about their approaches to business. May be you
are not always doing the right thing or the Government is
always doing the wrong thing.
35. Please do not be negative. Don't start tearing to
pieces Government policies the moment they are announced, as
happened with the Look East Policy. Look at the positive
aspects and try to see what good can be derived from these
policies. Government has over the years accommodated much
of the suggestions you have made.
36. An academic's view is fine. They may be right. But it
is the people who are doing the business who must do the
thinking in the end. There are no wise oracles whose
opinion must be sought every time a Government policy is
announced. To be interesting these oracles have to be
original and they invariably achieve this by tearing to
pieces whatever policy is announced, especially when they
are anti-establishment. Many perfectly sound ideas have
been strangled at birth because someone has to prove his
originality. Thus these people are now busy picking faults
with privatisation, having forgotten that only recently they
were picking faults with Government departments and
corporations.
37. If Malaysia is to recover, let us be positive. Let us
be ready to try new ideas. Let us improvise along the way
if something fails. There are no perfect ideas. There are
no perfect solutions. But positive people improve on them
as they go along.
Ladies and gentlemen,
38. Once again I would like to thank MIM for giving me the
opportunity to address this gathering. I wish you all a
successful deliberation.
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