Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	THE SHANGRI-LA HOTEL, KUALA LUMPUR 
Tarikh/Date 	: 	06/11/89 
Tajuk/Title  	: 	THE WORLD ECONOMIC FORUM NATIONAL 
			MEETING ON MALAYSIA 




 Distinguished Guests;
Ladies and Gentlemen,
                    .
    It  is a  pleasure  for me  to  address  this  National
Meeting on Malaysia organised by the World Economic Forum. I
am pleased to note that  much interest  has  been  generated
through  meetings  of  these nature, culminating in a better
perspective of the Malaysian business environment.  To those
of  you  from  overseas, I  bid  you  all  a  warm  welcome,
particularly those visiting  Malaysia for the first  time. I
hope  the  beauty of  our land and the friendliness  of  our
people  will   make  you  feel   that  the  visit  has  been
worthwhile.  The  real test lies in the future -- on whether
you will be  back again, to visit and to invest.
2.   It is timely that another Forum on Malaysia be convened
since  the  last    one   was held in 1986.  Timely, because
Malaysia had made great strides since 1986.   The impact  of
the self-imposed structural  changes  since  1983  have only
begun to bear fruit; and in the last two years, Malaysia had
joined the ranks of several Pacific Rim countries  recording
high growth rates that were last seen in the early 1970s.  A
seminar  in  Kuala  Lumpur at this  juncture,  therefore, is
useful  to  keep  alive  the dialogue that had started three
years ago.
3.   In the past few years, foreign  investors  have  become
increasingly  better  informed  of Malaysia's potential as a
business partner.  Many have made  significant  progress  in
establishing  manufacturing  bases here.   These businessmen
and  their  investment  testify  to  what  this  country can
offer.  For them, the  seminar  will  provide  an  update of
future policy direction,  which  no  doubt  will  remain  in
their  favour.  For the new entrepreneurs, a seminar of this
nature should provide the necessary information for them  to
make the decision to invest.
Ladies and Gentlemen,
4.   The  potential  of our economy needs little elaboration
for those associated with this region.    Nevertheless,  for
our  new  guests, let me briefly reflect some lessons of the
last  ten  years.  First  of  all, the  1980s  witnessed two
serious  economic recessions.  We emerged from  them  leaner
but   stronger,  with   an   economic   structure  that  was
substantially  different  through deliberate policy changes.
This  structural  change  was  achieved  to  some  extent at
the price of slower growth, which averaged annually at  5.4%
in sharp contrast  to the 60's  and 70's, when Malaysia as a
predominantly   agricultural  country  enjoyed  an  enviable
growth  record of 8%  per annum largely through expansionary
Government budgeting.  We learned the hard way that there is
no such thing as  a "free  lunch"  -- you eventually pay for
your excesses. The  sooner you realise this, the less severe
the cost of adjustment. But adjust you must. Fortunately for
us, we understood the danger signals and tightened our belts
early. The result is clear for all to see.
5.   Second, over the long haul, the Government is neither a
sustainable  nor  an efficient source of stimulus to growth.
The reliable "engine" is  private  initiative.    Government
should  play  the  catalytic  role in promoting and inducing
private sector  activity.    It  should  provide  the  basic
infrastructure  facilities, and  the  stable  political  and
financial  environment to  nurture  the  growth of long term
real investments.  The centre-piece of our adjustment policy
was   the   substantial   retrenchment   of  public   sector
expenditure,  with  a  supportive  monetary policy stance to
restore  external  competitiveness  and  stimulate   private
capital spending.  For    us,  this  has  been  our  winning
"recipe" and we intend to build on this to further encourage
more private spending on  new productive capacity.
6.   Third,   although  the   emergence   of    increasingly
diversified  agricultural  and  mining  sectors  had  served
Malaysia  well in the past three decades, our future lies in
a broadbased  industrial  sector,  augmented by a modern and
competitive  services  industry,  centred   on  tourism. The
manufacturing  side  has  since  developed  into  one of the
fastest   growing   sectors,  not   just  dependent  on  the
electronics   and   textiles  industries,  but  increasingly
becoming  more   broad-based  and  resource     based,  with
encouraging backward  linkages with the rest of the economy.
7.   Finally, the Government's early  commitment  to  reduce
the  twin deficits in the fiscal budget and external current
account, I believe, saw us through the worst of  times  when
for  the  first  time in history, Malaysia recorded negative
growth in 1985.
8.   Malaysia has come a long way since.    The  success  of
early structural adjustment measures has enabled our economy
to  consolidate  and  then  grow  from strength to strength.
While structural changes continue to take root, the  economy
has   become   more   resilient  to  external  shocks.   The
strategies  adopted  have  begun  to  pay off  in  terms  of
sustainable growth  with stability. Developments in the past
two years bear testimony  to  this.   The  latest   economic
indicators  show  that  Malaysia  is  now poised for further
rapid growth in the next few years.
9.   Economic growth is  now  rather  vigorous.    Real  GDP
growth  was  8.7% in 1988, the highest in this decade.  This
year's growth is expected to be between 7 to 8%.   In  1990,
growth   will   moderate  to  no  less  than  6.5%, which is
nevertheless still high by any standard in today's world.
10.  The   current   expansion   is   rather    broad-based.
Continuing  agricultural expansion  has wide ranging ripples
which   spread the benefits far and wide.  The manufacturing
sector expanded by 17.6% in 1988, though the  rate  will  be
moderately  lower  in  1989.    Following  close  behind are
construction, after a number of rather poor prior years, and
the  services sector.  Agriculture and mining have continued
to expand steadily.
11.  On the demand side, rising real investments  in  recent
years  have generated a momentum all its own.  This year, we
are confident that private investment will increase  by  19%
in  real terms.   That is quite an achievement.  Yet, not so
long ago, many had written us off as a poor  bet.    Foreign
equity  approved  by  MIDA  rose by 168% in 1988, and in the
first nine months of 1989, by a  further  80%.    Reflecting
this optimism, domestic investment   has   been   playing  a
significant  role,  especially  investments by the small and
medium scale industries.
12.  Rapid  economic  expansion  will  no  doubt  exert some
pressure on prices.  Inflation is expected to be higher, but
at no more than 4% in 1989. It was 2.5% last year.  Although
this is low  by  international  standards,  it  nevertheless
warrants  close  Government attention.  In this context, the
primary role of monetary policy will  continue  to  maintain
stable  financial  conditions,  conducive to long term price
stability.
13.  On the external side, the recent weakening of commodity
prices  has  been  partly  compensated  by  continuing  high
exports  of  manufactured  goods.  However,  rapidly  rising
imports, mainly of investment and intermediate goods,  meant
that  the trade  surplus  would moderate significantly.   Of
some concern is the growing services  deficit,  which  would
"eat up" most of the surplus expected this year in the trade
account.   The higher invisibles payments reflect the larger
freight and insurance bill from high imports, and the larger
payments of profit and  dividends  arising  from  a  buoyant
economy.    While  it is comforting that the current account
still shows a modest surplus, we are nevertheless determined
to address the problem of the  growing  invisibles  deficit.
Central  to this is the promotion of tourism.  1990 is Visit
Malaysia Year.    More  will  be  done  to  promote  inbound
tourism.   The unexploited tourism potential is  still  very
big and indications are that tourism and related  industries
will have high growth rates in the 90's.
14.  The  capital account of the balance of payments remains
strong.   Overall, reflecting strong  capital  inflows,  our
international  reserves  should rise above US$7.5 billion by
the end of the year.  The overall external  position  should
remain comfortable this year.
15.  Good external debt management has resulted in a decline
in our national external debt to just about US$16 billion by
the  end  of  1989.  This  reduction  is due  largely to the
continuing  prepayment of our debt since 1987.   The  impact
of    these  prepayments   would   have   been   even   more
significant if not for the increase in the ringgit value  of
this debt following the  sharp revaluation of key currencies
in recent years. Consequently, the debt service  ratio  will
fall below 12% by the end of 1989, and below 10% in 1990.
16.  It  is  in the fiscal area that the adjustment policies
in the past five years have made  the  most  direct  impact.
The Federal Government's current budget has rebounded firmly
since  last  year to record a surplus position, albeit still
small surpluses.  This turnaround appeared a year  ahead  of
schedule.
17.   Finally, unemployment has begun to show clear signs of
moderating,   as   indicated  by reports of labour shortages
in the agriculture and construction sectors.   Much  of  the
unemployment  is  structural in nature and will require some
time to resolve.
Ladies and Gentlemen,
18.  In the past couple of years,  investment  opportunities
in Malaysia have increased in scope and value, especially in
the   manufacturing  sector.   The  political,  social   and
economic  environments  are  stable  and the infrastructural
facilities, good. Over this period, many investors from many
nations have taken advantage of our offer as a profit centre
and  a competitive springboard to export from.  We want more
to come as we have the capacity to welcome more   to   bring
with  them  their  technology  and  marketing  expertise  to
combine  with  Malaysian  resources and labour to yield high
profits for mutual benefit.  To complement this role, we can
now  offer  new  tax  and  other  incentives   for   foreign
multinational  companies  to  establish  their   operational
headquarters for the Asia-Pacific region in Malaysia. We are
committed  to  make  Malaysia  an attractive and less costly
place to conduct business.  Furthermore, the quality of life
in Malaysia is high, and the cost of living relatively low.
19.  There is a third area which needs to  be  addressed  --
large  invisible  deficit.   The trade account would need to
generate a surplus of about US$4 billion  annually  just  to
meet   the   services   deficit   in  the  current  account.
Malaysia's strong appetite  for  foreign  services  reflects
partly  the  need  to  support  the production and export of
goods and partly the rising incomes  and  living  standards.
While  this traditional services deficit is likely to remain
a prominent feature in Malaysia's balance of payments in the
1990's,  we  have  all the  necessary ingredients to step-up
efforts in  promoting  a new role  as a competitive services
provider to complement its role as  a reliable  producer  of
goods.
20.  We  are  determined  to  bring  about  greater   import
substitution of services  from abroad  as well as the export
of services. This strategy will  take  many  forms.  We  are
rapidly  expanding  our  shipping  and  airline  fleets, and
insurance  services,  including  upgrading and expanding our
key  ports of call, both air and sea, in order to offer more
efficient  transportation  related services. This is an area
where  we  are  competitive  in  the  international markets.
Similarly, in the area of  communications, we have  invested
substantially in recent years  to   provide   domestic   and
international  links that are modern and in keeping with the
state of the art.  We have privatised our telecommunications
operation  resulting  in  increased  efficiency  and  rising
productivity.  You  will  find  our  telecommunication links
second to none in Asia.
21.  Then  there is a whole host of financial, brokerage and
professional   services   which   are   increasingly   being
internationalised.    Those  of  you who have business links
with us will  know  that  our  financial  services,  such as
banking,  insurance  and  brokerage,  are  modern and highly
professional.    Once  separated  from  Singapore,  our  own
stock  exchange will be the only exchange in the world which
offers a solid range of good plantation stocks. What is more
important is that  access to our exchange is free, much like
London, New York and Tokyo.  In Asia, the Kuala Lumpur Stock
Exchange is one of the  larger  exchanges  which  encourages
international  participation;  a  market  which is liquid; a
market that is getting more and more professional  with  the
recent    corporatisation of the  stockbroking industry.  We
actively encourage reputable foreign stockbroking  companies
to take equity in joint ventures with local concerns.
22.  We  also  have a thriving commodities exchange, in both
physical and futures.  We successfully manage the only  palm
oil  exchange in the world.  This exchange is professionally
run and regulated by an  independent  Commission  very  much
like in the United States.  This exchange is being developed
into a regional commodities exchange, with contracts trading
in  rubber,  tin  and palm oil.  Soon,  this  list  will  be
expanded to include other commodities and the feasibility of
financial  futures  is being evaluated.  In Asia, Malaysia's
capital market is one of the more developed.  We  had a head
start and a long list of measures are being  implemented  to
widen and deepen this market to be one of Asia's finest.
23.  Very  few  know this; we have the only secondary market
in Asia for long-term mortgage bonds.  It is still an infant
but viable market.   Soon,  a  professional  rating  company
would  be  established  and we hope to do so with assistance
from   a   reputable  international  rating  company.   Many
exciting  things  will  happen  in our capital market in the
next  few  years. I just  wanted  you  to  be aware of these
developments so  that you  can  be sure that our strategy to
promote foreign  investment  goes  beyond  the mere physical
investment of plant and machinery.  In this modern world, we
realise  the   importance  of  an   efficient,  modern   and
competitive  financial  and  capital market sector to better
serve foreign investors.  In  the  final  analysis,  we  are
offering  a package deal -- a  deal  that  goes  beyond  the
physicalact of investment.
24.  We have also embarked on an  ambitious  arrangement  to
promote   tourism   into  a  leading  growth   sector.   The
Government  is committed to this effort.  This area poses  a
positive  challenge  in  the  years  ahead  for Malaysia, as
the tourism  industry  world-wide is expected to boom in the
next  20  years. Although  Malaysians  spend  large  amounts
sightseeing abroad, the tourism strategy is not directed  at
reducing  leakages in the form of foreign travel, but rather
in increasing our capacity to attract and  absorb  more  and
more    foreign  tourists  to  spend  in  Malaysia.  In this
respect, Malaysia is beginning to exploit this potential.
25.  The necessary steps have already been taken to  develop
tourism.   The promotion of tourism is set in the context of
a   balanced   promotion  to  attract  domestic  travellers,
regional tourists and long distance tourists. Decisions have
been taken to improve  the  appropriate  infrastructure  for
travel  between  Malaysia  and its neighbours, as well as to
provide quality accommodation and recreation  facilities  in
Malaysia.
26.  In developing tourism facilities and products, Malaysia
will  go  alone if necessary, but    sees   clear   benefits
in joint-ventures.  Our package of incentives on tourism  is
possibly  one  of  the most  attractive  in  the  world  and
certainly  no less  favourable  than  those  offered to  the
manufacturing sector.
27.  To  further  boost  the  tourist  industry the Langkawi
Islands have been made a tax-free area.  This means not only
availability of tax-free goods for  tourists  but  investors
may  import  various  construction  materials,  vehicles and
other  goods  at  prices  substantially  lower  than in  the
general  customs area.  The island of Labuan is to be made a
tax haven  where foreign companies will be accorded the same
facilities as the well-known tax havens elsewhere.
28.  The  importance in  the  development  of  the  services
sector is reflected in  recent  pressures for a multilateral
framework to govern services, as is  the  case  with  goods.
Such  an  internationally  agreed  framework  is  viewed  as
necessary  to  act  as  a  bulwark  against   protectionism,
bilateralism and  unfair competition.   For Malaysia, we are
actively involved  in the  multilateral  trade  negotiations
following  the  Punta Del Este and the Montreal Declaration.
However,  while   we  are  aware  of  the   benefits  to  be
accrued  from the   liberalisation of services, we are  also
conscious of  the priority that would be given to strengthen
the  domestic services sector.
29.  In  this  respect,  while  we  would  welcome   foreign
multinationals to participate in  our services sector, it is
desirable  that there  is  a  firm  recognition  and  mutual
understanding  of  our  national   development   needs   and
aspirations.  In  developing  its  services sector, Malaysia
will  not  protect  the  inefficient  activities;   and   if
the liberalisation  of  services will yield clear net social
and  economic benefits, Malaysia will go along with it.
Ladies and Gentlemen,
30.  Malaysia   now  provides  a   package  of   exceedingly
attractive  investment  incentives in both the manufacturing
and    selected   services  sectors.  These  incentives  are
complemented  by  the  prerequisite  infrastructure support,
including efficient and expanding money and capital markets.
These will be combined with a disciplined workforce. We will
also not  use  our  exchange  rate just to give Malaysia the
competitive   edge.   Our exchange rate is determined in the
market place.  We feel that  our present rate is correct for
us.  We will   try  to  ensure  that  it is stable, but this
task   is not an easy one, given the volitility of the major
rates.  Our competitive edge will come from our  comparative
advantage  in  natural  resources  and our productive labour
force.  We encourage flexibility in wage determination and a
wage  structure  which  encourages  productivity,  in  order
to remain competitive internationally.  What is important is
the continuing need to inculcate a healthy work ethic and  a
positive   attitude  to   nurture   the  growth   of  rising
productivity.  Only in  this  way can  Malaysia maintain its
competitiveness,  independent  of movements  in the exchange
rate.
31.  We approach 1990 on a note of confidence.  As a growing
economy,  we  are  convinced  that  the  region provides the
centre of growth in the next decade.  We stand ready to move
forward to the next stage of economic development.  And,  we
do  so not alone,  but  through  the  forging  of  realistic
partnerships.  I  hope  you too  will take the position that
there is a good range of business possibilities in Malaysia.
There  is  ample  room  for  all  who  are interested.    As
pragmatic bankers,  businessmen and investors, I am sure you
know    precisely   what   you  are looking for in Malaysia.
I hope    you can find them so that we can work together for
our   mutual benefit.
     Thank you.