Speechs in the year
Tarikh/Date 	: 	22/08/90 

 Tan Sri Ahmad Sarji,
     President of The Harvard Club of Malaysia;
Distinguished Guests;
Ladies and gentlemen.
    It is indeed a pleasure for me to be here this evening.
I  wish to express my thanks to the Harvard Club of Malaysia
for inviting me to deliver this dinner address, the topic of
which is "Post 1990 -- Economic Policy of Malaysia" which is
much discussed of late.  There have been claims that  poten-
tial  investors  are postponing their strategic decisions to
invest here until such time that the post-1990 economic pol-
icy is unveiled in clearer terms.
Ladies and Gentlemen,
2.   Let me say from the start that I cannot provide the ab-
solute clarity that certain quarters seek on the  Post  1990
economic  policy  simply because we are still in the process
of formulating it.  I do not want to say anything that  will
bind the Government or that will cause confusion in the pri-
vate sector as well as the Government machinery.
3.   However  I would like to explain the process we adopted
this time.  When the New Economic Policy  (NEP)  was  formu-
lated  20  years ago there was inadequate consultation, par-
ticularly with those who were opposed to or were  inherently
critical  of the Government.  As a result the NEP came under
heavy criticism and attack.
4.   The critics may think they know better but really  they
were  looking only from their own narrow angle.  The Govern-
ment had to take everyone's needs into  consideration.    We
doubted  whether  the  critics  really know what it takes to
formulate an economic policy that is acceptable to a  major-
ity,  if  not  to everyone.   Certainly we do not think that
they could agree on the political  aspects  of  an  economic
policy in a multiracial society where there was unequal eco-
nomic development.
5.   It  must  be remembered that the NEP was almost the di-
rect result of the race riots in 1969 - a mere 12 years  af-
ter  independence.   It was therefore not just a solution to
an economic problem but it was as much, if not more, a  sol-
ution to a serious political problem.
6.   Economics cannot be totally divorced from politics.  It
was  the extreme division between the rich and the poor that
led to the birth of socialist and communist political  theo-
ries.   Today we know that socialism and communism have both
failed.  But after the birth  of  socialism  and  communism,
capitalism  too  was  forced  to change in order to survive.
The capitalism we see today is but a shadow  of  its  former
7.   The  extreme  exploitation  of man by man in the feudal
age and the early days of the industrial society, under  at-
tack  by  socialists  and communists, had to undergo drastic
modifications.  A more caring society resulted in the rights
of workers being recognised, the birth  of  an  intermediate
class  of people, and more equitable opportunities.  The ex-
treme disparities between rich and poor in the pure capital-
ist  society  were  drastically  reduced.    Certainly   the
servant-master  relationship  between  workers and employers
was eliminated.
8.   Perhaps if absolute capitalism was allowed to  continue
economic  growth  would  have been faster.  But it could not
last.  The extreme disparities of the pure capitalist system
would have resulted in  political  upheavals,  and  whatever
economic gains from it would be destroyed and destroyed com-
pletely.    The  socialist and communist revolutions were in
fact the reaction of societies of extreme disparities  which
capitalism created.  As we have seen the pendulum swung from
extreme  disparity  to  an attempt at extreme equality.  And
this attempt at extreme equality is at the root of the fail-
ures of socialist and communist  societies  in  Russia,  the
Eastern bloc nations of Europe, China, the African continent
and  the  Latin American states.   Man may be born equal but
absolute equality between man and man can only result in re-
duction to the lowest common factor, that is in poverty.
9.   It is important to remember this historical  background
in  order  to  understand the Malaysian experiment at social
engineering.  Had Malaysia opted for socialism or communism,
the disparities within the multiracial society  of  Malaysia
would  have been removed but the economy would have been de-
stroyed.  On the other hand if Malaysia had ignored the dis-
parities and opted for unhindered economic growth it is more
than likely that the kind of stability we  enjoy  now  would
not  be  achieved.   Instead the race riots of 1969 would be
repeated, and economic growth of  the  kind  we  have  today
would have been impossible to achieve.
10.  One  way or the other, there is a price to be paid.  We
think that we pay a lower price with the socio-economic  en-
gineering  of the NEP against a very much higher price if we
ignore racial sensitivities and go exclusively for  economic
11.  Still  the Government feels that it does not have a mo-
nopoly of wisdom.  And so in order to formulate the economic
policy of the nation after 1990 the Government  has  brought
an equal number of critics and supporters together under the
National  Economic  Consultative Council (NECC) so that they
can formulate by consensus the post-1990 policy.   Consensus
is  necessary because we are trying to avoid being unfair to
any particular group.  Otherwise the Government  can  formu-
late  the policy by itself, for the Government also has con-
siderable support.
12.  But as you know the DAP and the  Chinese  educationists
opted  out.    They criticised the Government formulated NEP
but their opting out means they have no  formula  which  can
draw less or no criticism from the public.  These people are
only good at criticising but are quite incapable of anything
positive or constructive.  While they condemn the Government
for  not  listening  to their views, it is obvious that they
are not prepared to listen to the views  of  others.    Much
less are they willing to adjust their demands in recognition
of the rights of others to make their demands.  They seem to
claim  that  they  have a monopoly of wisdom.  By opting out
they feel they can be free to criticise and condemn whatever
the NECC decides and, of  course,  whatever  the  Government
will  eventually  formulate.    They regard their own narrow
communal political objectives as  more  important  than  na-
tional interest.
13.  Since  the NECC cannot achieve a consensus, the Govern-
ment is not bound to accept all its recommendations.  We are
back almost to square one where the Government has to formu-
late and devise the economic policy after 1990 almost by it-
Ladies and Gentlemen,
14.  The NEP is an experiment in social engineering.    When
it  was drafted we knew our goals -- poverty eradication and
the restructuring of society to remove the identification of
race with economic functions.  But we had no experience  and
no  models  to fall back on in order to achieve these objec-
tives.  We had already rejected socialism and communism.  We
believe in a free market system, which means  that  we  must
submit  to  the  constraints  imposed by market forces which
tend to increase disparities rather than reduce  them.    We
had  to  accelerate the growth of one segment of the society
without causing a sense of deprivation  of  the  other  seg-
ments.   It was altogether a tall order for a Government and
a bureaucracy which was, until only 12 years ago,  a  purely
administrative set-up.
15.  The  pundits  cannot  be  blamed  if they predicted re-
gression for Malaysia.  We know now that the greatest socio-
engineering projects, socialism  and  communism,  were  even
then  failing.    Here was a set of amateurs tasked with the
implementation of a massive socio-engineering project.
16.  It is no wonder that many of the things they did failed
and failed miserably.  Since nationalisation was  unaccepta-
ble,  laws were passed for the restructuring of companies in
order to give bumiputeras a stake.   The Industrial  Coordi-
nation  Act (ICA) was promulgated.  Under its aegis the For-
eign Investment  Committee  (FIC)  and  the  Capital  Issues
Committee  (CIC)  were  set up.   State economic development
corporations sprouted out in every state and  they  in  turn
sprouted  hundreds  of subsidiaries, joint-ventures and sub-
agencies.  Corporations of all kinds  were  formed  --  from
heavy  industries  to  bakeries.   The PNB was set up to buy
shares and sometimes buy whole companies.
17.  A lot of people who were strangers to business suddenly
found themselves running multi-million dollar trading compa-
nies, manufacturing companies and construction companies.
18.  Civil servants unsure of what  to  do  yet  anxious  to
achieve the objectives of the NEP sometimes became overzeal-
ous.    They  and  the  Government  were  not  helped by the
bumiputeras and non-bumiputeras making use of  the  NEP  for
their  own  selfish  purpose.    Thus  bumiputeras  obtained
licences and permits and shares which they promptly sold  to
the  non-bumiputeras.    And non-bumiputeras abetted them by
buying licences, by using bumiputeras as fronts.    In  most
cases  bumiputeras  were not given first-hand experience and
knowledge of business management.   They were urged  to  get
the licences and forget about using them.  In many cases all
the  bumiputeras  learnt  was how to use their status to get
more and more licences.
19.  Clearly many sins were committed in the name of the NEP
both by the bumiputeras and the non-bumiputeras.    Malaysia
should  really  stagnate  or regress because of the NEP, the
way the socialist and communist countries regressed.
20.  But did Malaysia regress?  The answer is  a  resounding
no.  Economic growth actually accelerated with the NEP.  The
growth  in  the  1970s averaged 7 to 8%.  In the 80s after a
short period of recession caused  not  by  the  NEP  but  by
worldwide  depression,  the economy recovered and went on to
record 8% growth.
21.  To-day Malaysia is  placed  5th  among  the  developing
economies.   Only 4 out of over 130 countries throughout the
developing world are ahead of us.
22.  The Malaysian economy is booming now.    Investors  are
coming  in  droves.   Even locals, grumbling all the time at
the unfairness of NEP, are investing more  and  making  hun-
dreds of millions of dollars in profits.
23.  The  small  men are doing well too.  The number of res-
taurants,  big  and  small,  have  increased  and  are  well
patronised.    Private  cars  jammed  the  streets.   Luxury
boutiques abound.  More Malaysians are travelling  all  over
the world.  Domestic tourism is big business.  Crowds throng
the  numerous shopping complexes.  New Years and other holi-
days and festivals are lavishly celebrated.
24.  The fact is that the NEP has not been  a  hindrance  to
economic  growth.    Countries  without  the  NEP  have  not
achieved what Malaysia has achieved.  Countries with homoge-
neous  populations  are  not  better  off  than  multiracial
25.  In  a  recent  article  in Time Magazine, a journal not
noted for being very kind to Malaysia, Jay Branegan wrote of
this country under the heading "  A  Working  Racial  Bias".
Apparently  even  the  supervisors  of  international  moral
behaviour are admitting that Malaysia's NEP work.    With  a
growth  of more than 8%, 20 years of stability, and relative
racial harmony, few critics can say otherwise  that  is,  of
course, if they are willing to face facts.
26.  But  where do we go from here.  Should we continue with
the NEP since it has not been so detrimental  to  Malaysia's
economic growth and political stability.  Or should we put a
stop to it?  Should we say enough?
27.  Malaysia is an economic success but everyone knows that
the  NEP  has not achieved the arbitrary target that was set
by the nation.  Thus bumiputeras, by any measure, are  still
very  far  behind  the other communities.  Though their com-
plaints are more limited, and this is because they feel they
have a Government that will look after their interest,  they
are definitely still unhappy with their lot.  They still see
no  egalitarian society in which they get their share of the
good things of life.  With this in mind it would be  foolish
to  say  that  there  is  no  longer  a need for some socio-
economic engineering.
Ladies and Gentlemen,
28.  Malaysia is a rich country.  There is plenty for every-
one.  Giving the bumiputeras a share has not  done  absolute
damage to the economy or to the prosperity of the other com-
munities.  Let us therefore begin by admitting that we still
have  to  design  a  policy that will further reduce the ra-
cially related disparities in our society.
29.  First let us examine the failures of the NEP so that we
will not repeat them.   The thrust of  the  NEP  was  wealth
sharing.    It  was  simply  assumed  that  if  you give the
bumiputeras a 30% share of  the  wealth  then  restructuring
would  have been achieved.  And so the bumiputeras were sold
shares equal to 30% of the total share  holdings  --  or  at
least this was attempted.
30.  But  possession of wealth without the ability to manage
wealth will not make for a permanent or stable  solution  to
the  problem  of racial inequity.  As the famous saying goes
"A fool and his money is soon parted".   Anyone who  is  not
able to manage his wealth is soon made poor.
31.  Thus  when  the  NEP  put  wealth into bumiputera hands
without first training them in the management of wealth, the
result is a foregone conclusion.    Without  the  Government
controlled  agencies  such  as  the  PNB and Pernas, the NEP
would not have achieved the 19% bumiputera equity but proba-
bly only 4%.  Given time that 4% too could disappear as  the
bumiputeras dissipate their assets.
32.  Therefore  more important than the mere distribution of
shares and other forms of assets is the training  in  ethics
and management.  If any kind of social engineering policy is
to  be devised, then that policy must lay strong emphasis on
ethical and management training.
33.  The Government has already started by including in  the
school  curriculum  a subject called "living skills" to pre-
pare Malaysians to adapt to an industrialized society  in  a
free market system.  Knowledge of management is being taught
in  institutions  like  the  ITM and the universities.   The
Universiti Utara Malaysia has been  specially  dedicated  to
management.    Hopefully  the  bumiputeras  will  learn  the
rudiments of management in these institutions.    They  must
not  make  the  mistake  that with their degrees or diplomas
they have become fully qualified managers.   It  takes  more
than book-learning to become managers.
34.  But  the  private  sector especially the non-bumiputera
private sector must play their part too.    They  must  take
pains  to  train their bumiputera partners and executives in
the art and science of management.    The  bumiputeras  must
have  their management skills upgraded by precept and by ex-
ample.  They must accept the risks involved in business, the
need to control spending and the appreciation that for every
cent spent they must earn a return commensurate with the ex-
35.  Non-bumiputeras should not use their  bumiputera  part-
ners  as  fronts, useful only in interacting with Government
officials, getting licences and permits.
36.  The bumiputeras for their part must learn that there is
no easy way of getting rich quick.  If you do not earn  your
money,  it is not going to stay long with you.  And restruc-
turing is not intended to be a transient thing.  It must  be
something durable.
37.  Ethics  is important.  Wealth tends to corrupt, partic-
ularly easy wealth.  We need to have some ethical  code  for
bumiputeras  as  for others.   Far too many bumiputeras have
succumbed to the corrupting influence of easy money.    They
should  become wealthy but they should be made to earn every
cent of it.  The non-bumiputeras should not help in the cor-
ruption process and the bumiputeras must learn to resist the
corruption of easy wealth.
38.  What we want really is not 30% of the  wealth  of  this
country  for  the  bumiputeras but 30% of Malaysian managers
and  entrepreneurs  to  be  highly   skilled   and   ethical
bumiputeras.    With this percentage bumiputeras can acquire
the wealth and retain it with minimal help from the  Govern-
39.  The actual policy after 1990 cannot be spelled out with
clarity tonight.  It cannot, simply because we have not for-
mulated it.  But the Barisan Nasional Government has a track
record.   We have implemented the NEP without destroying the
Malaysian economy.  We floundered around at first  but  even
then  the  effect  was  minimal.    With the years we became
wiser.  We modified our approach and we altered  or  stopped
the  more  damaging operations.   Faced with a recession, we
responded with policies which helped with recovery yet with-
out abandoning the NEP.
40.  We are quite adept.  One thing that I can assure you is
that we are not going to destroy the economy because of  any
ideological  commitment.    We  do  have some experience and
ideas about how to reduce racial disparities  and  eradicate
poverty without upsetting economic growth.
41.  For  a  long time Malaysia is going to need foreign in-
vestment and technological know-how.  We are not going to do
anything to scare away foreign investors.  Their investments
will be safe here in Malaysia, at least for as long  as  the
Barisan  Nasional  remains in power.   We have shown that we
can be quite liberal and receptive to ideas.
42.  Local investors too need have no fear.   The  level  of
local  investment  during  the NEP period is quite high.  We
were willing to listen and to make adjustments.  The ICA was
modified in order to accommodate local businessmen.   If  we
go  by the number of local companies and their performances,
I do not think anyone can truly claim that the  NEP  is  the
bane  of the local investor.  As a matter of fact by comply-
ing with the NEP,  the  local  non-bumiputera  entrepreneurs
have done extremely well.  The old family companies have now
given  way  to  the  limited public companies and bumiputera
capital is not something difficult to raise  when  companies
are listed.
43.  Any new policy the Government formulates will take into
consideration the need to get the support of the local busi-
nessmen  and entrepreneurs.   They and the foreign investors
are the geese that lay the golden eggs.  We are not about to
slaughter them.
44.  The Barisan Nasional Government is dedicated to a rapid
economic development of Malaysia.   We have  shown  that  we
care  for  economic growth.   We do want wealth distribution
and bumiputera participation in management.  We do want  the
bumiputeras  to catch up and have their share.  But it would
be meaningless and a contradiction to destroy the economy in
order to give them their share.  It will be sharing nothing.
We will therefore ensure that the economic  growth  is  sus-
tained  while  we  attend  to the twin objectives of poverty
eradication and restructuring.
45.  We are not in a hurry.  We want the bumiputera share to
be lasting and to grow on its own accord, even when no  more
help  is  given by the Government.  It is a tall order.  But
we think we can do it without too much disruption.
Ladies and gentlemen,
46.  I have tried to describe the weaknesses in  the  imple-
mentation  of  the NEP and how we think we can correct them.
I have pointed out the need to upgrade bumiputera management
skills and ethical standards.  Any new policy  must  reflect
the  appreciation  of  these important factors.  We will not
force the pace but the non-bumiputeras and the  foreign  in-
vestors  will be doing themselves a good turn by helping the
bumiputeras achieve  their  goals  early.    The  sooner  we
achieve  our  goals  the  sooner  will  the need for special
treatment cease.
47.  It is important to remember always that there will be a
price to pay, one way or the other.  We think the price will
be much lower  if  everyone  accepts  the  need  for  socio-
economic  engineering  and  helps  to  make a success of the
48.  1991 will not bring a catastrophe.  The Government will
not alllow any radical changes to take place that  will  de-
stroy  all  that  the  Government  had carefully planned and
achieved.  We are not about to become suddenly irresponsible
and indulge in some hare-brained scheme.   That much  I  can
assure you.  The economic policy after 1990 will not involve
any  fancy foot-work.  It will be a well-thought-out plan to
achieve economic growth with equity.
49.  I am afraid that at this point in time I cannot be  any
clearer  about  the  post 1990 economic policy.   But I have
said enough for everyone to make an assessment of  the  kind
of  attitudes  and  approaches the Government will make.  We
have lived with the NEP for twenty years.  If Malaysian per-
formance is anything to go by, the NEP is not too  damaging.
It  irks  a  few people because they could not get what they
want.  But if they reflect they must admit that even without
the  NEP  not  everyone  will  get  what  they  want.    The
bumiputeras  too did not get all that they wanted during the
NEP period.
50.  If in this country, the locals and the  foreign  inves-
tors  could  live with the NEP for twenty years, they surely
can live with any policy that this  Government  will  devise
for  the  post  1990  period.    I say this Government, this
Barisan Nasional Government deliberately, because  you  know
this Government and you know its pragmatism and its record.
51.  We  care for this country.  We want this nation and its
people to prosper.  We want to share  prosperity.    Getting
30%  of  an  impoverished economy will be meaningless to the
bumiputeras.  They are as much committed to economic  growth
as everybody else, as is the Government.
52.  So even if I cannot spell out tonight the exact details
of  the economic policy in the post 1990 period, there is no
reason for anyone to worry.  If anyone is hesitating to  in-
vest  in Malaysia, he is wasting his time and probably miss-
ing his opportunity.  The economic policy that we will adopt
in order to eradicate poverty and to bring  the  bumiputeras
into  the mainstream of the nation's economy will be as well
thought-out, as positive, if not more so  than  the  present
NEP,  the  policy that has resulted in 8% average growth for
Malaysia and has put it among the top half  dozen  countries
of the developing world.
     Thank you.