Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : SHANGRI-LA HOTEL, KUALA LUMPUR (K.L)
Tarikh/Date : 22/08/90
Tajuk/Title : THE DINNER OF THE HARVARD CLUB
OF MALAYSIA
Tan Sri Ahmad Sarji,
President of The Harvard Club of Malaysia;
Excellencies;
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
self.
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
growth.
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-
self.
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
Malaysia.
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-
penditure.
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-
ment.
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
project.
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.
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