Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : THE HYATT SAUJANA HOTEL, SUBANG
Tarikh/Date : 18/09/90
Tajuk/Title : THE DIRECT REDUCTION PLANT CONTRACT
SIGNING CEREMONY
Distinguished guests;
Ladies and Gentlemen
I would like to thank the organisers for inviting me to
this gathering and to congratulate PERWAJA, Ferrostaal AG
and MAN GHH AG for coming together to pool their resources
for the growth of PERWAJA.
Ladies and gentlemen,
2. When the global recession hit Malaysia, we were as
badly hit as anyone else, but we very quickly took steps to
modify policies and approaches to expedite recovery. The
measures we took were apparently effective and today, the
Malaysian economy is stronger than ever and Malaysia has
been acknowledged as one of the Pacific Rim countries where
economic growth is expected to be among the highest in the
next decade. Our manufacturing industries like other sec-
tors recovered from the recession and went on to achieve
vigorous growth.
3. Like most industries, PERWAJA during the period of re-
cession ran at a loss, its financial problems further aggra-
vated by an unexpectedly rapid appreciation of the Yen.
Without expanding a single ringgit more, the capital and the
loans doubled, reducing the original feasibility study to a
meaningless scrap of paper. On the top of it the Direct Re-
duction (DR) plant failed. PERWAJA applied stringent meas-
ures to cut costs and increase production, especially after
Tan Sri Eric Chia took over and reorganised the management
and the philosophy of the company. The result was a remark-
able turnaround which restored confidence in PERWAJA.
4. Today, although PERWAJA is "young" in age, it's per-
formance ratings are moving close to world standards of ef-
ficiency. It is a measure of the renewed and strong
confidence in the viability of PERWAJA and its management
that the total finance package of over 800 million ringgit
for its expansion has been raised by a consortium of banks
without any Government guarantee. And now, with the direct
reduction plant which is to be resuscitated and a new DR
plant that is to be built, thus doubling the original de-
signed capacity, PERWAJA is set to enter the first phase of
its expansion.
5. When the new plants come into full operation, the total
production will be increased to 1.2 million tonnes of sponge
iron per annum. The directly reduced iron which the DR
plants will be producing will be used as feedstock and this
will enable the billet plant to produce a wide range of
steel -- from the very highest quality to the standard range
used for construction. With the availability of quality
steel at competitive prices, together with the efficient
infrastructure, investment incentives, a record of political
stability and a youthful and well disciplined workforce,
Malaysia will present a highly attractive proposition to
manufacturers of downstream steel products especially from
those highly industrialised countries where costs have esca-
lated.
6. This opens a whole new era of opportunities for PERWAJA
in various downstream activities. For the nation it will
mean that the true age of industrialisation has begun, for
no country can really be considered as industrialised if it
lacks a reasonable capacity to produce and process steel.
Although many new materials are used in modern products,
steel remains the basic material without which most modern
capital and consumer goods cannot be produced. It is there-
fore important for Malaysia to acquire the capacity to
produce steel and to be efficient at it. The latter is es-
pecially important because many old steel producers are go-
ing out of business due to poor efficiency. PERWAJA's
future depends not only on availability of plants but more
importantly the skills in managing and operating them at
maximum efficiency.
Ladies and gentlemen,
7. When Malaysia decided to go into heavy industries there
was scepticism all round. To-day that decision has been
vindicated. Apart from PERWAJA, the motor-car industry,
tin-plate plant, cement plant, motor-cycle engine plants as
well as the Heavy Industries Corporation or HICOM itself
have become successful and very profitable. And now PERWAJA
too has posted its first profitable financial year. The
move into heavy industry was essentially correct but Govern-
ment apparently overestimated management capacity to handle
these sophisticated capital intensive industries. The mis-
takes have been well learnt and whether privatised or not,
management skill must be given serious priority if we are
not to fail again.
8. Up till now the public sector has played a leading role
in financing the development of heavy industries either di-
rectly or through joint ventures with the private sector.
However greater private sector participation in such indus-
tries will be encouraged in future. The government will en-
courage such participation through privatisation or joint
ventures between local and foreign investors. We hope the
public sector participation will be reduced just to the
level of project identification and the creation of opportu-
nities for private investments.
Ladies and gentlemen,
9. All of you present today have a role to play in the
success of PERWAJA. It is the flagship of our country's
entry into the steel industry. It is my sincere hope that
everyone will give PERWAJA all the support it needs to make
it a success.
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