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Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	NEW YORK CITY 
Tarikh/Date 	: 	25/09/91 
Tajuk/Title  	: 	THE ASIA SOCIETY MEETING (THE 
			MALAYSIAN ECONOMY-THE WAY FORWARD) 




 Distinguished Guests;
Ladies and Gentlemen,
    I  am very glad of this opportunity to address the dis-
tinguished members of the Asia Society  in  New  York  espe-
cially  as  it  enables  me  to  explain  a little about the
complexity of Malaysia with its multiethnic  society  to  an
audience  of Americans with a wide knowledge of Asia and the
world.
2.   For more than a decade now Malaysia has opted  to  con-
centrate  on  economic development and to reduce politicking
to the minimum.  This is not easy of course, considering the
mutltiracial, multicultural, multilingual and multireligious
character of the Malaysians.  But if you compare the history
of independent Malaysia with that of other multiracial coun-
tries, including those in present-day Europe, our record  in
reducing  politicking  and  developing  our economy seems to
testify to our success in doing both at the same time.
3.   Except for the race riots in 1969,  race  relations  in
Malaysia  have been fairly good.  As to the economy, we have
done fairly well with growth averaging 6.8% in the last  two
decades.    The  four Asian tigers grew faster but then they
have no racial or religious problems;  their  society  being
more homogeneous and more compact.
4.   In  Malaysia, we have always been very conscious of the
need for political stability in order  to  achieve  economic
growth.  And so, right from the begining the different races
set out to formulate a system of working together.
5.   An  alliance of ethnic-based political parties resolved
the question of the character of independent  Malaya  before
they  presented their demand for independence in 1955 to the
British.  That Alliance of Malay, Chinese and Indian parties
then went on to rule Malaya and Malaysia after  independence
was achieved in 1957.
6.   For a time the euphoria of independence and the sharing
of political power was sufficient to maintain political sta-
bility.  But economic disparities were left unattended.  The
Alliance  Government felt that the status quo with regard to
the places for the Malays, Chinese and Indians in  the  eco-
nomic  spectrum  should remain.   This meant that the Malays
should remain peasants with a few serving in the Government;
the Chinese should do all the trading and other economic ac-
tivities and the Indians should tap rubber while a few  work
as professionals.
7.   Naturally  economic  disparities not only continued but
were amplified.  Within a decade the rumblings of discontent
among the Malays became audible and ominous.  Racial tension
increased as the races confront each other in the  political
arena.  In 1969 race riots broke out.
8.   It should be noted that the Government was not entirely
unconcerned  about  the  welfare  of the Malays in the rural
areas.  A comprehensive programme of rural development  suc-
ceeded in bringing modern amenities to these areas.  But the
fact  remained  that the Malays felt the greatest portion of
the wealth of the nation was beyond their reach and that the
Chinese were the  main  beneficiaries  of  post-independence
economic growth.
9.   Following  the race riots of 1969 the Government there-
fore decided to address the disparities  and  integrate  the
races into the economic sphere.  Thus was formulated the New
Economic   Policy   (NEP)   with   the  twin  objectives  of
eradicating poverty irrespective of race and the restructur-
ing of society in order to remove the identification of race
with economic function.
10.  Malaysia suffered severe criticisms from many  quarters
over  the New Economic Policy.  The political leadership was
labelled as racist and discriminatory.   That  the  previous
impartiality in the treatment of the different races had re-
sulted  in  enhanced  disparities and the race riots in 1969
were ignored.  It would seem that equal treatment,  even  if
it resulted in increased inequality, was more important than
real  equality  between citizens.   Yet society had long ac-
knowledged the justice of taxing the rich in order  to  sup-
port the poor.  The only difference is that in Malaysia, the
poor  happens  also  to be the indigenous people as a commu-
nity.    That  the  Government  also  subscribe  to  poverty
eradication,  irrespective  of  race,  was dismissed as mere
window-dressing and not worthy of consideration.
11.  The multiracial partners in the Government  stood  fast
together despite attacks at home and abroad and continued to
implement  the  NEP.    It was the most daring experiment in
socio-economic engineering ever undertaken by  a  developing
country.  There was no precedence to fall back on.  Mistakes
were made, but with some innovations, startling results were
achieved.
12.  While  all  these  socio-economic programmes were being
carried out, the Government had also to ensure that economic
growth would not be retarded.  Indeed the NEP could not have
been implemented if there was no growth, for it was premised
on the expansion of the economic cake and not on  redistrib-
ution  of  existing wealth.  With the world sliding into re-
cession the task for the Government was doubly difficult.
Ladies and gentlemen,
13.  When I took over as Prime Minister  in  1981,  the  New
Economic  Policy, was at its mid-point but had achieved only
1/3 of its target.   With the world  in  recession,  it  was
feared  that  in  the next 10 years the achievement would be
even less.  Clearly new approaches were needed not  only  to
achieve the NEP target, but also to accelerate growth.
14.  The  dynamic  economies  of the Far East were chosen as
models and the Government enunciated the "Look East  Policy"
and the "Malaysia Incorporated" concept.  The Look East Pol-
icy  did  not  mean buying from Eastern countries and giving
all contracts to them as the detractors of  the  Government,
both local and foreign alleged.  Looking East meant learning
the  work  ethics,  management  styles  and organisations of
those countries in the East  which  were  achieving  dynamic
growth.    These  countries  had developed fast because they
switched from an agrarian economy to an industrialised econ-
omy.  If Malaysia was to grow fast  it  must  industrialise.
Again it had no choice.  The agricultural sector cannot sup-
port  a  rapidly  growing  population  which  grew from 10.7
million in 1970 to 18.3 million in 1990.  Only manufacturing
industries can.  Since the domestic market is small, import-
substitute manufacturing would contribute little to  growth.
To cope, the economic growth must be export-led.
15.  New  forays  into  industry  were  launched.   The most
criticised was the venture into heavy  industries,  such  as
steel-making  and  fabrication and automobile manufacturing.
Many predicted failure with glee.   Indeed  in  the  initial
years  the projects seemed to fail.  But then, which company
in the steel and car manufacturing industry made money  from
day  one?    It so happened that almost as soon as the mills
began operation Malaysia  experienced  its  worst  recession
following  the  worldwide  recession in 1984-85.  Today with
these enterprises and a host of others started by the  Heavy
Industries Corporation showing handsome profits, the critics
are less vocal though they remain sceptical.
16.  The  deep recession in 1985 also called for new strate-
gies in order to recover.   New incentives were  devised  in
order  to  attract foreign investments as well as local ven-
tures.   A new Ministry of Tourism  was  allocated  a  large
budget  to  promote tourism.  A Visit Malaysia Year launched
in 1990 succeeded in increasing foreign visitors by  60  per
cent to over 7 million.
17.  In  the  meantime  the  Malaysia  Incorporated  concept
helped develop rapport between the Government and  the  pri-
vate  sector.    This is absolutely essential if the private
sector is to be the engine of growth as decided by the  Gov-
ernment.    Civil  servants  were retrained in order to cope
with new attitudes and strategies that  were  formulated  by
the elected Government.
18.  In  the  course of implementing the NEP, the Government
had moved aggresively into business.    Although  some  were
successful,  a  great  many were failures.   Fortunately the
privatisation policy enunciated in 1981 had  begun  to  show
results.    Accordingly,  the  Government  companies whether
profitable or otherwise were sold  off  along  with  various
Government agencies and services.
19.  Privatisation  was  successful  and profitable both for
the Government and the private sector.   An example  is  the
Telecommunication  Department.  When it was a Government de-
partment it needed continuous Government  financial  grants.
Revenue  from the service was minimal.  As a private company
Telekom Malaysia relieved the  Government  from  the  annual
grants,  paid the Government for the assets taken over, made
considerable profits which the Government gets as  dividends
for  its  majority  share, and provide better service.  Many
other services have been privatised and a list of  over  200
others has been earmarked for privatisation.
Ladies and gentlemen,
20.  At this point it is relevant to state that Malaysia had
clearly  deviated from the development model promoted by the
countries of the North through the World Bank  and  the  IMF
when  the colonies of the west gained independence.  In eco-
nomic terms, the model stipulated that the newly independent
country should extract and export raw materials and  commod-
ities to the North and with the earnings to pay for imported
consumer  goods,  machinery  and  technology,  also from the
North.  In agriculture, the model called for the opening  up
of  forests  to  plant crops using chemicals and fertilizers
from the North.  The model led to overproduction  and  lower
prices  for  commodities  and  deterioration in the terms of
trade for the developing countries.
21.  We are today looking at the ruins of this model in many
parts of the world, especially in Africa.   The  severe  ad-
justment  programmes  demanded  by the World Bank when these
countries failed because of its policy, caused further hard-
ships on societies and even governments.  Cuts in social ex-
penditures such as health care, water supply  and  education
have  led  to  more  poverty and health problems.   A recent
statement by UNICEF has linked the outbreak  of  cholera  in
some  Latin  American  countries  to policies imposed by the
World Bank and the IMF.
22.  In Malaysia's case, it was providential that we did not
adopt, in toto, the model above.  Ours was a non-doctrinaire
pragmatic approach which was not averse to learning and  ac-
cepting  methods from all sources, irrespective.  We did not
nationalise foreign owned assets but we made  sure  that  we
acquired  controlling  shares  through  normal  market mech-
anisms.  We practised consistently  an  open-market  trading
system but the Government was always ready to intervene when
necessary.    While we allow full interplay of market forces
in the private sector, the public sector remains a responsi-
ble partner monitoring the situation.
Ladies and gentlemen,
23.  On the 1st of July this  year,  Malaysia  launched  its
Second Outline Perspective Plan and the National Development
Policy  (NDP)  covering  a span of 10 years from 1991 to the
year 2000.  At the same time, we announced a  framework  vi-
sion  to make Malaysia a developed country by the year 2020.
Our concept of being developed does not simply focus on  per
capita  income  but  on  the quality of life and morality as
well.  The hedonistic materialism of present models  is  not
for  us.    We  hope the rest of the world will give us this
freedom of choice and not harass us into conformity  in  the
name of freedom.
24.  In  formulating  the NDP, the Malaysian Government also
took into account a number of key factors.  First, since the
NEP was a qualified success we will continue with its objec-
tives.  But we will concentrate on improving the  method  of
implementation  to  ensure that quality is not sacrificed in
favour of quantitative achievement.
25.  Secondly, the NDP must involve the participation of all
communities.  In implementing the NDP there will be  a  full
mobilisation of all resources and utilisation of all the as-
sets and skills of Malaysia's multiracial society.
26.  An important policy shift is to reduce Government's di-
rect  and massive role in opening up new lands.  The Federal
Land Development Authority or FELDA will be given  a  dimin-
ished  role  as  the  landless  now tend to migrate to urban
centres and work in factories.  Should new plam oil  estates
need  to be opened or expanded, the private sector will ini-
tiate and run them.  They are after all more efficient  than
the Government.
27.  The  third  factor  concerns  the external environment.
The already shrinking international capital market is coming
under even greater strain as the central economies of  East-
ern  Europe and the new Soviet Republics move towards market
economy.  Because of the uncertainty  in  the  international
capital  market, the NDP will generate capital from domestic
sources through efficient mobilisation of domestic savings.
28.  The export market is likely  to  get  tougher,  with  a
threat of increased protectionism and regulated world trade.
This  trend  will have to be countered by seeking more mean-
ingful support for keeping trade free.   Towards  this  end,
Malaysia  has  proposed  the formation of the East Asia Eco-
nomic Group or EAEG as a forum to garner  support  for  free
trade at international trade negotiations.
29.  In  order to achieve the targets of the NDP and the at-
tainment of developed nation  status  by  2020,  an  average
growth  of 7 per cent per annum is required.  Such a rate of
growth will result in doubling the output of goods and  ser-
vices  in  real terms every 10 years and would achieve a per
capita income of $17,000 by the year 2020.
30.  This is arguably an ambitious projection but it is  not
unachievable.   In the 1970's, the Malaysian economy grew by
an annual average of 7.8 per cent and in the 1980's  because
of  the  recession,  by  an  annual average of 5.9 per cent.
During the 20-year period of the  NEP  beginning  1970,  the
year  the  New  Economic Policy was launched, the growth was
therefore 6.8 per cent per annum.  What is needed is an  ad-
ditional  growth  of 0.2 per cent.  Considering that in 1989
the rate was 9.4 per cent and  10  per  cent  in  1990,  the
chances for a 7 per cent average growth are good.
Ladies and gentlemen,
31.  The pursuit of the objectives of the NDP will entail an
accelerated  industrialisation programme.  The manufacturing
sector will spearhead development in the next decade.   This
sector  is  projected to grow by 10.5 per cent per annum re-
sulting in the share of the sector in GDP increasing from 27
per cent in 1990 to about 37 per  cent  in  the  year  2000.
Last year, the manufacturing sector enjoyed a growth of 18.2
per cent.  The growth in this sector will have a significant
impact  on  the  composition  of  exports, with manufactured
goods accounting for about 80 per cent of total  exports  by
the year 2000.
32.  Labour  shortages  being experienced presently will re-
quire that the nation move into higher technology  and  more
capital  intensive industries.  At the same time, there will
be a need to diversify and broaden the  nation's  industrial
base  through  new  growth industries including metal fabri-
cation and engineering, petrochemicals and transport  equip-
ment  as well as non-metallic mineral, rubber and wood-based
industries.
Ladies and gentlemen,
33.  An important thrust in the NDP  is  the  high  priority
given  to  the  development of human resources.   We are not
thinking merely in terms of educational and skills training,
but attitudinal training as well.  A peasant  mentality  and
value  system  is  incompatible  with  progress  towards  an
industrialised society.   The people  will  need  to  change
their  values and work ethics if we are to achieve our ambi-
tion to become a developed nation.  An active programme  for
training   the  people  in  the  required  ethics  has  been
launched.  This sounds very much  like  thought  control  or
brainwashing.    We  know that left to themselves the people
would probably adjust.  But we do not have  time  to  spare.
Too many nations are ahead of us.
34.  Economic  development  plans  can  never be implemented
successfully in an  environment  of  political  instability.
Considering  Malaysia's multiracial population, proneness to
political  instability  is  perhaps  much  greater  than  in
homogenous  societies.  Brilliant foreign observers who have
intelligently questioned Malaysian taxi drivers on their way
from the airport to the city during their one-day visit have
never  failed  to  detect  religious  and  racial   tensions
simmering  under  the surface.   We have a great respect for
taxi drivers and barbers, but our approach towards  creating
political  stability  does  not  depend exclusively on these
people's observation.  We think we have the correct  formula
and  we  will  stick  to it with a fair deal of tenacity.  I
have already explained how  deliberate  power-sharing  among
our  ethnic  groups has resulted in political stability.  We
also believe that the equitable sharing of  national  wealth
by all is also essential for that stability.
35.  The  above  would  be the way forward for the Malaysian
economy.  With hard work, tenacity and a singleness of  pur-
pose,  we  feel  we can succeed.  Even the challenges of the
external environment can be overcome,  at  least  partially.
What  we  require  is less of the all-knowing do-gooders and
their drive to liberate us from ourselves.  It must  be  ac-
cepted  that  there are many roads to heaven.  The idea of a
monolithic all-purpose model cannot be accepted by us.    We
hope  people do not latch on to causes and crusades in order
to justify political and economic recolonisation.    Govern-
ments  should  also  not  hide  behind  the Non-Governmental
Organsiations.  And nations should not feel  unhappy  if  we
retaliate  in  the same manner when they deliberately run us
down.  After all the so-called civilised nations  have  more
skeletons in their cupboard and indeed are continuously add-
ing  to  them,  than we have in Malaysia.  If you try to re-
produce us in your image the world might be a  boring  place
to live in.
36.  The  way  forward for Malaysia may not meet with every-
one's approval but it is our choice.   If there  is  such  a
thing  as  human rights, let those rights also extend to the
choice of the people of Malaysia.

 
 



 
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