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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