Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : REGENT HOTEL, KUALA LUMPUR
Tarikh/Date : 22/01/92
Tajuk/Title : THE OPENING CEREMONY OF THE TWENTY-
SEVENTH CONFERENCE OF GOVERNORS OF
SOUTH-EAST ASIAN CENTRAL BANKS
On behalf of the Government of Malaysia, I have great
pleasure in extending to you a very warm welcome to the
Twenty-seventh Conference of Governors of South-East Asian
Central Banks or SEACEN in Kuala Lumpur. I am told that
this gathering of SEACEN Governors is one of the few long-
standing and successful vehicles of regional co-operation of
its kind in the world and I am proud that Bank Negara
Malaysia is an active partner closely involved with this
group. I am a firm believer in regional co-operation, par-
ticularly among like-minded countries, as a means of promot-
ing beneficial exchanges which contribute to the economic
growth and well-being of member countries. Your presence
here for this conference is, I believe, a testimony that you
share the same sentiment. It is my sincere hope that the
SEACEN Governors and their guests, through their deliber-
ations today and in the next two days, would further
strengthen the bonds of co-operation and friendship among
their institutions and countries.
2. In 1991, we saw the growth of world output and trade
decelerating for the third consecutive year. In particular,
economic activity in the industrial countries slowed down
significantly, with output declining and unemployment in-
creasing in many countries. Current prospects for any
strong recovery in North America and in the United Kingdom
are not encouraging. Risks of continuing weak economic ac-
tivity remain, due largely to the low level of business and
consumer confidence. Recent policy easing by the Federal
Reserve Board offers some hope of a recovery in the United
States this year, but all indications are that it is likely
to be mild. Economic growth in Japan and Germany is ex-
pected to moderate to more sustainable levels, but new un-
certainties have since emerged, leading to the possibility
that the slowdown in economic activity may turn out to be
more severe than expected, with detrimental effects on the
global economy. These developments have generated concerns
for the continued growth of developing countries, since they
are highly dependent on export markets in the industrial
countries. They underline the growing need of developing
countries to become more self-reliant and reduce their de-
pendence on industrial countries in charting their economic
future. It seems to me that developing countries will have
little choice except to accelerate South-South co-operation
in the fields of trade and investment if they wish to con-
tinue to enjoy sustained growth.
3. Concerns have also been expressed in the past year or
so by both developed and developing countries about the pro-
spective shortage of global savings. There will be an in-
creasing demand for world savings, particularly to finance
structural reform in Eastern Europe, the economic unifica-
tion of Germany, the debt problem of many developing coun-
tries, the post-war reconstruction of Iraq and Kuwait, and,
very likely, prospective reforms in the Commonwealth of In-
dependent States. Developing countries also still need
large amounts of funds for development. These factors, to-
gether with investment demand in the industrial countries
arising from their need to improve productivity and maintain
or improve their living standards are expected to put upward
pressure on international interest rates over the longer
run. This would exacerbate the debt servicing problems of
developing countries and force them to curtail growth. This
prospect underscores the importance and urgency of arresting
the decline of global savings. It is imperative that the
industrial countries implement policies that will increase
savings so that international resources and capital stock
can increase.
4. The situation in the heavily indebted developing coun-
tries remain extremely difficult, with the prospect of re-
gaining external viability remaining elusive. The
persistent global debt problem continues to undermine the
success of the adjustment programmes of developing coun-
tries, and their ability to attract foreign direct invest-
ment and external financing. Moreover, the slowdown in
global economic activity has led to a weakening of export
markets, with falling commodity prices contributing to a
further deterioration in the terms of trade of primary pro-
ducers. There is a pressing need for further debt relief
for countries willing to undertake economic reform. Further
progress in extending debt relief along the Trinidad and
Tobago terms, most certainly merits greater attention. The
successful resolution of the debt problem also requires a
freer international trading environment to enable developing
countries to realise their export potential, and the
adoption by industrial countries of appropriate macroeco-
nomic and structural adjustment policies, so as to induce
sustained growth with low inflation, and stable exchange and
interest rates. External financing flows in adequate
amounts and in a timely manner are no less important.
5. Given the outward orientation of our economies, the ma-
jor challenge facing us in the 1990s will be to ensure that
international trade is carried out in an open and compet-
itive system. Protectionist measures have increased sub-
stantially and are a major threat to the future trading
environment. Increased protectionism has also tended to
discourage investment in export sectors and reduce the re-
sponsiveness of trade flows to prices. Of growing concern
also is a discernible trend towards the linking of totally
unconnected issues, such as human rights and environmental
matters, with trade. There is a belief among developed
countries that by forcing the poor to become poorer, they
will show more respect for human rights and spend more money
on the environment. In fact it is poverty which brings on
repressive and insensitive Governments. A freer interna-
tional trade environment will enable developing countries to
expand their exports and, thereby, increase their incomes
and standards of living. They can then afford to be more
liberal and to care for their environment. The successful
conclusion of the Uruguay Round of multilateral trade nego-
tiations are therefore very urgent.
6. Turning closer to home, I must highlight the fact that,
generally, the strong outward orientation, external
competitiveness and relatively low level of indebtedness of
the SEACEN region have contributed to its economic dynamism.
Moreover, our region is blessed with abundant natural re-
sources and a hard-working workforce motivated by aspi-
rations to achieve a much higher standard of living than
previous generations. Given the growing economic interde-
pendence, it is rational that we move toward pooling our re-
sources and sharing regional markets. Regional co-operation
in our part of the world, therefore, holds vast potential to
further enhance the dynamism of our economies. First, sus-
tained economic expansion in the region will insulate us at
least partially from the vagaries of the external environ-
ment. Second, greater trade among ourselves will enable us
to reap the advantages of large-scale production, create
greater mutual interdependence and accelerate the pace of
industrialisation.
7. As a government, the ultimate objective of economic
growth must be to eliminate poverty and to raise living
standards. Unfortunately, we live in an imperfect world,
and the art of economics, even though many in the profession
still prefer to call it a science, has not yet been able to
find a satisfactory way to measure the standard of living of
nations, especially across countries. Often, the income per
capita denominated in United States dollars is used as a
convenient proxy -- indeed, to the extent that many, includ-
ing politicians and professionals who should know better,
regard them as synonymous. The use of per capita income for
any purpose is fraught with limitations. What is perfectly
clear is that it is a poor approximation of domestic pur-
chasing power. We all know that the same McDonald "Big Mac"
hamburger in Kuala Lumpur is about 3 times cheaper than in
the U.S. and 5 times cheaper than in London. Furthermore,
per capita income pays no attention to improvements in the
quality of life, arising from improved health care, re-
duction in income inequality, increased access to housing,
education and other social amenities, higher life expectancy
and lower infant mortality, and a cleaner environment. On
each of these, we have made rapid progress.
8. The American dollar is not a stable currency. When it
appreciates against the ringgit, our per capita goes down.
When it depreciates our per capita goes up. To complicate
matters the dollar may depreciate against the ringgit but
the yen might appreciate. Then as a country which does 25%
of its trade with Japan, we will find our per capita higher
but we will have to spend more money to buy Japanese goods.
With fluctuating exchange rates which in many instances are
totally unrelated to economic performance, per capita income
in U.S. dollars really measure nothing.
9. For Malaysia, our living standard needs to be assessed
beyond just the per capita number. We intend to make fur-
ther progress to become a developed nation by the year 2020
in the broadest sense of the term, that is, politically,
economically, socially, spiritually and culturally. That is
to say, we want to be considered beyond sheer economic num-
bers -- our record will reflect the maintenance of political
stability, progress in social justice, enhancement in the
quality of life, and the strengthening of ethical and moral
values.
10. Perhaps, Governors present may want to pick up this
challenge to develop for SEACEN a sensible yet practical
measure of living standards across countries, so that we are
in a better position to evaluate our own achievements and
weaknesses, and others, too, will be better placed to assess
our progress and performance in the world community of na-
tions. To the extent that you succeed, you would have made
a positive contributions to how the world can better under-
stand national aspirations and, for that matter, how the
world should look at itself, thereby ensuring that the
fruits of economic progress are always measured in terms of
the economic and social welfare of the peoples of nations.
11. Honourable Governors, distinguished guests, delegates
and observers, I hope your deliberations would be able to
bring about a better understanding of the complex issues and
challenges facing our world and help you to find sensible
solutions to the problems that plague the world economic
system. Although you have a sizeable agenda to cover in the
next few days, I am pleased to note from the programme that
you will have some time to visit Langkawi and Penang in the
northern part of the country. I hope you will enjoy your
stay in Malaysia and come back again.
12. Finally, in the spirit of the true co-operation, under-
standing and friendship among the South-East Asian nations,
I take great pleasure in declaring open the Twenty-seventh
Conference of Governors of South-East Asian Central Banks.
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