Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : LONDON
Tarikh/Date : 21/09/92
Tajuk/Title : THE SEMINAR ON "MALAYSIA: YOUR
PROFIT CENTRE IN ASIA"
Sir Nicholas Spreckly,
Chairman of the Seminar;
Distinguished Guests;
Ladies and Gentlemen,
It is indeed a pleasure to welcome you to this seminar
especially held to apprise you of the present status of in-
vestment and trading opportunities in Malaysia.
2. It would not be too presumptuous to say that your pres-
ence reflects your keen interest to know more about what
Malaysia can offer you in terms of business opportunities.
It is my hope that this seminar will generate a greater in-
flow of investment capital into Malaysia, bringing with it
improved technology and expertise for which the British are
well-known.
Ladies and Gentlemen,
3. Over the past few years, Malaysia registered very sat-
isfactory rates of economic growth, with last year's growth
of 8.8 per cent in real Gross Domestic Product (GDP) repres-
enting the country's fifth consecutive year of high economic
expansion. This year our economy has been forecast to grow
at about 8.5 per cent, and although this is lower than the
average growth achieved in the past four years, it is never-
theless impressive given the slowdown experienced by all
Malaysia's major trading partners in the world. So far, the
performance for 1992 has been encouraging, with growth in
the first half of the year registering 8.6 per cent.
4. While we are happy with this growth, we are anxious
that this should be achieved with a reasonable degree of
price stability. Thus our primary concern now will be to
give more focus to economic consolidation measures such as
combating inflation and reducing price pressures. This, in
turn, would enable sustained growth to go on and conse-
quently the generation of higher levels of confidence in the
Malaysian economy.
5. With the growth momentum experienced in the late
eighties expected to continue into the nineties, the
Malaysian economy has been targeted to grow at an average
rate of 7 per cent per annum over the next 10 years. This
is not an unduly optimistic figure considering the fact that
the Malaysian economy actually grew at an average rate of
6.7 per cent per annum in the 20 years between 1971 and
1990.
6. In charting this growth, efforts will be made to fur-
ther transform the structure of the economy so that its
resilience would be enhanced. While the agricultural sector
will remain an important part of the economy, the main
thrust for growth and structural change will come from the
manufacturing sector.
Ladies and Gentlemen,
7. Private investment in the manufacturing sector has been
the primary driving force behind the growth of the Malaysian
economy. Following an aggressive export-led
industrialisation strategy, the manufacturing sector aver-
aged a growth of 15.8 percent per annum during the period
1988 to 1991. The contribution of the manufacturing sector
to the country's GDP had also risen, from 24.3 per cent in
1988 to 28.1 per cent in 1991.
8. For 1992, the prospects are equally encouraging with a
growth forecast of 14.5 per cent for the sector, which would
account for about 30.2 per cent of the country's GDP.
9. The manufacturing sector, which is expected to grow at
10.5 per cent per annum over the next 10 years, is expected
to raise the manufacturing sector's share of the GDP to 37.2
per cent by the year 2000, thus paving the way to making
Malaysia an industrial economy. Manufacturing exports are
projected to account for about 81.8 per cent of the total
exports by the end of the decade. Presently it is 64 per
cent.
10. To realise the rapid expansion envisaged for the manu-
facturing sector during the 1990s, a high growth of manufac-
turing investment will have to be sustained. It has been
estimated that in order to achieve the targeted growth rate
of the manufacturing sector at 11.0 per cent per annum for
the period 1991 - 1995, the amount of total investment re-
quired will be 16 billion pounds (M$80 billion). This is
about 36.5 per cent higher than the approved investment dur-
ing the previous 5 year period. Of this, 6.6 billion pounds
(M$33 billion) or 41 per cent is expected to be from foreign
sources, and the balance from domestic sources. The Govern-
ment therefore recognises the critical role of foreign di-
rect investment in maintaining the growth momentum of the
Malaysian economy and is therefore committed to creating an
environment that will provide foreign investors with the op-
portunities for increased investment, growth and profit.
11. Malaysia's efforts in attracting foreign investment to
the manufacturing sector have been fairly successful. Over
the last four years, between 1988 and 1991, total approved
foreign investment amounted to 9.42 billion pounds (M$47.1
billion) and this represented 60.7 per cent of the total
proposed capital investment (15.52 billion pounds/M$77.6
billion) in all the projects approved during the period.
For the first eight months of this year, approved foreign
investment in manufacturing projects totalled 2.64 billion
pounds (M$13.23 billion), which constituted about 78.5 per
cent of the total approved investment in all sectors. This
underscores the attractiveness of the Malaysian business en-
vironment.
12. What is perhaps more important is Malaysia's viability
as an export base since most of the investments are for fac-
tories producing for the export markets. Of the 3,642
projects that were approved during the period 1988 to August
1992, 2,635 projects or about 72.3 per cent of the total
would be exporting at least 50 per cent of their production.
Of these, many would be exporting close to 100 per cent of
their production. Indeed it is this competitiveness that
has propelled us to the top in the world's exports not only
of semi-conductors, of which we have been the leader for
some time, but of late also in room air conditioners,
extruded rubber threads, rubber gloves, colour TVs and audio
equipment. We are now fast becoming a leader in the world
production of cameras. Exports of manufactured goods thus
constitute 64.7 per cent of the total exports of the country
in the first quarter of 1992. We therefore do have a cut-
ting edge when it comes to producing for the world markets.
13. The Government will continue to place great emphasis on
foreign investment as foreign investors are expected to
bring in new technologies, new processes, vital linkages and
access to international markets.
14. We are aware that the private sector thrives best under
stable macro-economic conditions. The Government will
therefore continue to create the conditions which are condu-
cive to private investment growth and entrepreneurship de-
velopment.
15. Our current liberal policies in foreign investment,
which have proven successful, will be maintained. Foreign
investors will therefore continue to be allowed to have ma-
jority, including a 100 per cent ownership of the equity of
their export-oriented manufacturing projects.
Notwithstanding this, we would encourage you to set up
joint-ventures with Malaysians, whenever possible.
16. In addition to the liberal investment policies,
Malaysia offers a wide array of tax incentives. The pro-
vision of these incentives for the manufacturing sector has
contributed much to the growth of private investment. There
is a need, however, to constantly review the package of in-
centives so that we can put in place a more selective and
effective system to promote efficiency, productivity and
corporate restructuring to ensure the attainment of an envi-
ronmentally sustainable growth in the manufacturing sector.
We have recently made some changes to the tax incentive
scheme. The changes made are aimed at enhancing self-
reliance and the creation of more competitive and efficient
industries.
17. Revisions to the tax incentive system are intended to
encourage a transition to lower import-content, higher
value-added and capital, and technology-intensive industries
in order to strengthen industrial linkages and to enhance
greater export capabilities. This is in line with our new
strategy which emphasises the development of capital and
technology-intensive industries.
18. We realise that with the changes, our tax incentives
may be slightly less attractive than what they used to be.
Nevertheless, we are confident that Malaysia will remain an
attractive location in which to invest, given our political
stability, availability of natural resources, the
workforce's familiarity with the English language, and our
commitment to human resource and infrastructure development.
19. In our bid for an accelerated industrialisation drive,
we are aware that there will be obstacles along the way.
Our strategies for the years ahead will take into consider-
ation not only the local politico-economic and social scene
but also the recent drastically-changed external geo-
political and economic environments. Still we feel that in-
vestors will appreciate our consistency and predictability
and our willingness to adjust policies to suit the times.
20. The thrust in the future will be to promote new growth
in the following areas:-
i. Broadening and Deepening the Industrial Base
____________________________________________
In order to sustain Malaysia's industrialisation momen-
tum and her industrial competitiveness, a broader in-
dustrial base is needed. We aim to increase the
value-added contents of our resource-based industries,
to go far beyond the production of basic components in
the electronics field.
ii. Encouraging more Capital-Intensive and Technologically
_______________________________________________________
Sophisticated Industries
________________________
With our easily trainable, educated and relatively low-
cost labour, and an unemployment rate of around 5 per
cent, we feel we can shift into the less labour- inten-
sive, high-technology industries which promise higher
added values and productivity. In this respect, the
Government has identified 5 key technology areas for
building competence and developing niche areas for the
domestic industries.
These are the areas of:-
- Automated Manufacturing Technology,
- Advanced Materials,
- Bio-technology,
- Electronics, and
- Information Technology.
iii. Promoting the Development of Intermediate and Capital
_______________________________________________________
Goods Industries
________________
With the rapid pace of industrialisation, Malaysia's
requirements for capital and intermediate goods have
increased significantly. Mostly these are imported.
In 1991, machinery equipment alone accounted for 18.6
per cent of the total merchandise imports. This trend
is expected to continue as the country's
industrialisation pace accelerates. In order to reduce
future imports of such goods, the manufacture of indus-
trial machinery and parts, machine tools and related
engineering industries is being encouraged.
iv. Promoting Industrial Linkages between Foreign and Local
_______________________________________________________
Companies
_________
The Government is also concerned with the lack of inte-
gration in the industrial sector where the Free Zones
have become export processing enclaves of imported raw
and semi-finished products. There is little linkage
with the domestic sector, particularly the small and
medium-scale sector. The Government now wishes to pro-
mote industrial linkages which can contribute to
greater domestic value-added. Through these, the small
Malaysian firms can benefit from the transfer of tech-
nology and skills, product upgrading and market access.
21. These are the challenges facing us. They are at the
same time your opportunities. Given the technological supe-
riority of the British industries, I am sure these Malaysian
needs will offer good prospects for investment.
Ladies and Gentlemen,
22. Malaysia, of course, has long traditional ties with the
United Kingdom which encompass the political, economic, so-
cial and education sectors. In this regard, I am happy to
note that developments in bilateral economic cooperation
have been encouraging.
23. The UK is Malaysia's fourth largest trading partner ac-
counting for about 4.5 per cent of Malaysia's total trade in
1991. Total trade increased by more than three times from
564 million pounds (M$2,820 million) in 1989 to 1.76 billion
pounds (M$8,807 million) in 1991.
24. Currently manufactured products constitute about 90 per
cent of Malaysia's total exports to UK, a radical change
from the former dominance of tin and rubber.
25. I am certain that the current strong bilateral economic
cooperation will continue to expand and grow in strength.
As a member of the Commonwealth, Malaysia's trading environ-
ment must be familiar with the British business community.
Besides, the system of administration and laws was laid down
by the British and English is still widely spoken. Clearly
the British have many things in their favour in Malaysia.
26. In respect of investment, the UK has traditionally been
an important source of capital and know-how in the develop-
ment of Malaysia's manufacturing industries. Investment
from the UK in our manufacturing sector dates back to the
early years, even before our industrialisation drive. Thus
it comes as no surprise that the UK features strongly in the
Malaysian scene and is consistently placed among the ten
leading countries from which investments in the manufactur-
ing sector originate.
27. Cummulatively, investments from the UK during the pe-
riod 1980 to 1991 in approved manufacturing registered a
total of 592 million pounds (M$2.96 billion). For the first
eight months of 1992, UK investments in eight manufacturing
projects totalled 250 million pounds (M$1.25 billion). This
compares favourably with projects approved for the whole of
1991 which involved a proposed total capital investment of
107.6 million pounds (M$538.4 million). However, the in-
creasing interest of UK companies in Malaysia can be further
underlined by the fact that for the first eight months of
1992, four project applications with UK interests had been
received, in which total proposed capital investment would
amount to 324 million pounds (M$1.62 billion). The trend
towards capital-intensive, high technology and high value-
added projects from the UK is very much in keeping with
Malaysia's policy.
28. Within the East Asia region, the ASEAN countries cur-
rently enjoy one of the fastest economic growth rates, rang-
ing from 5 to 8 per cent. Based on the present growth rates
of the ASEAN population and the economies, the GNP for the
region is projected to reach between 100 billion to 110
billion pounds by the year 2000. This scenario offers tre-
mendous opportunities for the U.K. companies to locate their
manufacturing operations there.
29. In this context, ASEAN will become a much more attrac-
tive market when the Governments of the six member countries
begin to implement the Agreement on the Common Effective
Preferential Tariff (CEPT) for the ASEAN Free Trade Area
(AFTA). This Agreement, which will liberalise trade through
gradual reduction of tariffs within ASEAN, hopes to estab-
lish a free trade area within 15 years commencing January 1,
1992. I am certain that you, as investors, will welcome
this move. In establishing a production base in Malaysia
you will be able to export to other ASEAN countries freely
or with minimum import duties.
Ladies and Gentlemen,
30. I hope that at the end of today's session, you will
have a clearer picture of the business environment in
Malaysia. For those of you who are familiar with our coun-
try, it is also my hope that my address this morning will
have helped shed more light on the recent developments that
have taken place in Malaysia.
31. As mentioned earlier, companies from the UK, especially
the pioneers in the manufacturing, plantation, mining and
finance sectors, have helped us lay the foundations for our
economic progress. While we aspire to join the ranks of the
world's industrialised nations by the year 2020, it is to be
in the Malaysian mould. In essence this entails adopting
Japanese, American and British management cultures and
adapting them to suit the Malaysian value system.
32. We therefore, value our ties with the UK and welcome
more of your investments. Although your economy and that of
other industrialised nations have slowed down somewhat, we
are confident that this will not materially affect UK in-
vestment abroad as such moves are rarely based on short-term
considerations. We value long-term commitment as against
short-term cooperation.
33. On this note, I take this opportunity to personally in-
vite you to visit Malaysia to explore the vast investment
opportunities in the country.
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