Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : HONG KONG (HK)
Tarikh/Date : 14/10/92
Tajuk/Title : THE EUROPE/EAST ASIA ECONOMIC
FORUM EAST ASIAN REGION: TOWARDS A
PROSPEROUS FUTURE
Distinguished Guests,
Ladies and Gentlemen,
Allow me to congratulate the World Economic Forum (WEF)
for organising this first meeting of the Europe/East Asia
Economic Forum. I would also like to thank them for invit-
ing me to deliver this keynote address. The hosting of this
forum is indeed timely given the rising protectionism in
international trade and the creation of exclusive trading
blocs. Unless good sense is restored there will be much
that everyone will lose. And good sense will only surface
when interaction and dialogue expose the dangers facing us.
2. For the Eurocentric world of the past East Asia was the
Far East. And the Far East conjured up many strange and ro-
mantic images of exotic Cathay and dragons, of tea, opium
and exquisite silk, of strange peoples with even stranger
customs.
3. Unfortunately for the European romantics, the Far East
has now become East Asia, a region of concern not to the ro-
mantics, of which there are not many left, but to politi-
cians and economists. European uneasiness seem to suggest
that Asia today is a more serious threat than even
militaristic Japan in the first half of the century. Run-
ning through this perception is a current of distrust and
fear. For East Asia is peopled by different people, not
Europeans but by non-Europeans.
4. Thus a pacific but economically progressive East Asia
in the post World War II period does not seem to be as wel-
come as a pacific and prosperous Germany and Italy, the
European partners of the World War II Axis. Whereas the re-
covery and economic growth of the two European members of
the Axis were not hampered, indeed were welcome, the eco-
nomic growth of a pacific Japan and of the little Japans of
the Far East appear to be less welcome.
5. And so Europe, together with the transplanted original
European Community, the United States of America have tried
to stifle the growth of the East Asian states through vari-
ous impediments. Apart from the attempt to impose the west-
ern model of democracy, clear attempts have been made to
render the economies of the states of East Asia uncompet-
itive.
6. This is unfortunate. The world has gained much from
the East Asian approach to development. Having accepted
that the military route is not productive, Japan had turned
its tremendous skills and energy to creating a world where
the poor can live almost as comfortably as the rich. It is
the Japanese who succeeded in lowering cost without sacri-
ficing quality and so make available yesteryear's luxuries
to more people. True it is not altruistic but the end re-
sults are the same.
Ladies and gentlemen,
7. It is difficult to imagine a world without Japan now
but it is worthwhile to try and do so. Without Japan,
Europe and America will dominate the industrial world. They
will set the standards and the prices which they and the
rest of the world will have to pay for the goods which only
they can produce.
8. In their quest for ever higher standards of living for
their people, their likely approach in the absence of compe-
tition is to raise prices in order to recover cost. Their
socialistic and egalitarian philosophy demands that their
workforce be paid whatever they and their unions think they
deserve. The Europeans will meet all their demands and the
consequent not inconsequential demands of their executives.
Cost will go up as pay packets become heavier while work-
loads become lighter.
9. Raw materials imported from the poor South will be
fixed at the lowest level when the European North are the
sole buyers. This will make the South a poor market.
Rather than pay higher prices, loans and aid would be given.
The terms of trade will always be against them, rendering
them poorer and poorer and making them less and less inde-
pendent. In addition the loans condition will make debt-
slaves of these nations.
10. Since all the products of the European North will be
high-priced, perhaps three times higher than they are now,
the poor South would not be able to afford the radios and
televisions and the few domestic appliances which they take
for granted now, nor would their small farmers own pick-up
trucks and small motorcars. Generally the South would have
a much lower standard of living than now.
11. The economic development of some of the states of the
South and the emergence of a number of vibrant industrial
countries in East Asia would also not happen. It is impor-
tant to remember that it was the need to compete with the
Japanese that forced the Multi-National Companies (MNCs) to
invest in the low labour cost South. Without this need,
there would be no investment in the developing countries.
And since there would be no Japanese to invest, the stimulus
to growth due to foreign investment would not be there.
12. In addition without Japan and the Japanese success
story, there would be no role model for the East Asian na-
tions. They would continue to believe that the Europeans
could not be challenged in the fields they had pioneered and
perfected. Sophisticated industries were not for the East
Asians. At best they could imitate and produce inferior
products. And so there would be no tigers or dragons to
worry the West.
13. It was Japan which proved that it could be done and
done well. And the other East Asian countries dared to try
and to their surprise and that of the rest of the world they
succeeded. East Asians are no longer shackled by an infe-
riority complex. They now believe what Japan can do, they
too can. And they did.
14. A world without Japan will certainly be very different.
It will not be uncharitable to say that the rich North would
be richer and the poor South would be poorer. The European
North's domination of the world would be permanent. Coun-
tries like Malaysia would continue to plant rubber and mine
for tin and sell at whatever price dictated by their rich
industrialised customers.
15. It is a scenario that many will dispute. But it is a
plausible scenario nevertheless. If we try to imagine what
would happen if the Japanese did not invest in Europe and
America and kept all their cash at home we may get a fair
idea of the consequences. The Europeans would have to pay
higher prices for their own manufactured goods and would not
have the money needed for their own expensive lifestyles.
16. As it is, if Europe becomes protectionist Europeans
will have to pay more for everything. On the other hand the
countries which open themselves to the products of East Asia
will enjoy lower-priced high quality goods. Perhaps the
economies of scale will not be achieved by the East Asians
without the European markets. But they have demonstrated
that even small production runs can make them competitive.
With abundant low-cost labour, the investments in machinery
for high-speed production will not be needed. In any case
East Asian investment in the developing countries will
sooner or later enrich their markets and make up for the
loss of the European market.
17. The countries of East and South East Asia now consti-
tute a very substantial market for the goods of Europe,
America and Japan. This is due to their rapid economic de-
velopment resulting from investments initially made by the
Japanese. As they prosper, these East Asian countries began
to invest in their less prosperous neighbours. Today the
ASEAN countries, still classified as developing, are actu-
ally investing in Indochina. With this the chances of the
states of Indochina progressing the way the ASEAN countries
have are quite good. Once Indochina moves into the main-
stream, East Asia will become a big market and a powerful
economic region.
Ladies and Gentlemen,
18. There are some who believe that the free market system
is reserved only for democratic countries. One should not
help undemocratic countries to benefit from the free mar-
kets. One should insist upon democracy first or democracy
together with free markets before one extends a helping hand
to develop a country.
19. In East Asia there are countries which are not demo-
cratic but which have more or less rejected the command
economy of the Communist. They have espoused private enter-
prise and the free market. The signs are that they can
prosper economically. Their people while still politically
tethered, are now better off. Do we try to prevent them
from prospering in order to force them to be democratic or
do we help them now?
20. In the former Soviet Union and the Eastern European
countries, democracy was introduced along with the free mar-
ket. The result is chaos and increased misery. Not only
have the countries broken up, mainly through bloody civil
wars, but there is actual recession and more hardship for
the people than when the Communists ruled. One may ask
whether democracy is the means or the end. Democracy at all
cost is not much different from Communist authoritarianism
from the barrel of a gun. Both in theory are for the good
of the masses. But clearly the results of democracy in some
of the Eastern European and the former Soviet republics are
not much different from Communism as far as the people are
concerned. Even the nations, broken up and unstable, are
not better off.
21. In a number of East Asian countries, while democracy is
still eschewed, the free market has been accepted and has
brought prosperity. Perhaps it is the authoritarian stabil-
ity which enables this to happen. Should we enforce democ-
racy on people who may not be able to handle it and destroy
stability? Or should we allow for a natural evolution of
democracy? Actually authoritarian rule cannot be sustained
once a country achieves prosperity through a free market
economy. Sooner or later the prosperous free market people
will demand for more freedom. And the Government must give
in. Thus there will eventually be not just a market economy
but democracy as well. Perhaps this is wishful thinking but
events in a number of countries show that a prosperous free
market people cannot be kept shackled for long. So helping
undemocratic nations to prosper under a free market system
is a positive way to achieve democracy.
22. East Asian countries' involvement in rehabilitating the
economies of their less democratic members is perhaps a bet-
ter way than the precipitate adoption of democracy in East-
ern Europe and Russia. Democracy should come gradually.
This is the East Asian way. This is culturally more East
Asian.
23. And culture is important. East Asia is not just a ge-
ographical entity. It is also very much a cultural entity.
To be East Asian a nation must not just be geographically in
the right location. It must also be culturally East Asian.
And the cultures of East Asians are very different from the
cultures of the West. We are for example not so given to
giving unsolicited advice or sitting in judgement over oth-
ers. Diffidence is good manners for us. Bluntness is not.
24. And so despite differences in political ideologies, the
countries of East Asia may evolve in the near future into a
crescent of prosperous nations extending from North East
Asia to South East Asia. This economic crescent will be-
lieve in free enterprise and in free economic competition.
It has demonstrated that it can prosper and succeed without
being inward-looking and ganging up. It is prepared to com-
pete and compete freely.
Ladies and gentlemen,
25. The only grouping in its midst so far is the ASEAN
group. This group is more political than economic. It is
not protectionist. It is not a trading bloc. When in 15
years time Asean Free Trade Area (AFTA) is formed, it will
give certain advantages to the members in intra-regional
trading. But otherwise the members will continue to be free
to trade with the rest of the world.
26. Despite the ascendency of protectionism in Europe and
North America, East Asia has not shown a desire to form a
trading bloc of its own. There has been no governmental
proposal for a free trade arrangement or area. There has
been no proposal for an East Asian Preferential Trade Ar-
rangement (PTA), Free Trade Area (FTA), customs union, com-
mon market or economic union in the last decade although
South Korea did propose an "Asian Common Market" in 1970 and
Japan's MITI proposed an "Asian Network" in March 1988.
27. There has, however, been an ASEAN proposal for an East
Asian Economic Grouping or Caucus. This is not a PTA, FTA,
a custom union, a common market or an economic union. It is
merely a forum for the East Asian countries to discuss com-
mon problems related to international trade so that a common
stand can be taken with regard to maintaining international
free trade. Additionally it can help the less developed
members to accelerate economic growth in the same way that
the ASEAN countries serve each other.
28. The countries in the EAEC can continue to trade freely
with the rest of the world including EC and NAFTA. We think
it will do them no harm. This is because without any formal
agreement they have always been able to trade with the world
and to achieve growth.
29. And they can trade with each other. Without the inter-
vention of Governments or deliberate integration of East
Asian initiatives, intra East Asian trade has vigorously
grown to 40.8 per cent of their total trade in 1990 despite
the fact that the total GDP of East Asia was only 18 per
cent of the World's GDP.
30. Last year the U.S. took only one fifth of the exports
of the East Asian economy, down from one third in 1985.
Japan now exports more to East Asia than to the U.S. even
though East Asia minus Japan is only 19 per cent the size of
the American economy.
31. Clearly a formal agreement or arrangement or community
is not necessary for the East Asian nations to prosper.
Merely by reacting to free market forces, they are able to
make their economies complementary and mutually stimulating.
But for their own good and that of the world they need to
defend the world's free trade system.
32. In the meantime what is happening in Europe? Fear of
another destructive European war as well as the disinte-
gration of their overseas empires had forced the Europeans
to come together in the immediate post World War Two years.
A European Economic Community was mooted in order to rebuild
Europe and reduce the type of European belligerency which
had prevented that continent from knowing peace for centu-
ries. Essentially the EEC was to be an economic bloc. It
would be in a better position to compete with the culturally
similar United States of America.
33. The European Community was a sound idea and should suc-
ceed but for the emergence of Japan as an economic power
house. This threw their carefully-laid plan into disarray.
Instead of sticking to fair competiton in a free trade envi-
ronment as advocated by both Europe and America, the
European North decided on protectionism and pressures. True
the Japanese had quite unnecessarily protected their market.
But the strategy adopted by Europe through the Group of 7 is
contrary to the principles of fair competition.
34. Voluntary quotas and yen revaluation may help Europe
but the cost to them can be high. In the case of quotas it
is the people in Europe who must pay. The revaluation of
the yen in particular simply made the Japanese richer. They
were not only able to buy their raw materials, including pe-
troleum at half-price, but their investments and purchases
abroad cost them much less.
35. Unable to compete with East Asia in the burgeoning
electronic and consumer-goods industries, Europe opted for
the manufacture of sophisticated military hardware. This
was fine as long as the Cold War lasted. Today weapons no
longer find a ready market. Manufacturing facilities have
to be closed down and hundreds of thousands have to be
thrown out of work.
36. Because wages are maintained at an artificially high
level and unemployment benefits are unlimited, new invest-
ments are not forthcoming. Thus at a time when state reven-
ues are low due to a downturn, the need for more expenditure
on social security is increased. The two just cannot be
reconciled.
37. The end of the Cold War has not brought any relief.
True there is a lot of savings on military expenditure but
the cutback only resulted in soldiers becoming redundant and
unemployed. At the same time the new democracies in Eastern
Europe and Russia are not developing into good markets for
the West. Instead they require massive financial support of
Europe, just when it can least afford it. Failure to sup-
port these countries can result in massive migration from
East to West. In the past when this happened the problems
were horrendous and defy solution. More and more we are
seeing the kind of racial intolerance of the pre-war period.
Thirty million East European and Russians migrating to the
West will upset everything, including economic recovery.
38. The mechanism of economic cooperation among the
European countries has all but broken down. The recent
failure of the Exchange Rate Mechanism (ERM) is an example.
There is still a great deal of will to forge ahead with the
European Union. But will alone cannot work.
39. The fact is that Europe is living beyond its means.
Its people are being paid too much for too little work.
Europe cannot really expect the rest of the world to support
their profligacy. While Europe expects high living stand-
ards and a healthier environment for its people it is not
willing to make sacrifices. When it was suggested that
Europeans accept a lower standard of living in order to sus-
tain the environment, they reacted with horror. Yet they
expect the poor countries not to exploit their own natural
resources because these are needed to sustain the environ-
ment of the North. In other words the poor must sacrifice
for the rich. But the rich will not make any sacrifices.
40. There was a time when Asians looked West for guidance
and models. Perhaps it is time for Europe to look East for
the same. Perhaps this forum can serve that purpose.
Ladies and gentlemen,
41. I am not sure whether you consider me an East Asian or
a South East Asian. Whatever I may be, I must admit that my
views are coloured by the fact that I am not only a South
East Asian but I am also from a developing country.
42. Malaysia has certain ambitions. We want to be a devel-
oped country one day and we find it frustrating when unnec-
essary obstacles are placed in our way. We believe in free
trade and fair competition.
43. In the ASEAN experience friendly competition and the
willingness to learn from each other can contribute to good
economic progress. Similarly we think that competition and
willingness to learn among East Asian nations will achieve
the same results. By extension fair competition and cooper-
ation between Europe and East Asia will help everyone to
prosper.
44. East Asia would never be protectionist even if Europe
and America become protectionist. East Asia can compete.
It has demonstrated this quite clearly. For instance in
1960 the combined GDP of East Asia was 42 per cent that of
the EC, 23 per cent the size of the U.S. and 21 per cent the
size of NAFTA. By 1990 the combined GDP of the East Asian
countries was 67 per cent the size of the EC, 47 per cent
the size of Western Europe, 73 per cent that of the U.S. and
64 per cent the size of NAFTA.
45. Intra East Asian trade has also grown in absolute terms
and by percentage of world trade. It has done this without
recourse to protectionism and despite the many obstructions
placed in its way.
46. In the process it has improved the quality of life not
only of its own people but of the poor peoples of the world.
47. The success of East Asian countries is not due to some
magic. What Japan has done, other countries in East Asia,
to a greater or lesser degree, have also been able to do.
And by the same token the countries of Europe can also do.
48. The main ingredient of this success is the willingness
to accept lower living standards when one cannot afford a
higher one. East Asians are willing to do so. They should
not be forced to have a higher living standards in order to
nullify their competitive edge. Rather it is the Europeans
who must question the wisdom of their ways and come to terms
with reality. Then Europe and East Asia can cooperate for
mutual benefit. But whatever the situation East Asia cannot
be stopped. It has a right to develop itself.
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