Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : SHANGRI-LA HOTEL, KUALA LUMPUR
Tarikh/Date : 15/11/93
Tajuk/Title : THE INTERNATIONAL CONFERENCE ON
FROM HERE TO VISION 2020
Let me first extend a warm and cordial 'Selamat Datang'
to all our foreign delegates attending this international
conference. I hope you will use this opportunity to see our
country, not only to observe at first hand the progress that
has been achieved but also to enjoy the many sights and the
hospitality that Malaysia has to offer.
2. I also wish to take this opportunity to congratulate
the organisers of this conference, the International Herald
Tribune, MIDA and ISIS Malaysia for hosting this conference
which is both timely and appropriate.
3. The purpose of my address today is to present some
thoughts on Malaysia's course today and in the future. As I
am today among the leaders of the foreign business community
it is therefore apt that my address highlight the state of
the Malaysian economy today and its promise for the future,
particularly in the context of Vision 2020.
4. Vision 2020 is the crystallisation of
Malaysia's ambitious target to become a fully developed
nation in every sense of the word: socio-economically,
technologically, politically and from the ethical and
spiritual viewpoints. The establishment of a competitive
economy must mean, among other things:-
- a diversified and balanced economy with a mature and
widely-based industrial sector, a modern and mature
agriculture sector and an efficient, productive and an
equally mature services sector;
- an economy that is quick on its feet, able to quickly
adapt to changing patterns of supply, demand and
competition;
- an economy that is technologically proficient, fully
able to acquire, adapt, innovate and adopt the latest
in modern technology and to keep up with it;
- an economy that has strong and cohesive industrial
linkages throughout the system;
- an economy driven by brain-power, skills and diligence
in possession of a wealth of information, and able to
utilise it;
- an economy with high and continuously increasing
productivity at every phase of the process;
- an entrepreneurial economy that is self-reliant,
outward-looking and prudently adventurous;
- an economy characterised by low-inflation and low cost
of production; and
- an economy that is geared to the full discipline and
rigours of market forces.
5. Without the above economic virtues, or a substantial
portion of them, it would be impossible to attain the
required growth of seven percent per annum and a per capita
income of over RM30,000 by 2020, a four-fold increase over
today's per capita income. If we take the Purchasing Power
Parity (PPP) approach, our current PPP is equivalent to
a quarter of the USA's PPP and about 40 percent of Japan's.
By 2020, Malaysia's standard of living in PPP terms, at
current values, will translate into material standards on
par with or better than those enjoyed by the world's most
prosperous nations.
6. The structure of production is expected to change with
the share of manufacturing stabilising at about 40 percent
by 2020. But more critically, although agriculture is
expected to account for only six percent of GDP, value-added
growth will ensure that it is capable of supplying the
nation's food needs and enjoy a competitive export niche.
7. Another articulation of these objectives is labour
productivity which is targeted to grow by 4.2 percent per
annum. This is a critical target as it will ensure
improving wages and per capita incomes without any serious
negative effect on inflation.
8. Our export and trading base is expected to expand
vigorously as in the past, with exports being made up of
high quality and high value-added items. Trade flows will
shift more towards East Asian destinations. This is
inevitable given the current size of East Asia's
contribution to world GDP and its share of world exports.
Total East Asia GDP is 21 percent of world's GDP at US$4.4
trillion while its share of world trade is also 21 percent.
East Asia has a population size 31 percent of the world's
total. The dynamism and youthfulness of the region and its
high savings and investment activities will keep it dynamic
for years to come. We are all convinced that the Pacific
decade is round the corner, if not already here. Hence the
expected contribution of East Asia to Malaysian trade.
9. You may well ask how Malaysia plans to achieve the
target growth of seven percent per annum. Well, the key to
sustaining growth at seven percent per annum lies largely in
stimulating a high rate of investment. The private sector
will have to take the lead while the Government will
continue to ensure that stable socio-economic and political
conditions are maintained and even enhanced. Malaysia has
been quite successful in improving the physical,
legislative, administrative and financial infrastructures so
as to sustain investments at 34 to 35 percent of GDP in
order to achieve growth. These were achieved even when the
targets of Vision 2020 had not been determined. With the
new long term plan the target is not too far-fetched. A
high rate of domestic savings, currently at 35 percent of
GNP, will provide the necessary funding.
10. We foresee private investment being upgraded into
higher value-added, technology-oriented and more productive
sectors with export potential. There will be a higher
degree of indigenous capability in order to enhance domestic
economic resilience. The recent implementation of the
domestic investment initiative and the setting up of the
Small and Medium Industries (SMI) Authority are part of
these policy measures.
11. The Bumiputera community, still largely outside the
mainstream of economic activity, is nevertheless a rich
source of manpower, capital and business entrepreneurship.
The experience of the past decade shows that, given the
right training and opportunities, they can play a very
significant role in the economic development process. They
are also not without financial resources as they contribute
towards numerous large savings and investment funds.
Their full participation in the economy can, with proper
guidance, enrich it considerably.
12. The structural transformation envisaged by Vision 2020
means also that human resource and labour must continuously
be upgraded in order to meet the needs of the higher
value-added and technology-oriented sectors. This upgrading
process will require the combined efforts of both the
Government and private sectors. This is the reason why the
Government today is focusing seriously on education as an
industry rather than merely as a basic social facility
provided by the Government. Educational and training
services will contribute towards economic growth even as
they cater to the nation's manpower needs.
13. In the current competitive international investment
climate, a principal challenge is to create and maintain
conditions and an environment that will be more attractive
than those offered by other competing nations. This is
especially critical when managing success. This may appear
to be contradictory but conditions of success create ever
higher expectations and are therefore more difficult to
improve upon. Yet they have to be improved if the pace is
to be kept up.
14. While we are in control over local conditions, we are
much less able to ensure greater freedom in global trade.
Keeping world trade free is becoming more difficult and
elusive. GATT was born after World War II. After 40 years
of negotiations, during which time markets and processes
have become increasingly global, we appear to be no nearer
to achieving the goals of liberalising and increasing world
trade.
15. Perhaps the paradigm shift towards open regionalism,
espoused by many liberal thinkers in the East and West, is
what is needed to spur freer and greater world trade and
stimulate investments. And the economic and other malaise
that affect both Europe and the United States can and should
be remedied through harnessing the East Asian economic
engines and through greater openness, greater liberalism and
greater free competition.
16. Malaysia's success, within the East Asia Group, in
attaining and sustaining high socio-economic growth and
progress, is clearly due to its commitments, acceptance and
practice of these principles. Malaysia should be able to
achieve its objective of becoming a fully developed and
forward-looking industrialised nation within the next three
decades because it is now laying the kind of strong
foundations and attitudes compatible with this objective.
Vision 2020 has in fact become a unifying dream and target
of every responsible Malaysian citizen. Successive
Governments can thus be expected to work towards this
Malaysian dream if they wish to get the support of the
people.
17. The creation of a unified market in Western Europe, the
democratisation of Eastern Europe and the former republics
of the Soviet Union, the structural changes being undertaken
in these countries along market-based principles, and the
end of the Gulf War, provide increasing opportunities for
developing countries like Malaysia to expand their trade.
Malaysia must take advantage of the potentials of all these
changes in its efforts to expand and globalise its trade.
18. However, our experience has shown that free trade is
more honoured by words than by deeds. Rising protectionism,
lack of policy co-ordination among developed countries on
monetary matters, the slow progress towards agreement at the
new Uruguay round of the GATT negotiations, and above all,
the emergence of new trading blocks, such as NAFTA and the
unified markets of EC, render free trade almost meaningless.
For trading nations like Malaysia it means that growth and
development will be retarded.
19. It is in order to reduce dependence on the traditional
trading partners that Malaysia has embarked on an aggressive
programme to find and develop new export markets. Our
interest in South-South trade; our initiatives in the G-15
nations; our active participation in regional organisations
like ASEAN, as well as our attempts to form the East Asia
Economic Caucus (EAEC) as a bulwark against trade blocs; the
establishment of new trade and investment links with
developing countries in South East and East Asia and the
newly independent Central Asian republics of the former
Soviet Union; represent efforts to diversify trade links and
create a fairer and mutually beneficial trading relationship
between nations. These actions, we believe, will not only
circumvent the effects of managed trade by the Euro-
American blocs but also will help increase world trade as a
whole. They will counteract some of the negative effects of
rising trade protectionism by certain developed countries.
20. Our ultimate objective is to ensure that the targets we
have set in our thirty-year plan are met. So far we have
held steadfast to our beliefs in free trade and open
regional non- exclusive groupings. The next twenty-six
years will be fraught with challenges, both in the
international economy and the domestic economy. We will
continue to be positive, innovative and pragmatic in our
approach. We will work closely with the private sector in
order to maximise our capabilities.
21. The overall performance of the manufacturing sector is
expected to remain strong in 1993 with an anticipated 12.5
percent expansion in output, higher than the 10.5 percent
achieved in 1992. The buoyant outlook is based on the
unexpected growth in the external demand for manufactured
goods despite protectionist trends and the poor economic
performance of our major trading partners. For 1993 as a
whole, the contribution of the manufacturing sector to GDP
is expected to increase to 30.1 percent from the 28.9
percent estimated in 1992.
22. Private investment in the manufacturing sector grew at
an average rate of 50 percent per year between 1987 and
1990. This was as a result of several measures adopted by
the Government whereby foreign equity guidelines were
liberalised and the Promotion of Investments Act 1986 was
passed to provide a package of incentives for investments in
the manufacturing sector. Steps were also taken to
encourage a greater private sector role through
privatisation, deregulation and liberalisation of rules and
administrative procedures. The Industrial Coordination Act
1975 was also amended to exempt manufacturing establishments
with less than RM2.5 million shareholders' funds or
employing less than 75 full-time employees from compliance
with the provisions of the Act on ownership.
23. The favourable economic environment in the country
attracted significant inflows of foreign investment as
manufacturers from Japan and the dynamic Asian economies
began to relocate their industries in this region. The
huge increase in manufacturing investments was also
accompanied by a significant shift towards more
capital-intensive and higher-technology industries from
labour-intensive industries. There was therefore a
pronounced change in the structure of the industrial base
from labour-intensive and mere assembly-type operations to
higher value-added and more capital-intensive processes in
the late 1980s. The ratio of employment per RM1 million
approved investment showed a decline from 22 jobs in 1980 to
four jobs in 1992. In contrast, the ratio of
capital-inteity per project increased markedly from RM4.6
million in 1980 to RM31.8 million in 1992. In addition, the
sma
ll and medium-scale industries were also encouraged to
provide greater inter-industry linkages and to create a more
balanced and integrated manufacturing sector.
24. The Government will continue to encourage greater
private investment initiatives whilst ensuring that the
public sector does not crowd out activities in the
commercial and business sectors. Necessary support will be
provided to strengthen and enhance the role of the private
sector. The tax system will be continuously reviewed to
enhance its competitiveness. While bearing in mind the need
to increase its sources of revenue, the government will
continue its liberal tax policies in order to encourage
private investment. Recognising the critical role of direct
foreign investment in terms of new technology, creation of
employment and industrial linkages in the domestic economy,
the current liberal policies towards foreign investment will
be maintained.
25. The Government will ensure that its machinery at all
levels will work efficiently and closely with the private
sector in the spirit of Malaysia Incorporated.
26. It is recognised that success also carries a
cost, and creates problems and issues of its own. Where
these involve the domestic economy, they are not impossible
to manage. But external problems do not lend themselves to
easy solutions. Wherever adjustments have to be made in
order to accomodate international demands, they will be
made. But at the same time Malaysia must participate fully
in the search for a more equitable and open world trading
regime. An aggressive and high profile in international
trade affairs for Malaysia is therefore unavoidable.
27. As I said, the problems that Malaysia faces
domestically are not insurmountable. Shortage of labour and
low productivity, infrastructure shortcomings and inflation
are being tackled and have been partially resolved. More
critical and less easily resolved are the problems of
sustaining the political and economic climate for extended
periods in order to achieve Vision 2020.
28. Still, I am confident that the targets of Vision 2020
are attainable. This Government and its successors are
committed to this Vision simply because the people as a
whole have accepted it as a national aspiration and target.
To ignore these aspirations is to court defeat.
29. Besides, the Government has gained much valuable
experience in the management of the nation's economy. It
has not all been plain sailing but it is a measure of the
administrative ability of the Government machinery, that
despite many economic and political crises, domestically and
abroad, the country has managed to pull through and to grow
steadily.
30. The expectation of continued growth is therefore not
unreasonable considering that Malaysia grew on the average
by approximately 6.7 percent in the first 20 years of its
independence. All that is needed in order to achieve Vision
2020 is an additional 0.3 percent growth. It needs only a 7
percent annual growth over the next 26 years for Malaysia to
become a fully developed nation. We are not an
over-ambitious upstart. We are in fact very modest.
31. I would like to congratulate once again the
International Herald Tribune, MIDA and ISIS Malaysia for
organising this timely International Conference on trade and
investment.
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