Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : THE SHERATON HOTEL, LANGKAWI, KEDAH
Tarikh/Date : 26/07/95
Tajuk/Title : THE INAUGURAL INTERNATIONAL
DIALOGUE ON SMART PARTNERSHIPS
SMART PARTNERSHIPS FOR GLOBAL HARMONY
AND CO-OPERATIVE PROSPERITY
It is indeed a pleasure for me to be here this evening
and to have the opportunity to meet with the captains
of business and industry from many corners of the
world. I also wish to bid a warm welcome to Malaysia,
and in particular to Langkawi, the isles of legends, to
all participants.
2. I would like to apologise for my frankness in
stating my views but I believe it is in the interest of
all of us to put all the cards on the table.
3. A term which we hear often is the Zero Sum Game, a
game in which the winner wins at the expense of the
loser. When we add up the result of the contest, there
is no real gain from it. It is just a process of
transferring what one contestant has to the other, the
so-called winner. The net result is no different from
the situation or the assets at the start.
4. If this is to be the basis for trade between
nations then there will be no growth for the world as a
whole; only growth for one or the other of the trading
partners. Thus the growth of the poor nations must
result in the impoverishment of the rich. In which
case there is every reason for the rich to prevent the
poor from ever growing. Similarly the growth of the
rich must be at the expense of the poor. Not being in
a position to prevent this, the poor will merely get
poorer.
5. We know in fact that this is not the case. Over
the years the economies of all the countries of the
world have grown. There are many reasons for this but
I would like to draw attention to the experience of
Malaysia where economic growth has not really been at
the expense of others. Indeed the opposite is true.
Malaysia's prosperity has benefitted most of her
partners.
6. Early on after independence Malaysia bucked the
trend. Instead of being ultra nationalistic and
ejecting foreign participants in its economy, Malaysia
actually invited more foreign involvement in it.
7. As a result many foreign companies invested in
Malaysia. Since our main problem was unemployment, we
created conditions suitable for labour intensive
industries. It was not cheap labour which we touted.
Rather, it was the generous incentives, infrastructure
and the political stability. The lower cost of labour
in Malaysia has always been due to a deliberate policy
of keeping the cost of living low.
8. The Japanese took advantage of this invitation
most, although others also came. The net result is
prosperity for Malaysia and the present full employment
for its workforce.
9. The foreign partners who brought about Malaysia's
prosperity have not suffered. Indeed they gained by
being able to sell more goods and get more contracts
from a more prosperous Malaysia. They, the investing
companies and countries, have prospered by making
Malaysia prosperous enough to buy their goods and
services.
10. Today Malaysia in a small way is trying to do the
same to the less developed economies of Southeast Asia.
We are investing there in order to create employment
and generally to jump-start their economic growth. The
results are already being enjoyed by Malaysia and
others. Not many refugees, economic or political, are
landing on our shores now. Trade with these countries
has multiplied manyfold. And Malaysia has not lost
anything. We continue to grow at eight percent plus
even as the Indochinese and other countries prosper.
11. "Beggar thy neighbour" is never a good policy.
And today all the countries of the world are
neighbours. By impoverishing neighbours a price will
have to be paid, including by the country which follows
this policy.
12. Let us take the trade war between Japan and
Europe/America. Japan's emergence as an alternative
source of manufactured goods was beneficial to the poor
countries. The Japanese have a different business
philosophy. They want market share rather than big
margins. Left to themselves the Europeans and the
Americans would have priced their goods according to
what their own people could afford. If they could not
it was a simple matter to increase wages or reduce cost
by down pricing the raw materials and energy from the
poor countries.
13. There would have been nothing the poor countries
could do. They would have to accept exchanging more
and more raw materials for less and less manufactured
goods.
14. But the Japanese kept their prices low in order to
penetrate foreign markets and increase market share.
The result was that the poor countries were able to
afford products which otherwise would have been beyond
their reach. If the Asian or African or Caribbean
farmer could afford to buy a pick-up truck or a
television or a refrigerator, it was because the
Japanese were able to produce cheap but high quality
products.
15. The West could have adopted the Japanese approach
and competed, thus bringing prices even lower. But the
West was not willing to give up its profligate ways.
Workers in the West wanted high wages without working
as hard as the Japanese. Companies in the West took
the easy way out, sacking their workers when faced with
losses. And Governments continued to pay ridiculous
unemployment pay, sometimes as much as 90 percent of
last drawn salary. All these kept their costs high and
the goods uncompetitive.
16. Unwilling to make any sacrifice the West decided
to render the Japanese products uncompetitive by
forcing the revaluation upwards of the Yen. Today the
Yen is three times higher in value against the U.S.
Dollar and of course against the currencies of most
developing countries.
17. What is the result? Japan is now going through
its worst recession from which it does not seem able to
recover. Japanese goods are no longer cheap. The
Japanese seem unable to manage their politics with weak
Governments succeeding weak Governments. Japan is in
deep trouble.
18. But the competing economies of Europe and America
have gained practically nothing. They have not been
able to fill the void left by the Japanese in the
international market place. Their own economies are
not faring any better. Even if more European and
American goods are imported into Japan, the earnings
from these are not going to be significant. Despite
the high Yen, the balance of trade persists in being in
favour of Japan.
19. Clearly neither Japan nor its competing trading
partners have gained anything from the Plaza Accord and
the Yen appreciation. For both sides it is a lose-lose
situation.
20. What about the third parties, the developing
countries like Malaysia? The appreciation of the Yen
has trebled Malaysia's debt. Japanese products are now
priced out of the reach of the peoples of the
developing countries while the competing products from
the West remain too expensive. At the same time most
of the commodities of the poor countries are sold in
U.S. dollars, which means that earnings are even less
able to buy Japanese goods or pay Yen debts.
21. It is not just a lose-lose situation for the
developing countries. It is a lose-lose-lose situation
for everyone. Making Japan uncompetitive may be good
for the ego but it is not very smart.
22. When are we going to learn that beggaring your
neighbour does you nothing good? Indeed as has been
pointed out it has done everyone a bad turn. Surely
the better thing to do is to Prosper Thy Neighbour.
23. What applies to countries also applies to
companies, even to individuals. Again Malaysia can
provide the example. We had an abundance of low cost
labour, the result of our low cost of living, who are
quick to learn new skills. The manufacturing companies
which came to Malaysia availed themselves of Malaysia's
assets which also included political stability and
general hospitality. The result is that their products
became affordable and competitive in the world markets.
24. Perhaps by investing in Malaysia they deprive the
workers in their own countries of jobs. But these are
highly skilled and highly paid workers who could be
easily trained to do hitech jobs with higher value
added. Indeed this is what the Japanese did.
25. Investments by companies from developed countries
in developing countries can be considered a form of
smart partnership. Similarly cooperation between
individuals possessing complementary skills falls
within the category of smart partnership.
26. Nations, companies and individuals should really
strive for a win-win situation, for partnerships which
benefit both instead of one at the expense of the
other. By adopting this philosophy, individuals,
companies and nations will all be more prosperous. As
it is, relative to the unprecedented advances in
science and technology the world today is poor. Whole
nations are impoverished. Even the rich countries are
finding more and more of their citizens living under
bridges, pitifully covering themselves with cardboard
boxes and begging for a living.
27. Malaysia has striven to escape from the poverty
trap. We have, to a limited extent, succeeded. But
for how long can we succeed? If beggar thy neighbour
remains the creed for this world, sooner or later we
have to join the ranks of the unfortunate nations of
the world.
28. The world today is dividing itself up into blocs,
antagonistic blocs with the objective of gaining for
one at the expense of the other. Only Asia has no
trade bloc. But there is fear that Asia might unite
and defy the West. Imagine a trade bloc consisting of
Japan, the world's second biggest economy, China with
1.2 billion people and the potential for being the
world's most powerful economy, together with Korea,
Taiwan and Southeast Asia. With almost two billion
hard working and skillful people and the capacity to
make full use of modern technology, the confrontational
potential is frightening. It will totally dominate the
world.
29. Can Asia be stopped? It is not likely. Sooner or
later the Asian economies must outstrip the rest of the
world. Will Asia then browbeat the Western nations the
way Asian countries are being browbeaten now?
30. It will be unfortunate if Asia's emergence as a
powerful economic region results in a confrontation
with the rest of the world. There is nothing to be
gained by anyone in the end. Asia needs the rest of the
world to be prosperous even as Europe and America need
a prosperous Asian market. A troubled Europe and
America is just not good for Asia.
31. If there is to be no confrontation, if there is to
be a smart partnership between Asia and the developed
world in the West, the foundations must be laid now.
By adopting an unfriendly attitude towards each of the
countries of Asia, the West is unnecessarily
antagonising them and pushing them together. Singly
they are already a handful. But united they will be
beyond handling.
32. Whether it is admitted or not trade blocs have
formed in Europe and North America. The NAFTA is to be
extended in order to include all of Central and South
America. There are serious talks about close
collaboration between NAFTA and the European Union.
33. In the meantime Asian countries are not even
allowed to talk to each other. They may not form the
East Asia Economic Caucus, a forum for discussing
mutual problems. Japan and South Korea are directed
not to join any such grouping. Instead all must join
APEC and be directed by the dominant members from among
non-Asians.
34. All these are not likely to be welcomed by Asian
countries. If they become strong, and this is very
likely, then they will not forget the unfair treatment
they had received. They are not likely to propose
partnerships for mutual prosperity with the West. They
will plump for the zero sum game, i.e. Asian prosperity
at the expense of Europe and America.
35. Who knows what this will lead to. Confrontation,
economic and military threats, nuclear war or another
cold war which goes on for decades sapping everyone's
strength. All these are possible, unless we are smart
enough now.
36. Smart partnership is about companies working
together for mutual gains. It is the logical and the
best approach. We should all prosper not at the
expense of but together with our
partners and even our competitors. Smart partnerships
apply to individuals too, and certainly to nations
worldwide.
37. On this note, I wish all of you here a very
successful dialogue and hope you have an enjoyable stay
at this salubrious holiday resort islands of Langkawi.
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