Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : LANGKAWI, KEDAH
Tarikh/Date : 29/07/96
Tajuk/Title : THE SECOND LANGKAWI
INTERNATIONAL DIALOGUE
1. I would like to welcome all the participants to
the Second Langkawi International Dialogue on Smart
Partnership. This second meeting is made more
significant by the presence of so many prominent
leaders and Chief Executive Officers (CEOs)
including H.E. President Robert Mugabe of Zimbabwe
and H.E. President Sam Nujoma of Namibia. The CEOs
and high executives represent many well-known
business corporations all over the world, both from
the Commonwealth as well as non-Commonwealth
countries. must say that the interest and the
support for the Langkawi Dialogue has become very
significant indeed and I do hope that positive
results will crown this innovative conference which
has as its general theme `Smart Partnerships'.
There is here an element of social objective in
addition to those of purely commercial concerns. It
is hoped that it will inject new ethics into the
business world, or at least a better understanding
of the role of commerce and business in the life of
the ordinary citizens of our countries.
2. We believe that business should be mutually
beneficial to the parties concerned while at the
same time it should contribute to the good of the
peoples and the nations, whether they are involved
or not involved. In other words business should
enrich our world and help to relieve poverty and
distress everywhere, even as profits are made and
enjoyed.
3. Last year when I spoke at the opening of the
first Langkawi Dialogue, I told about how Malaysia
bucked the trend. When we achieved independence we
not only did not seize foreign-owned businesses from
their owners, we actually encouraged them to stay
and to invite new foreign businesses to come to
Malaysia. As a result there were many more white
colonial faces after independence than before
independence.
4. Later though, when we had enough money we
bought up many of the big foreign-owned estates and
mines. We did this on the London Stock Exchange
mostly, mounting a spectacular dawn raid in the case
of one very well-known company.
5. This we did legitimately without breaching any
of the rules or practices of the `haloed' London
Stock Exchange. Nevertheless we were accused of
`Back Door Nationalisation'. Forthwith dawn
raids were made illegal. But no matter, we
continued to buy up foreign companies as and when
necessary. Fortunately for us we can still do even
now.
6. The point I am trying to make is that we did
not do the conventional thing on attaining
independence. We went the opposite way instead. And
as events showed we fared quite well and certainly
we did not lose out.
7. But that was not the only occasion when
Malaysia bucked the trend and rejected conventional
wisdom. We have done so in many areas. None however
was and is as untrendy as the adoption of the
concept of Malaysia Incorporated, i.e. the close
cooperation between the public and the private
sectors in the development of the country through
business. Since we are interested in smart
partnerships, I hope you will excuse me if I talk
about Malaysia Incorporated as an example of smart
partnerships.
8. For ages it had been assumed that the primary
duty of Government, the public sector, was to
oversee the selfish pursuit of personal and
corporate gains by those in business. The private
sector was regarded as being avaricious, caring
nothing for the people and the nation while they
pursue maximum profits. They were the bloodsuckers
who more than thrived on the sweat and toil of their
workers and their swindling of the public. The more
these business people were frustrated, the better it
was for society and the nation. It was the duty of
the Government and those working for it to put as
many obstacles in the way of business as possible.
Indeed never do today what you can do tomorrow. One
Malaysian Ministry actually adopted as its slogan
"To be inefficient is efficient".
9. We know of course what Karl Marx thought of
private businesses and businessmen. His preaching
led to the formulation of the Communist and
Socialist ideologies. The Russian took 70 years to
find out that the people did not get all the riches
through state control of all the means of
production. The only thing that Communism actually
distributed equally was poverty.
10. I suspect however that had there been no threat
from the spread of Communism, Capitalism would have
remained exploitative. But fear of Socialism and
Communism resulted in reforms in the capitalist
system which reduced exploitation and spread the
wealth to workers, shareholders and consumers alike.
In addition, Governments benefitted through
corporate and personal income taxes, which of course
helped to spread the benefits of the profitability
of private enterprise to civil servants and the
public through salaries, infrastructure and
development projects.
11. The reforms in the capitalistic system reduced
the ugliness of personal capitalism. More and more
of the individual and family-owned companies became
public limited companies whose shares were owned by
all and sundry. The founders and the original
owners of these companies gradually lost control to
new shareholders and professional managers. In many
cases only the name of the founders remained, while
none of their heirs owned even a single share.
Obviously ownership has not only been more
spread, but has also become more equitable as a
result of evolutionary reforms.
12. These changes resulted in the unprecedented
prosperity of the non-Communist countries. Though
the Communist still referred to them as capitalist
countries, they have in fact evolved into market
economies, where market forces and not capital per
se determine the performance. If the market
supports the enterprise then capital will be readily
available from the bank or from the public. In fact
it is not so much the capital which is the
determinant of an enterprise. Ideas and the
resultant products determine the founding and the
success of business.
13. The equitability of state-owned enterprises
seems socially attractive. Control of the means of
production however did not result in wealth accruing
to the State or the people. Equal earnings are a
disincentive to productivity. If the wages are
equally high for everyone, the cost of products will
go up and the wage-earners cannot buy much more than
if wages are equally low and products are sold at a
low price. In fact in a Communist or Socialist
command economy, money becomes quite irrelevant due
to the subsidies being given for everything. The
present problem for the adoption of the free market
system by ex-communist countries is due to the
distortion of prices and earnings resulting from
subsidies provided by the state.
14. Malaysia rejected Communism for ideological
reasons but found some aspects of socialism
attractive. Hence the proliferation of state
enterprises at a certain period of Malaysia's
independence. State enterprises became particularly
attractive as Malaysia faced the problem of
inequality in the development of the different races
making up its population.
15. More than two thousand Government-owned
companies and statutory bodies (known as para-
statals in many Commonwealth countries) were set up.
Billions of dollars were poured into these
companies. In fact they received capital injections
every year through Government budgets as they never
seemed able to generate funds internally to enable
them to expand. But invariably they, like Government
departments, made out a case for expansion all the
time in order, as they claim, to fulfil their
unwritten social obligations.
16. Run by civil servants very much in the way
civil servants run government departments, most of
these Government-owned corporations merely got in
the way of private enterprises even as they failed.
But worse than that they often spawned subsidiaries
which also failed miserably.
17. In 1982, after Malaysia's affirmative action
New Economic Policy had succeeded in throwing up a
fair number of able businessmen from among the
economically backward indigenous people, the
Government decided it was time to switch strategy.
18. And so the State, i.e. the Federal Government
and the Governments of the 13 states were asked to
cease setting up more Government-owned corporations.
Instead the private sector would be asked to take
over these corporations and certain Government
functions and activities. And so privatisation was
begun in earnest.
19. When Malaysia adopted the privatisation
programme in 1982, few countries had espoused it.
Consequently there was no model to follow. The
going was very tough, especially the resistance on
the part of Government employees in the entities to
be privatised. This was overcome by guaranteeing
the right to choose between Government wages and
company pay schemes, no retrenchment and wages not
inferior to Government wages at all times.
20. But the greatest obstacle was the dislike of
the civil service to give up the departments and
authority they had been wielding and to avoid
harassing these entities once they have
been privatised. The civil service could really
make life miserable for the privatised entities.
21. We must remember that the Government as a whole
and the civil service in particular regarded the
private sector as their natural enemy. They had
always made things difficult through their
complicated bureaucratic procedures. They never
considered the private sector as contributing
towards nation building or the welfare of the
people.
22. The taxes that these business enterprises paid
were just dues to be collected as a kind of
punishment for their making so much money for
themselves. They paid the taxes because they
selfishly made a disproportionate amount of money
for themselves. They, the private sector, were
sharks. While Government servants got so little by
way of salaries, every approval by the Government
results in millions for the private sector. The
approving authorities got almost nothing from these
millions.
23. This was the perception by the civil service of
the private sector and their wealth. If they want
the civil service to service them, they should come
crawling to the civil service. And indeed even the
lowliest of civil servant assumed a higher status
than the most successful businessman.
24. And the views of the private sector were no
better. Away from the civil servants, they
established their own exclusive society. They may
be polite to the civil servants but they always
managed to imply that the civil servants were
failures, poverty stricken and inferior to them.
They managed to create an impression that although
the civil servants may think they were superior,
they were in fact inferior. And they suggested that
all civil servants are corrupt and incompetent.
25. Then there were the politicians, the elected
members of the Government. Neither the
administrators nor the business community liked the
politicians, each for their own reason. And the
politicians did not like the administrators or the
businessmen either. And they vented their dislike
through carping criticisms of the administration and
the business community in their debates, siding with
their electorate whether they were right or wrong.
26. Clearly no love was lost between the public
sector, the private sector and the elected
Government. How anyone could expect a Government to
function at all is amazing. What should prevailed
and what nearly always prevail is something close to
undeclared civil war and anarchy. And the people
have to pay and when they go to the polls they were
merely perpetuating anarchy. Truly the situation
was ridiculous.
27. The Japanese decided that civil servants should
cooperate with the business people. As soon as
Japan showed signs of prospering, this cooperation
was condemned. Japan was accused of being Japan
Incorporated, which for some reason or other carried
a stigma. Apparently the right thing was for the
civil service to fight and undermine the private
sector. Japan Incorporated was roundly and
repeatedly condemned.
28. Malaysia, being naive, did not understand why a
cooperative attitude which leads to economic success
for the nation should be stigmatised. What is wrong
with businesses being profitable or businessmen
being rich? Profits and personal income are taxed
by the Government. Obviously if profits are low
Government would get less tax. And if companies
lose money Government get nothing at all. So why
shouldn't a Government help the private sector to
make money? Why shouldn't civil servants help the
private sector to make money? Who really pays the
salaries of civil servants anyway? Who pays for the
running of the Government, for the development of
the country, if not the business people? The poor
pay practically no tax. If everyone is poor how do
we run Government, pay salaries and develop the
country for the benefit of the people, i.e. the
electorate?
29. And so once again Malaysia decided to buck the
trend. We decided to officially adopt the concept
of Malaysia Incorporated. We decided that everyone,
civil servants, business people and members of the
elected Government should cooperate with each other
in order to enhance business success and help
support the country's development.
30. Many people including the civil servants were
horrified. They see the corruption of the civil
servants and the ministers, in particular the Prime
Minister by the business people. These moneyed
people would be too close for comfort. Associating
closely with them would undermine the dignity of the
civil servants etc.
31. Actually corruption is more likely when civil
servants keep away from businessmen and tie up
everything in red tape. Frustrated with the delays,
the more enterprising and brazen businessmen would
offer bribes. But if all business people have easy
access to civil servants, deliberate delays become
more difficult. If everyone gets attended to
quickly there would be less reason for bribes.
32. One of the best evidences of corruption is
things not getting done. When things are done, and
done quickly and efficiently, corruption cannot have
got in the way.
33. The open association between businessmen and
civil servants as well as politicians render their
business more transparent. Again corruption becomes
more difficult.
34. Of course there is the feared Anti-Corruption
Agency. Although they are themselves accused of
corruption, only those who are corrupt need fear
them. Those who are not corrupt can always talk
loudly in an open society if the ACA tries anything
funny.
35. The Malaysia Incorporated concept is working
well in Malaysia. Privatisation has succeeded
because civil servants are no longer antagonistic
towards the management of the privatised entities.
They work with these entities and help them to
achieve success.
36. Thus when the North-South toll expressway was
privatised, the civil servants did not obstruct and
delay the project. Instead it was completed one
year ahead of time with quality that is second to
none.
37. The Telecoms Department used to receive RM100-
200 million every year from the Government. After
privatisation Government was relieved of the burden
of financing it. Instead the privatised Telecoms
Malaysia Bhd earns huge profits every year and the
Government receives both dividends and corporate
tax.
38. There are other factors which contribute
towards the success of privatisation in Malaysia.
But there can be no doubt that cooperation with the
business community on the part of the political
leaders of the Government and the civil service
contributed a great deal. Although privatised,
telecommunication and road transport continue to
need supervision. Consequently, a number of the
officers in the Telecoms Department and the Road
Transport Department have to be retained to do the
supervision. As Government servants their pay is
generally lower than that of the executives in the
privatised entities. Yet they must wield some
authority over the privatised service. They can
easily obstruct the work of the privatised entity
and lift the obstruction only if they get something.
39. But the elected political leaders in the
Government cannot afford to let the privatised
entities fail. They would come in for massive
criticism from their electorate and from the workers
in the privatised companies. Their detractors would
bray that they had been right in condemning the
privatisation policy. They must therefore put
things right if the privatised entities looked like
failing. If the civil servants seem to be the cause,
corrective action under the Malaysia Incorporated
concept would be instituted. But this kind of
situation hardly ever happens. Under the Malaysia
Incorporated concept civil servants have become
helpful rather than obstructive.
40. But the detractors of the Government are not
willing to acknowledge the success of the Malaysia
Incorporated concept. They had condemned it along
with privatisation and so they must insist that
although the cooperation between the civil servants,
the businessmen and the politicians under the
Malaysia Incorporated concept appears to be
delivering results, actually it did not; actually it
is only coincidental, an accident, the result of
corruption on the part of the politicians,
especially the ministers, more especially the Prime
Minister.
41. Just about any businessman who succeeds is
described in lurid terms as having done so because
he is a friend of the Prime Minister. That in
Malaysia very many who do not know the Prime
Minister also succeed is ignored. That very many
who are close to or even related to the Prime
Minister have never succeeded, have remained as poor
as the proverbial church mouse never gets any
publicity. Friendship or closeness to the Prime
Minister is made out to be the sole reason for
business success in Malaysia. Without directly
saying the Prime Minister is corrupt, the detractors
manage to imply that the Prime Minister is corrupt.
42. The fact is that if the Malaysia Incorporated
concept is to work the civil servants and the
political members of the Government must be close to
the businessmen and must actively help to solve
their problems. For example, a businessman may have
a wonderful idea for a project that will benefit not
just himself but the country as well. Under the old
non-cooperation system he could only present his
project to the most junior of officials.
43. The junior officials, thinking only about
approving or not approving may very well reject the
proposal. There may be valid reasons for rejection.
It may not be because of just wanting to be
difficult, to be dilatory in order to encourage
bribery. The reason may be that the project does
not fulfil all the conditions necessary. The
rejection is both legitimate and right. But
nevertheless a perfectly good project which can
benefit the country has to be abandoned.
44. Under the Malaysia Incorporated concept the
story does not end there. The promoter may meet
more senior officials to ask for a proper
presentation. He may even contact a Minister or the
Prime Minister, all of whom are accessible under
Malaysia Incorporated. It is entirely possible that
a proper presentation would reveal the beneficial
effect of the project, not least is the fact that
the project can be profitable and can contribute
towards Government coffers by way of taxes. The
presentation might reveal the failure to meet
certain conditions and this can be overcome through
some changes or indeed by overruling the objection
in the larger interest of public good.
45. This kind of objectivity and purpose cannot be
observed by minor officials who have limited
authority. Only senior officials or the topmost
people can do all these things in order to push
through a project.
46. Thus in the case of Malaysia's national car
project, it would not have started if the topmost
people had not overcome all sorts of bureaucratic
objections and procedures, assembled all the
approving authorities in one meeting where all the
requirements and problems were discussed, obstacles
ironed out and approval in principle given. The
top man insist that action be taken immediately and
a report submitted within one week. The result was
that what would have taken two years at least was
resolved in two weeks. The national car project was
off to an early start because of this Malaysia
Incorporated approach. Without it the time taken
would have been very considerable, Government
support especially in the tax area would have been
denied and the project would have failed after
considerable loss of money on the part of everyone.
As it is, not only has the national car been
produced, it has contributed towards enhancing the
technological capacity and skills of Malaysians,
paid dividends and taxes to the Government much more
than the tax foregone, increased the capitalisation
of the stock market and increased the foreign
exchange earnings of the nation. More than that,
where once there was no capacity to produce
components for cars, today there is a thriving
industry in which small and medium scale
entrepreneurs take part. And there are other
benefits too numerous to mention, all of which
enrich the Government and the nation. So why should
bureaucratic delays and petty conditionalities be
allowed to get in the way? The Malaysian
Incorporated concept of cooperation is what enabled
a project like Proton to take off. And it is the
same with other major projects by the Government,
the privatised entities and the private sector.
Without the active support and cooperation of the
civil service and members of the Government they
would practically all be delayed, their construction
or implementation slowed down and their cost
escalated.
47. If Malaysia in the last ten years has grown
faster than it ever did before, if its growth and
development is now so noticeable that it has become
a model cited by the World Bank, it is because in
part at least, the concept of Malaysia Incorporated
has made such rapid growth possible. Without
Malaysia Incorporated Malaysia would probably still
grow but it would not be as spectacular.
48. And what is Malaysia Incorporated? It is the
embodiment of smart partnership. How else can we
describe the partnership between the civil service,
the private sector and the so-called political
masters. Partnership is implied in the deliberate
policy of tri-lateral cooperation. And the
partnership is smart because it yields results,
results which are shared without exception by
everyone, not only the three partners but the people
and the nation as a whole.
49. There is only one thing regrettable about
Malaysia Incorporated. One partner is missing. The
trade unions and the workers are not consciously
partners. It cannot be said that Malaysia
Incorporated has not benefitted them. It has.
Unemployment is practically nil now and wages and
perks have gone up for the workers. Such is the
demand for labour resulting in part, at least from
the employment of the Malaysia Incorporated concept,
that workers now choose their employers and not the
other way round.
50. But why are the trade unions and the workers
not partners in Malaysia Incorporated? The
international trade unionist dislike to see
cooperation between workers and their union with
their avowed enemies, the employers. Their idea of
helping the workers earn more is through
confrontation and industrial action. To work with
their employers through the Malaysia Incorporated
concept would be to undermine the will, to make
unreasonable demands and establish a bargaining
position. The unions act on a basis of strength and
the threat to do damage otherwise. The Malaysia
Incorporated approach is through mutual help in
order to succeed in whatever we are doing. The
sharing comes later, when profits are made. In the
trade union creed demands must be met first and the
funds must come not because of greater profit
through productivity but simply through making the
end users or the consumers pay more.
51. The Trade Union view is short term. The most
important thing is the pay rise. That the rise may
result in cost going up and consequently prices and
loss of competitiveness, sales and profitability,
that is not a matter of concern. If inflation
erodes purchasing power, that too can be easily
resolved by increases in pay, never mind the price
spiral.
52. This mindset prevents close cooperation in the
spirit of Malaysia Incorporated. But if the Trade
Union abandon their traditional stance and enter
into the smart partnership of Malaysia Incorporated,
Malaysia will truly be unbeatable. It will grow and
prosper even faster and everyone will have bigger
and bigger slices of the expanding economic cake,
including of course the workers.
53. You are here to discuss smart partnerships, to
aim for a win-win situation. You, I am sure, have
many ideas which will contribute towards smart
partnerships. But I would like to ask you to study
the concept of a whole nation as a corporation, a
nation incorporated as the example par excellence of
a smart partnership.
54. With that humble suggestion I would like to
welcome you to Langkawi the legendary islands where
the salubrious climate may perhaps stimulate the
grey matter and render you even more generous to
your fellow men, of varied colours from varied
continents.
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