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Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : HONG KONG
Tarikh/Date : 20/09/97
Tajuk/Title : THE ANNUAL SEMINAR OF THE WORLD BANK
ASIAN ECONOMIES: CHALLENGES AND OPPORTUNITIES
1. When I was invited to speak at this World Bank and IMF
gathering more than three months ago things were going
very smoothly indeed for Asia, in particular East Asia,
the part which the nave thought it was logical and easy
to bring together in an economic caucus, the East Asia
Economic Caucus.
2. East Asian countries were at peace, within and
without. Even the fracas in Cambodia had not happened.
The certainty was that the nations of South East Asia and
North East Asia would be growing economically and would
gradually become economic powerhouses for the rest of the
world.
3. There was much talk then of Asian dragons and tigers
and of course the East Asian miracles. We were quite
flattered. We thought they were admiring our strength and
our skills.
4. We had forgotten the experience of Japan and Korea.
When these two countries seemed about to catch up with the
developed world, things began to happen to them. The Yen
was yanked up in order to reduce the competitiveness of
Japanese goods, while Korea was designated an NIC, a Newly-
Industrialising Country which must be stopped in its
track.
5. We had even forgotten the lesson of Mexico whose
economy was suddenly blighted when foreign funds were
suddenly withdrawn. Mexico was forced to borrow 20
billion U.S. dollars in order to tide over and restore its
fractured economy. Someone made a packet from this loan.
6. And of course we in Malaysia had laughed at the
suggestion that our country would follow the fate of
Mexico. How could that happen when our economy was so
sound. We had practically no foreign debts. Our growth
was high, our inflation low. Politically we were stable
and socially harmonious. We had put in place, tried and
tested strategies for a continuous thirty-year growth
plan.
7. We dismissed the rumour that Malaysia would go the
way of Mexico. And indeed it did not. We did not realise
how close we were to a manipulated economic crisis. We
blithely sailed on. And we were convinced that Mexico,
Korea or Japan and their fates were irrelevant as far as
we were concerned. We felt totally insulated against
events in other countries.
8. But now we know better. We know why it was suggested
that Malaysia would go the way of Mexico. We know now
that even as Mexico's economic crash was manipulated and
made to crash, the economies of other developing countries
too can be suddenly manipulated and forced to bow to the
great fund managers who have now come to be the people to
decide who should prosper and who shouldn't.
9. I did not know all these when I accepted the
invitation to speak, to speak of our hopes and aspiration,
of sharing our prosperity with others. I had wanted to
speak about prosper-thy-neighbour policies, about
strategies, about the multitude of opportunities in Asia
for everyone.
10. In case you are wondering about what is meant by
prosper-thy-neighbour, I would like to explain again that
it simply means if you help your neighbour to prosper you
will prosper along with it. When countries are prosperous
they become more stable and their people need not emigrate
to your country. Instead their prosperity provides you
with a market for your goods, with opportunities to invest
and to enrich yourself even as you create jobs and wealth
for them.
11. Poor neighbours are a source of problems for
everyone, for themselves and for you. Their problems tend
to spill over your borders and undermine your peace and
prosperity.
12. When Japan invested in Malaysia it created jobs and
wealth for us and enabled us to industrialise rapidly.
Japan of course gained directly from its investments but
more than that we have become one of Japan's best markets.
13. Clearly Japan has prospered by helping us to prosper.
This is what is meant by "prosper-thy-neighbour" as
opposed to "beggar-thy-neighbour". Everyone gains from
"prosper-thy-neighbour" policies while only one side gains
from "beggar-thy- neighbour" mindsets.
14. Malaysia is a developing country but we expend a lot
of money in helping others. I will not elaborate on what
we have done, but we really do, in the spirit of
prospering-thy-neighbour.
15. The old mindset can be summarised by the term zero
sum game. You win if others lose, you prosper at the
expense of other's impoverishment.
16. Malaysia had prospered because we believed in being
open when others seemed paranoid about foreigners and were
ultra-nationalists, wanting to keep their country's
economy to themselves. But in South East Asia ultra-
nationalism very quickly gave way to pragmatic open
economies.
17. Asean, and for that matter the whole of East Asia,
seems to subscribe to the prosper-thy-neighbour
philosophy. Now South Asia seems to be picking it up,
together with countries in Africa. Imagine how wonderful
the world would be if we all help each other to prosper,
something that really is entirely possible.
18. But it would seem that the old beggar-thy-neighbour
instinct is still around, is still the guiding principle
of a group of ultra-rich people. For them wealth must
come from impoverishing others, from taking what others
have in order to enrich themselves. Their weapon is their
wealth against the poverty of others.
19. For almost half a century the countries of East Asia
have toiled day and night, to better the lot of their
people. When Malaysia became independent in 1957, the per
capita income of its five million people was 350 U.S.
dollars. By June 1997, after 40 long hard years of toil
and sweat the per capita of its 20 million people was
almost 5,000 U.S. dollars. After June you know what
happened.
20. All along we had tried to comply with the wishes of
the rich and the mighty. We have opened up our markets,
including our share and capital markets. On the other
hand, most foreign companies operating in our country, do
not allow local participation. They are not open, but we
have not complained. Their profits accrue to their
shareholders in their home country. They pay practically
no tax.
21. We were told that we must allow our money to be
traded outside our country. We were told to permit short
selling, even to let trading in borrowed shares to be
legalised. We must allow for speculation. We did all
that we were told to do. But we were told we have not
done enough. We were told to slow down our growth. We
were told that it could not be sustained, that it would be
bad for us, that we would overheat. In particular we
should not venture into big projects, the so-called mega
projects, even if only to provide the necessary
infrastructure that we were told we needed. And of course
we were told that if we don't provide the infrastructure
then we will not be able to grow. Quite confusing,
really.
22. But Malaysia and its South East Asian neighbours
continued to grow, to prosper. Disobedient, recalcitrant
and at times impudent, these upstarts, Malaysia in
particular had the temerity to aim higher than the
developed countries, the powerful, the movers and shakers
of the world.
23. I don't know about the average men in the street but
quite a few people who are in the media and in control of
the big money seem to want to see these South East Asian
countries and in particular Malaysia stop trying to catch
up with their superiors and to know their place. If they
don't then they will just have to be made to do so and
these people have the means and the wherewithal to force
their will on these upstarts.
24. There may be no conspiracy as such but it is quite
obvious that a few at least, media as well as fund
managers, have their own agenda which they are determined
to carry out.
25. We have always welcomed foreign investments,
including speculation. They can come in to buy shares
and to get out if they wish to for whatever reason. But
when the big funds use their massive weight in order to
move the shares up and down at will and make huge profits
by their manipulations then it is too much to expect us to
welcome them, especially when their profits results in
massive losses for ourselves - in the classic zero sum
game theory.
26. International trading makes currency exchange
necessary. Otherwise we may have to resort to barter.
Buying and selling currency to finance trade is fine. But
out of this evolved pure trade in currency as a commodity.
27. We are told that the trade in currency is actually 20
times bigger than real trade in goods and services. Other
than profits and losses to the traders involved, there
really is no tangible benefits for the world from this
huge trade. No substantial jobs are created nor products
or services enjoyed by the average people. The whole
trading is secretive and a bit shady as huge sums are
apparently moved about from banks to banks. No real money
are involved, only figures. One billion Malaysian
ringgits would need a big truck to move from place to
place. Obviously this is physically impossible if the
Great Train Robbery is not to be repeated hundreds of
times over.
28. The traders apparently make billions with each
transaction. But when the funds at their disposal is huge
and they are in a position to influence the values of the
currencies with their investments and divestments then the
currency market become cash cows to them. They cannot
fail to make a profit whichever way the index goes.
29. Unfortunately their profits come from impoverishing
others, including very poor countries and poor people.
South East Asian countries have now become their target
simply because we have the money but not enough to defend
ourselves.
30. In the case of Malaysia, the ringgit is devalued by
20 percent. What this means is that we, everyone of us
including the Government, have lost 20 percent of the
purchasing power of whatever money we have. The poor have
become poorer and there are now more poor people in
Malaysia. The rich have become poorer too but we will not
waste any sympathy on them of course.
31. But the currency traders have become rich, very very
rich through making other people poorer. These are
billionaires who do not really need any more money. Even
the people who invest in the funds they operate are rich.
We are told that the average return is about 35 percent
per annum.
32. And we are told that we are not worldly if we do not
appreciate the workings of the international financial
market. Great countries tell us that we must accept being
impoverished because that is what international finance is
all about. Obviously we are not sophisticated enough to
accept losing money so that the manipulators become
richer.
33. We are also warned that these are powerful people. If
we make a noise or we act in any way to frustrate them
they would be annoyed. And when they are annoyed they can
destroy us altogether, they can reduce us to basket cases.
We have to accept that they are around, that they will
always be around and that there really is nothing we can
do about it. They will determine whether we prosper or we
don't.
34. Once upon a time the U.S. allowed monopolies. Then
Rockefeller cornered the oil industry in America and
destroyed the small players and squeezed the consumers.
The U.S. government decided that this was not right and
outlawed monopolies through the Anti-Trust Laws.
35. A few decades back some enterprising people hit on
the idea of acquiring controlling interest in companies
and then stripping their assets. The shell left by them
was incapable of giving any return to the small
shareholders. Thousands of people lost money.
36. Again the government stepped in and required anyone
acquiring more than a certain percentage of shares to make
an offer for the rest . That way the small shareholders
were able to dispose of their shares at the offered price.
They were relieved of the possibility of owning shares in
useless companies.
37. To prevent other abuses anyone buying more than five
percent of the shares have to declare.
38. When insiders made use of inside information to sell
or buy their own shares it was regarded as unfair
advantage and was made illegal.
39. I mention all these because society must be protected
from unscrupulous profiteers. I know I am taking a big
risk to suggest it but I am saying that currency trading
is unnecessary, unproductive and immoral. It should be
stopped. It should be made illegal. We don't need
currency trading. We need to buy money only when we want
to finance real trade. Otherwise we should not buy or
sell currencies as we sell commodities.
40. We cannot go back to Bretton Woods and the fixed
exchange rates although we should be honest enough to
admit that fixed exchange rates did not hold up the
economic recovery of the world in the post World War
period. It was wrong only because it did not really
reflect the economic performance of the nations concerned.
Sovereign nations were allowed to devalue at will. But
the float resulted in nations losing their sovereign
rights. Currency traders emerged who made killings
tracking the snake etc. But they were relatively small
players. They were not the movers and shakers who ruled
the market. They were mere speculators.
41. No one I think would want to return to the fixed
exchange rates. But if anarchy is abhorred by good
citizens everywhere, there is no reason why we should not
abhor anarchy in the world financial system. A certain
degree of uncertainty is fine but an absolutely uncertain
financial world is no good for anyone, except of course
for those who deliberately create the uncertainty. But
then these people know for certain what they are going to
do and could take cover or take advantage. For them there
is no uncertainty. They are dealing in absolute certainty
and they cannot possibly lose. If insider trading is
unfair, outsiders who know exactly what is going to happen
and then trade, can it be said to be fair?
42. If trade is to grow then currency values must be
linked to the economic performance of the countries
concerned. There are enough indices which can help
indicate the value of the currencies, and the rates of
exchange. A country that is doing reasonably well at a
certain exchange rates should be allowed to maintain the
rate. If the country is doing badly, devaluation can help
the country by making their costs lower and their products
more competitive. On the other hand, if the country is
too competitive it is safe to assume that the currency is
undervalued. Since many factors are involved, many rates
are possible. Traders can then take the risk and trade in
the currency, if they must.
43. This way there will not be a fixed rate but the range
of fluctuation will not be too wide. There will be enough
uncertainty for genuine traders but there will not be
violent swings as to cause financial crisis for the
country concerned. Trade would not be too disrupted and
would in fact be enhanced, increasing the wealth for
everyone. It would be a win win situation.
44. The countries of South East Asia have prospered
because by and large they have managed their economy
better than most other developing countries. Their
prosperity has contributed to the prosperity of their
trading partners. In fact they have contributed to the
economy of many developing countries by their willingness
to serve as models for other developing countries.
45. In Malaysia, we have always believed that we are
better able to convince other developing countries, and in
particular ex-communist countries wanting to liberalise,
of the benefits of a market economy. When these countries
look at Europe or North America they would feel that the
free market economy is beyond their capacity to manage.
Europe had taken over two centuries to achieve what they
have achieved. These developing countries always feel put
off by the complexity and the time required. The
centrally-planned socialist system had always seemed
easier. But as we all know, socialism and communism had
failed. Their economic system did not work. The ex-
socialist countries need to adopt at least a part of the
evidently successful free market system.
46. When they see that a country like Malaysia, a former
colony of Britain, 40 years ago very much like them,
fairly successfully managing a market economy, they feel
more confident that they can do the same. Some of the
other countries of South East Asia are also attractive and
convincing models for them. A number of these countries
are willing to open their books and even to train
personnel from developing countries in economic
development and management.
47. We did not spend as much money as the rich aid-giving
countries; we did not lend money, but we believe that we
are more effective in helping many developing countries in
South East Asia, Africa, Central Asia and the South
Pacific to make the transition from the centrally-planned
command economy to the free market economy.
48. Additionally, the South East Asian countries learnt
about administrative measures and development strategies
by observing each other. We adopt what seems right and
discard what fails to work. It is no coincidence that we
have prospered together. We are each other's models.
49. Given half a chance, the countries of South East Asia
can become the systems and strategies engine of growth for
a lot of countries in Asia and indeed in other parts of
the developing world.
50. What would happen to the rest of the world if these
developing countries become developed? If it is a zero
sum beggar-thy-neighbour world, then we can assume that
the presently developed world would become poorer, weaker
and ready for colonisation by the New Emerging Developed
World. If this is to be the end result then the
developed countries should prevent others from ever
developing. North East and South East Asia must be
impoverished and rendered perpetually unstable. And of
course, the Indian sub-continent which seems likely to be
the next growth region must be undermined. Under no
circumstances must the 1.2 billion people of South Asia
together with the two billion increasingly wealthy people
of the East Asian region be allowed to become developed.
51. To the yellow peril of yesteryear will be added the
brown peril. The Europeans will be overwhelmed. Genghis
Khan will ride again and so on and so forth.
52. But the zero sum game theory is an invention of the
pessimists, the xenophobic, the clash of civilisation
people. Whether it will come about or not depends very
much on our present attitudes and what we do now. The
attempt to deprive Japan of the raw materials for its
industries resulted in Japan launching the Pacific war.
53. But supposing we all espoused the prosper-thy-
neighbour policy, supposing we see in the prosperity of
others opportunities for enriching ourselves, then we need
not be so afraid of the growing wealth and technological
advancements of the developing countries of the world.
54. I repeat, when Japan invested in manufacturing in
Malaysia, we became not only prosperous but also one of
Japan's biggest markets. Today the trade balance is
hugely in favour of Japan. And of course Japan reaped
huge profits from its investments in Malaysia.
55. Foreign Direct Investments have helped Malaysian per
capita to increase by almost 1,000 percent over a period
of 30 years. Better still we have now acquired the
capacity to manufacture and export our own branded goods.
56. Clearly this was no zero sum game. This was a win
win formula. By helping us, Japan and the others had
helped themselves. They have not lost one little bit.
Even the rest of the world benefited because we helped to
reduce cost and make goods available to poor people
everywhere, particularly in the poor countries. And of
course Malaysia is not a market for Japan alone. With our
wealth and our ever growing needs, we have become a good
market for all kinds of products from all the other
developed countries. In other words, Malaysia's
prosperity has helped to prosper the developed countries
everywhere.
57. It is the same with all the South East Asian
countries. We have helped to prosper very many countries,
including the rich countries of the North. The trade
figures will bear testimony to this.
58. There are many developing countries which are still
very poor. They contribute almost nothing to the wealth
of the rich. They need financial support continuously.
They are unstable. They have incessant civil wars,
famines and disasters of every kind. Tourists run the
danger of being killed in these countries. Huge sums have
to be expended on peace keeping in these countries.
59. Prosperous countries on the other hand, are more
likely to be peaceful and less of a burden to the rest of
the world. A prosper-thy-neighbour policy would therefore
give a better return than a beggar-thy-neighbour policy.
60. There is therefore no need to fear the prosperity of
the developing countries. They are not going to be a
threat to the prosperous. There is no profit in trying to
contain them, to undermine them, to prevent them from
talking to each other or to their richer neighbours. They
cannot be a threat because they will be too busy
competing among themselves to gang up against the
developed countries. Asians in particular are more
ethnically different than Europeans. They can never work
together. The clash of civilisation will not take place.
61. There will not be a totally peaceful world of course.
There will be local wars. Arms can still be manufactured
and sold profitably to these people. But by and large, a
generally better developed and prosperous world would be
better than one which is divided into the very rich and
the very poor.
62. Despite our bitterness over the attempts to push us
back by a decade through forced devaluation of our
currency, through the rape of our share market, we in
South East Asia and in Asia are still keen to receive
investments from Europe and America. There has been a lot
of talk about our scaring away foreign (meaning Western)
capital. But you should also appreciate that we of South
East Asia at least, are now very scared about foreign
capital. We thought they were helping to prosper us. We
conducted roadshows to encourage them to invest in our
share and financial markets. We will continue to do so.
But we will have to be more circumspect. We still believe
there are sincere investors out there. But there are also
quite a few rogues who can cause an avalanche forcing
others to run for cover.
63. We still believe in prospering Asia in order to
prosper everyone. The media and the great financial
experts may know how or what a country should do, but then
if anything fails they are not going to be voted out of
office. We are, and we do claim to know a few things
about developing our countries. Malaysia has become one
of the so-called tiger economies not by listening to the
media or the great financial wizards. We have in fact
developed ourselves by actually doing the opposite of what
the wizards told us we should do. And we think,
outrageously and impudently that the same formula can help
develop other countries as well.
64. We were a commodity producer with only two
commodities to sell. Without any skills in the
manufacturing industry we decided to industrialise. And
we did. We were told that affirmative action to correct
the socio-economic imbalance is not fair and will not
work. Our New Economic Policy worked and created a fairer
society with no race riots. Similarly we were told that
the majority Malays would oppress the minorities. Instead
Malays, Chinese, Indians, Iban, Kadazan and 30 other
tribes work harmoniously together.
65. We were told that a developing country should not
aspire to go into the automobile industry. We did and we
have succeeded.
66. Privatisation was a new fangled thing when in 1982 we
launched our privatisation programme. Many developed
countries failed in their privatisation. We have
privatised more than 400 government departments, companies
and functions. We have succeeded and we are still going
on.
67. Japan Incorporated was condemned. We made Malaysia
Incorporated our creed and it has helped our country to
grow and prosper faster than most other countries.
68. I will not bore you with tales of our rejection of
the conventional including raising our interest rates in
order to protect our Ringgit. As you know we went the
other way.
69. One of the unconventional things we did was to go
big. Our 830 km North-South Highway, our six-kilometre
wharf at the new West Port, our Penang Bridge, the Kuala
Lumpur Telecommunication Tower, the Petronas Twin Towers
and many many more big projects we have completed have all
contributed to our growth and our wealth. They are not
monuments but basic infrastructure.
70. We are building the biggest airport in Asia for Kuala
Lumpur because of sheer need. Our present airport built
33 years ago was for 400,000 passengers. It now handles
16 million and has no room for expansion.
71. All over the world governments find difficulty in
locating new and necessary airports. It would be stupid
to build a new airport to handle one million more. We
will never find another site when the need arise for a
bigger airport. If you must build a new airport, build it
big enough at least for the next 30 years if not 100
years. But we were told that we should not build a mega
airport. Why? Because you think it would undermine our
economy in which you have invested. You do not want our
economy to go under and you will lose your money. But
please give us some credit for knowing something about
managing our country.
72. We like to think big. We even have great ideas for
bringing wealth to other developing countries. We
proposed the development of the Mekong Valley, beginning
with the railway from Singapore to Kunming because we know
that transportation will stimulate economic development.
It is a big project but small projects make little impact
on the economy.
73. We want to link up with the railways of China,
Central Asia and on to Europe. Central Asia is landlocked
and cannot develop because of it. You build VLCC to
transport oil and bulk cargo for yourselves. Why cannot
an ultra-wide gauge railways with trains of two kilometres
be built, to move goods in and out of the Central Asian
Republics? They can then prosper and the world will have
another big market.
74. We have other big ideas to prosper our neighbours, to
prosper everyone, the developed countries included.
75. But we are not going to be allowed to do this because
you don't like us to have big ideas. It is not proper.
It is impudent for us to try, or to even say we are going
to do it. If we even say that when we have the money we
will carry on with our big projects, you will make sure we
won't have the money by forcing the devaluation of our
currency.
76. Beggar-your-neighbour, this is the mindset of some
people. They will not help. Worst still they will block,
obstruct and undermine.
77. Asia is full of great opportunities not just for
Asians but for everyone. Given half a chance we can
prosper. We cannot all be as big economically as Japan,
but we will not be excruciatingly poor. If the countries
of Europe and of North America can be almost uniformly
prosperous we don't see why we cannot be allowed to be a
little prosperous.
78. We will not act in concert against the rest of the
world. We are not ethnically related as are the
Europeans. We come in various colours and shades,
practising different religions, speaking different tongues
and with very different cultures. We will always disagree
with each other, possibly fight against one another
leaving us little time to confront others from Europe.
You have nothing to fear from the prosperity and well-
being of the Asians. You have everything to gain, for our
prosperity will contribute to your prosperity and the
prosperity of the rest of the world. So think of Asian
opportunities and seize them.
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