Oleh/By : DATO' SERI DR.
MAHATHIR BIN MOHAMAD
Tempat/Venue : BANGKOK, THAILAND
Tarikh/Date : 12/02/2000
Tajuk/Title : THE PLENARY SESSION OF THE TENTH
UNITED NATIONS CONFERENCE
ON TRADE AND
DEVELOPMENT (UNCTAD X)
I would like to thank UNCTAD for inviting me to
address this distinguished gathering. This conference
is timely in the light of recent developments impacting
the global economy, particularly of developing
countries.
2. This Conference provides an excellent occasion for
us to take stock of the lessons and experiences of the
past; and to look forward to new ideas and new
programmes, to meet the developmental needs of the 21st
century. The theme of the Conference is most
appropriate as we all want to see the benefit of
globalisation being shared by all including the
developing countries.
3. Looking back at the last few decades, I cannot but
acknowledge that it has been a time of significant
changes for developing countries. For many of us,
managing our own destiny is new. Our experience with
development therefore, has been comparatively limited.
A number of us have achieved some measure of success in
economic development; but there are many which have yet
to achieve any significant progress.
4. Many of us have on our own undertaken
liberalisation measures by opening our markets to trade
and investment, evolving our institutional and
regulatory systems, orientating our economies to
external challenges and eventually welcoming
globalisation, in the hope of benefiting from the
opportunities afforded by this process.
5. These developments have occurred against a
backdrop of changes over which we have little control.
Political stability, natural and human resources,
capital and investment, were once the only ingredients
in the formula for development. But today
technological advances, borderless flows of capital and
the advent of a knowledge-based economy have
complicated the development equation. We are not
certain we can deal with this new complex environment
which changes even as we try to adjust to them. And
because we are not so competent in dealing with these,
our development have been and will be affected
adversely.
6. What we do know is that the path to development
has never been easy even at the best of times. Despite
our efforts we see rising inequality between developed
and developing countries, with continued high levels of
poverty and unequal and inequitable benefits from
globalisation. We see increasing uncertainty of the
global economic environment. We see greater
marginalisation as a result of the globalisation
process. And we see growing inadequacy of global
institutions to deal with developmental problems.
7. Income inequity is growing. There are growing
divergences between the incomes of the richer group of
countries and the poorest. The major developed
countries have GDP per capita over 25,000 U.S. Dollar
while the poorest have as little as 100 U.S. Dollar.
It seems that the benefits of international trade and
investments have been unequally shared among countries.
The current belief by the global community, that
countries must embrace liberalisation and adopt global
rules and development would then follow, have not been
proven correct. It would seem that the current
practices in trade and investments are not capable of
distributing wealth equitably.
8. The instability in the global financial system has
also adversely affected us. Just two years ago, a
number of East Asian economies were badly affected by a
severe financial crisis. Although there is recovery
now but the global financial system continues to be
characterised by volatile capital flows and excessive
speculative activities of the hedge funds and highly
leveraged institutions (HLIs). Developing countries
continue to remain vulnerable to another crisis unless
reforms to the international financial system are
undertaken.
9. Meanwhile the affected economies, including
Malaysia, have undertaken strong economic measures and
instituted financial reforms to address weaknesses that
have emerged and to restore confidence in the economy.
Although in the initial stages Malaysia found it
necessary to follow the advice of the IMF, we had to
abandon the IMF prescription because things actually
got worse faster. We noticed that the IMF approach of
high interest rates and tight liquidity, far from
reviving confidence, led to a severe contraction of the
real economy and an overhang of debts.
10. We were thus compelled to adopt and implement
measures consistent with our domestic circumstances in
order to address the issues of economic recovery.
These measures although unorthodox, have helped to put
the economy on a path to recovery. We relaxed fiscal
policy, reduced interest rates and imposed selective
exchange controls to eliminate the internationalisation
of the Ringgit and regulate volatile short-term
portfolio flows. No controls were imposed on movement
of funds for international trade settlements and
Foreign Direct Investment (FDI). These are free to
come in and leave the country at any time. The
controls brought about sustained stability which
enabled us to take various measures to bring about the
on-going broad-based economic recovery.
11. As a recalcitrant and heretic I would like to
insist that the affected economies of East Asia were
practising the right economic policies, which enabled
them to enjoy high rates of growth. Current account
deficits and bank borrowings which were on the high
side, are to be expected, given the openness of these
economies and their high rate of economic growth. Some
believe that periodic financial crises may be a small
price to pay for the development resulting from
liberalisation and globalisation. But is it really
necessary to have financial crisis every now and then,
especially the severe kinds which affected the East
Asian tigers and dragons? Cannot we have
liberalisation and globalisation with less disruption
for economies which are as yet not too resilient? I
think we can if we are not too rigid in our thinking
about globalisation and liberalisation and our
tolerance of abuses of the system.
12. It is disappointing that the international
community cannot think of any other solution to the
crisis in East Asia except to call for improvements in
transparency and governance. The argument is that lack
of transparency and accountability makes it difficult
for markets to function well. And when the players in
the market feel uncomfortable they just pull out,
regardless of the consequences to the countries which
had in the past given them good returns. Cannot there
be other ways of responding to the discomfort? It
seems that the international community is now more
concerned to avoid periodic crisis and has set up
various committees and working groups to study these
and to suggest a new architecture for the international
monetary system. This include the setting up of the
Financial Stability Forum and the G-20.
13. But Malaysia remains pessimistic on the outcome.
The membership of the G-20 seems to make it heavily
influenced by the views of developed countries. We
hope the G-20 agenda will not be limited to promoting
information exchange and co-ordination among national
authorities, international institutions and
international regulatory or relevant expert groupings.
In our view, central to the issue of reform of the
international financial system is the need to address
the volatility of capital flows, particularly through
direct regulation of hedge funds and highly leveraged
institutions.
14. We are also concerned that although much
discussion has taken place, and agreement reached on
certain specific issues, implementation details have
yet to emerge. We recognise that some progress has
been made to address the issue of transparency and
disclosure as well as indirect regulation of market
players. But even in these areas we are yet to see
concrete measures. Until and unless there is a
reshaping of the international financial architecture,
we can expect the global economic system to remain
inherently unstable and this would not be conducive to
further development, particularly for the developing
economies.
15. While some countries have adjusted and benefited
from the liberalisation and globalisation process, many
because of their low level of development have not
managed to get a share in the benefits of
globalisation. In the context of the present
environment, capital flows have been channelled to
where the returns are highest, and not where capital is
most urgently needed to uplift the level of
development. Considering that we place such faith in
market forces, this is only to be expected.
16. Further, the benefits resulting from the rules-
based multilateral trading system as embodied in the
WTO, have not been equally distributed among all
countries. Tariff reductions in industrial and
agricultural products, as well as improved trading
rules are of little consequence to these countries, if
the products of export interest to them are not granted
market access. Commodity exports, the mainstay of many
developing economies, continue to experience severe
declines in their terms of trade.
17. Existing international infrastructure is
inadequate to deal effectively with the developmental
problems and crises. The international institutional
machinery, comprising the United Nations, the IMF and
the World Bank, have not been able to cope with the
challenges confronting the developing world. The Asian
financial crisis has clearly shown the inability of the
developed world and the international institutions to
respond to crises and the effects of contagion.
18. Poverty and unequal distribution of wealth have
resulted in security and social problems. And they are
likely to continue to do so in particular in the
developing countries. We must be sincere and earnest
in finding solutions, solutions that can realise the
full economic potential of developing economies, and to
reduce significantly the problems of poverty, hunger,
ill health, aids, illiteracy and gender discrimination.
19. The responsibility to address the issue of
development is a collective one. Developed countries
must play an active role in assisting countries
affected by these problems. However, developing
countries must accept that we too have to do our bit to
ensure that sustainable growth and prosperity can be
attained.
20. Firstly, developing countries must continue to
enhance domestic resilience and capacity. We must
continue to invest in human resource development, to be
equipped with the skills and knowledge to cope with a
rapidly changing world dominated by technological
innovations and advances. Investment in education with
emphasis on science and technology must be given
priority. Attention must be given to strengthening
domestic institutions and the framework of laws, rules
and regulations to ensure resilience in the face of
challenges posed by globalisation.
21. Secondly, apart from the efforts of developing
countries, industrial countries also have a special
responsibility to facilitate this process, by assisting
developing countries gain access to knowledge, ideas
and inventions, which must be made available at a
reasonable price. Intellectual property must be
protected but consideration must be given to the needs
of the poor. By all means profit from the intellectual
rights but make those who can afford pay more while
reducing the profit from the poor.
22. The new millennium will continue to witness rapid
advances in information technology, which will have
wide-ranging implications on developing countries. The
Internet has become a force of tremendous potential.
Those who can see the usage it can be put to will gain
tremendously. Those who are still dazed by the ease of
access to information, to the market and to people in
general will just stare at the screen while their
little businesses get pulverized by the amazing dot-
coms companies. By the time they awake to the
potential it may be too late. UNCTAD could undertake a
set of programmes to promote better understanding and
capacity building in this area.
23. Thirdly, all countries must work together to
manage the globalisation process for our mutual
benefit. The trading regime under the WTO can bring
both benefits and challenges. In the context of trade
liberalisation, greater flexibility must be given to
developing countries for a wide variety of options and
responses to deal with the complexities of development
and nation building.
24. This aspect and the special situation of
developing countries are often not given adequate and
appropriate treatment in trade liberalisation
negotiations. Developing countries cannot and should
not be expected to undertake obligations at similar
levels as developed countries. Market opening measures
expected of developing countries must be commensurate
with the level of development. The principle of
progressive liberalisation must not only be an integral
element of any WTO trade liberalisation initiative, but
must be fully recognised by all.
25. Fourthly, to be able to manage the pace and
direction of liberalisation and globalisation,
developing countries must be allowed to effectively
participate in the decision making process in all
international institutions. International institutions
must have the mechanisms to allow the views of all to
be heard. The decision making process must be
transparent and must reflect not just the views of big
business and big Governments but those of the
threatened small business and small Governments as
well. The recent WTO Ministerial Conference in Seattle
clearly demonstrated the need to involve even the NGO's
in the decision making process. It is time that the
relevant NGO's be given a proper forum to air their
views. Street demos can serve as a wake-up call but
their usefulness is quite limited.
26. Frankly speaking I am worried and frightened at
the preparations being made by corporations in certain
industries and business activities in order to take
advantage of liberalisation and globalisation. I am
referring to the mergers and acquisitions which are
making big corporations even bigger. Now many of these
corporations are financially more powerful than medium
sized countries. While we welcome their collaboration
with our local companies, we fear that if they are
allowed into our countries unconditionally they may
swallow up all our businesses.
27. A situation of worldwide oligopoly seems already
to be emerging. If market forces are allowed free play
then oligopolies may end up as monopolies. I believe
that the general consensus is that monopolies are
unhealthy. Can it be possible that a corporation is
not a monopoly in its country of domicile but a
monopoly in the rest of the world? In such a case
whose laws will apply? And if we restrain them would
we be accused of not subscribing to globalisation and
liberalisation?
28. Clearly UNCTAD 10 has a big agenda before it. If
you want to make globalisation an effective instrument
for the development of all countries and people, it is
imperative that you take serious notice of the fears
felt by the developing countries about what is
happening to the world's economy, the world's financial
system in this era of interdependence and
globalisation. You have also to let the developing
countries have a say in the interpretation and shaping
of the new forces that are being unleashed by a
globalised world where policies and practices are to be
standardized so as to facilitate trade and investments.
29. We must not forget that UNCTAD is not just about
trade. It is also very much about development and
development is the particular need of developing
countries. Other fora are already exclusively
concerned with trade. UNCTAD is one of the few
concerned with development and because of that it is
extremely important to the developing countries.
30. I am confident that the deliberations during this
Conference will result in concrete outcomes that will
set a new direction for development, in terms of a new
development strategy that embodies elements that would
enable in particular, developing countries to meet the
challenges of the 21st century. UNCTAD must assume a
leading role in achieving this objective.
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