Oleh/By : DATO' SERI DR.
MAHATHIR BIN MOHAMAD
Tempat/Venue : THE HILTON HOTEL, KUALA LUMPUR
Tarikh/Date : 29/08/2000
Tajuk/Title : AT THE 21ST CENTURY CONFERENCE
TO COMMEMORATE THE
ESTABLISHMENT OF THE TUN
ISMAIL ALI CHAIR IN MONETARY
AND FINANCIAL ECONOMICS
Today, we honour the memory of a man of clear vision, a
man of high intellect, a man of strong character, and a
man who places service to the nation at the top of his
personal agenda, even though this meant at times
sacrificing the interests of his family, not to mention
his own. He is also a dear friend, although we often
disagree on many things, including issues on public
policy. Of course, he also happens to be my brother-in-
law. This latter relationship accords me no special
privilege in his eyes -- he merely viewed me as a
medical doctor who happened to have married his sister.
His respect, I have to earn, like everyone else. Deep
down, both of us have come to an uneasy truce, in the
knowledge that we were each sufficiently capable of
conducting a good discussion on any issue of public
interest with calm and honesty, and respect for well
reasoned differences of views. I can tell you that we
did have differences of views -- but they were never
serious enough to affect our cordial personal
relations. He liked to have the last word on issues
where both of us felt strongly, and so did I. I
usually approach the Mexican standoff by putting down
in writing how I really felt. That was my way of
getting the last word. After all, he was the elder
between us.
2. Looking back, Tun Ismail left behind a legacy that
relates mainly to his 18 years as the first Malaysian
Governor of Bank Negara Malaysia, our own Central Bank.
This is not to say that his contributions at the helm
of Permodalan Nasional Berhad or PNB, which he helped
create, was less significant. With due apologies to
Shakespeare, for Tun, it was not that he loved PNB
less, but that he loved Bank Negara more. Today, I
wish to address you on Tun's long standing and far
reaching legacy at Bank Negara and the nation, as I
recall his work and its impact on our lives as an
interested citizen and Head of this Administration. As
I reflect on it, I must say that his legacy is sizeable
and significant, and remains most relevant for us
today.
3. For those who know Tun Ismail, all will agree that
he is very focussed in whatever he does. He usually
knows precisely what he wants, and organises himself in
the best way he knows how to get them. It is
interesting to note that as far back as January 1969,
on the 10th anniversary of Bank Negara, Tun Ismail
provided one of those very rare insights into his own
philosophy on two fundamental relationships regarding
public policy which remains relevant today, namely: the
relationship of the Central Bank with the banks, and
with the Government. Bearing in mind that these were
articulated some 30 years ago, I think they were rather
revolutionary; certainly then, and even now. As we
emerge from the 1997 currency crisis, these two
issues have resurfaced and I would like to delve on
these relationships as they continue to underpin many
of the matters that concern us today.
4. First, the relationship with the banks. Tun
Ismail believed that it is fundamental for the banking
community to always recognise and readily accept its
true role, namely: to efficiently mobilise savings; to
effectively channel these savings for productive use to
develop the national economy; to instil sustained
public confidence in the soundness of banks and their
management; and to continually inject expertise and
professionalism to develop a competitive intermediation
mechanism to lubricate the development process. Once
the banks are able to successfully meet these
challenges, Tun Ismail envisaged that both the
Government and the Central Bank need resort to serious
regulatory and legislative measures only in the event
of market failure. Otherwise self regulation with
simple prudential rules will be the order of the day.
Thirty years ago, Tun Ismail expressed the hope of
looking forward to the day when such a situation would
come to pass. Today, as we complete 240 days into the
new millennium, I, too, would like to see Tun Ismail's
vision being realised.
5. Alas, although the banking system has progressed,
I am afraid Tun Ismail's dream has yet to be fulfilled.
Indeed, as I watch bankers at work during the recent
crisis period, I am still to be convinced that the
banking community really appreciates and honestly
accepts its true role as envisaged by Tun Ismail; and
if they do, they are certainly not showing it by their
actions and deeds. After five quarters of consecutive
positive GDP growth, the last three being rather rapid,
net lending by the banking system remains
indeterminate, or sluggish at best; the flow of money
supply and bank liquidity are still generated from the
external sectors. Bank lending is a drag on the
economy, instead of leading it as we had expected. I
worry that our banks still have this culture of taking
the umbrella away when it rains. They are still far
too risk adverse to be able to effectively play their
real role in nurturing recovery and pushing forward the
development process. To the extent they have been
extending new credits, I know a significant part was
being directed at the `blues' and other large
corporations which do not really need them; in this
regard, those in need are often denied. Even working
capital finance is hard to come by despite the rapidly
expanding economy. Of course, small businesses
continue to complain regularly that banks are always
`seen' but seldom `heard from', and when heard, it is
often a `no'; or `place-deposits-with-us-and-we-will-
extend-the-loan-to-you-of-an-equivalent-amount'.
6. Collateral lending is still far too prevalent,
even for the most viable of ventures. Big projects, I
am afraid, have little hope of being financed, and
bankers remain extremely guarded with even good
projects involved in the `new' economy. I am told that
many bankers are ill prepared to venture into venture-
capital type proposals or for that matter,
`incubators'. As I see it, bankers worry far too much
about their bottom line at the expense of the real
intent of their very existence. Some even pat
themselves on the back, regarding themselves as `good'
bankers simply because they consider themselves prudent
in lending out only 50 to 60 per cent of the deposits
mobilised. Truly, they miss the wood for the trees,
and not know it. Like Tun Ismail, I look forward to
the day and hopefully, it will not take another 30
years, when bankers truly acknowledge and readily
accept their real role in the economy and become more
pro-active in discharging their responsibilities as
professional intermediaries between savers and
borrowers to help develop the Nation. We need
entrepreneurial bankers and not mere money lenders. We
need bankers who are experts at managing risks and who
are not afraid to take calculated risks. We
desperately need bankers whose umbrellas are ever
present, come rain or shine, so that they can be relied
upon as true partners in national development. Bankers
must lend and lend prudently. That's their business.
They should be good at it. But lending based on
collaterals of equal or higher value speaks not of
prudence but of primitive banking skills among bankers.
7. Tun's second concern involves the relationship of
the Central Bank and the Government, or what classical
economists call the independence of the Central Bank.
As I understand it, Tun's approach was as simple as it
was pragmatic: fiscal and monetary policies are most
effective when they are well coordinated as it takes
two hands to clap to make the `right sound' in terms of
meeting public policy objectives of the national
agenda, set by the Government of the day. So long as
there is professional integrity and honesty in serving
the national interest, first and last, the issue of
independence of the Central Bank did not pose a real
problem for Tun Ismail. He talked in terms of the
Central Bank being independent within Government, but
not of Government. As a result, during his time,
fiscal and monetary policies were always designed and
implemented in-sic.
8. There was no question of the right hand not
knowing what the left hand was doing. I think Tun's
perception of the issue at hand was realistic, based on
his unquestioned integrity, sound expertise, and high
standing within Government. I recall an occasion when
he echoed a piece which he had read during his days at
Cambridge University when asked how he managed when he
disagreed with Tun Tan Siew Sin, the Finance Minister,
as follows: "realistically, the central bank works in
an uncertain world, with policy tools that are often
not easily understood, and seeking to meet objectives
of policy that are always broadly defined. With these
uncertainties in an imperfect world, the central banker
needs to have the serenity to accept what cannot be
changed, the courage to change what cannot be accepted,
and the wisdom to distinguish one from the other". I
think there is much wisdom in these remarks which all
of us should seriously think about.
9. While these two relationships were important, Tun
Ismail approached his role at the helm of Bank Negara
at a more basic working level, i.e. in ensuring that
the Bank had the means, the medium and the mechanism to
effectively discharge in practice its wide ranging
responsibilities. To ensure efficiency and
effectiveness, Tun needed dependable expertise. It was
in this area that Tun's real legacy lies: i.e. his
success in building what he called a body of lasting
traditions at the Bank: a tradition of absolute
integrity; a tradition of competency at the highest
level; a tradition of efficiency to the point of
ruthlessness; a tradition of dependable expertise in
matters monetary; a tradition of selfless service to
the Nation; and a tradition of setting-up benchmarks of
excellence.
10. In his 18 years as Governor, Tun worked hard and
long at setting the highest standards with his building
blocks to develop, nurture and promote these
traditions. This task was accorded the highest
priority at the Bank and when he moved to PNB, he set
the same process in motion. Tun Ismail should be
justifiably proud of what he has done. I am told that
these traditions are now deeply rooted in the psyche of
Bank Negara staff, young and old, as well as in PNB
staff, including many who are no longer in service in
these organisations. For many of them, these Bank
Negara-PNB alumni have become proud standard-bearers of
this tradition in their own right. At this time, as we
attempt to ensure sustainability in the development
process, it is timely for us all to begin building
traditions of excellence ourselves, as Tun did for the
last 50 years of his life. I know the march of time
can work to blur our senses to continually uphold
tradition. It is often said that it is far easier to
fight for sensible traditions than to live up to them.
As we all look to the future, more than ever, we need
to build traditions of excellence in a very practical
manner if we are to survive in an increasingly
globalised and less equitable world.
11. The currency crisis had exposed the bankruptcy of
unfettered free market mechanisms. More than ever, we
need integrity, competence, efficiency, expertise,
selflessness and equity. We need to go beyond the pure
pursuit of profit. I know that in our society, there
is also a deep-rooted scepticism about the reliability
and moral quality of business' integrity and of the
business approach to efficiency, expertise and equity.
More than ever, we now need to work hard at changing
mind-sets and set for ourselves a new path forward,
learning from the bitter lessons of the recent crisis.
Without a strong foundation in excellence, sustainable
development will remain elusive.
12. All these lead me to the ethical tradition of
business. Does business ethics make economic sense?
Concern with ethical questions such as this is of
course as old as civilisation; indeed, ethics has
always been at the centre of philosophy and moral
theory, be it Christian, Buddhist or Muslim. And it
still is today. All religions have their own ethical
standards. Muslims are required to act in a very
precise, decent and benevolent way which has been spelt
out in detail and to refrain from wrongdoing. This is
reminiscent of Aristotle's admonishment not to harm
others, very much like the golden rule of the
Christians: "Do unto others as you would have them do
unto you", which is echoed in Islam: "No one of you is
a believer until he desires for his brother that which
he desires for himself". Similarly, Buddhism expresses
it in terms of: "Hurt not others in ways that you
yourself would find hurtful". This spirit of
benevolence and non-aggression underlies the
fundamental need for social justice.
13. It is this concern for others and for
distributional equity that raises ultimately the
quality of life; hence, the challenge to the classical
orthodoxy of the supremacy of the private market place
and the tyranny of the rule of maximisation of private
profits. The more narrowly profit-oriented an
enterprise is, the more it would tend to resist looking
after the interests of others -- workers, consumers and
associates, as well as the environment. This is one
area in which sensible ethics can make a difference.
Indeed, visionary entrepreneurs and businessmen have
tended of late, to encourage this line of reasoning.
This is of critical importance if we are to have
distributive justice, so vital to the sustainability of
political stability.
14. Looking back to the origins of Western classical
liberalisation, it was Adam Smith's `Wealth of Nations'
that started the process to glorify the egoistic
pursuit of personal advantage. Accordingly, people
regarded businesses, big and small, and banks as
enterprises committed solely to the pursuit of material
gains. In more recent times, however, new social
theories have succeeded in establishing the good of all
players in the economic process as the final goal of
business activity. This shift in ethical values
towards greater sensitivity to post material needs, and
reflected in more ecological sensitivity and increased
responsibility for the poor and socially disadvantaged,
came at a time when the material aspects of life are
becoming more accessible. So much so that there
emerged a longing for a new ethic. And so, increasing
attention is being placed on those responsible for
corporate decisions and to the economic systems whose
main stakeholders are the entrepreneurs themselves.
Mind-sets are beginning to change in favour of social
justice.
15. It is recognised, of course, that ethical business
practices can only thrive within the economic systems
created by Government to protect the environment,
assure the soundness of the banking systems, control
the presence and the use of weapons for mass
destruction, and so on. These regulations are needed
to provide standard benchmarks to protect national
security and to ensure fair competition in the market
place. To make economic sense in this context,
corporate culture will need strong ethical content.
Enterprises, for example, should offer `environmental
audits'; and banks, greater transparency in disclosures
on best practices in corporate ethics, and even,
`distributive justice audits'. This implies that
businesses need to move beyond a short-term view of
their own potential, i.e. forgo some short-term profits
in exchange for longer-term ethical goals. In a
classical sense, ethical businesses today move to
optimise profits, as against maximising them, that is,
after adjusting for environmental and distributive
justice considerations. At the same time, this also
means that corporate governance provisions will become
more responsive not just to shareholder power, but also
consumer power and the interests of other stakeholders,
distributive and social. Strangely by being concerned
over the needs and interests of others, business will
actually do better because they will have a longer
life, earning and growing steadily and accumulating
greater wealth than those who maximise profits at the
expense of everything else.
16. Finally, it must be recognised that for business
ethics to make good economic sense, it has to be
integrated into the overall values of workers and
professional personnel: integrity, competence,
efficiency, selflessness and hard work, attributes
which Tun Ismail spent a lifetime promoting. In the
end, this means that businesses will say what they
think make good business ethics, do what they say, and
be what they do. This should encourage a whole new
level of social responsibility and accountability for
businesses and entrepreneurs as they look forward to
meet new challenges in the new millennium. We need
this to achieve the high quality of life which future
generations of Malaysians rightly deserve. We need
this if Vision 2020 is to be achieved and to last
beyond that.
Sumber : Pejabat Perdana Menteri
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