Oleh/By  	:	DATO SERI DR MAHATHIR BIN MOHAMAD
Tempat/Venue	:	NEW YORK, USA
Tarikh/Date	:	03-02-2002
Tajuk/Title 	:	ENSURING CAPITAL FLOWS IN A 
			RISK AVERSE ENVIRONMENT
Versi 		:	ENGLISH
Penyampai	:  	PM 
		    

  1.    There  is a belief that capital likes  risks  and
   that  it  thrives  only in situations  of  uncertainty.
   Therefore  when  the  risks are  partially  or  totally
   removed,  then capital would stay away,  would  not  be
   invested.
   
   2.     Thus when Malaysia removed the risks of exchange
   rate  fluctuations  there were  dire  predictions  that
   capital  would not only avoid Malaysia but would  leave
   the country.
   
   3.    As  you  know  nothing of that sort  happened  in
   Malaysia when we fixed the exchange rate of the Ringgit
   and  prevented  excessive  manipulation  of  the  stock
   market by big foreign investors.
   
   4.    Business including exports picked up quickly  and
   the  KL  Composite Index rose from 262 to  nearly  900,
   reducing   non-performing  loans,   increasing   market
   capitalisation and relieving the pressure on  Malaysian
   businesses.   Of course there is no more  cost  due  to
   hedging  against  currency  fluctuation,  nor  did  the
   fluctuation affect budgeted performance.
   
   5.    Speculators  and manipulators  do  not  like  the
   absence  of  uncertainty  but serious  businessmen  and
   serious  investors love it.  There is still some  risks
   involved because while the rate against the U.S. dollar
   may be fixed, rates against other currencies cannot  be
   fixed simultaneously.
   
   6.   Capital flow in and out of the share market cannot
   be  controlled  indefinitely.    When  foreigners  were
   allowed  to  take out their investments  in  the  share
   market,  capital did not suddenly flow out.  After  all
   the  restriction  on taking out capital  after  dumping
   shares had resulted in almost 200% capital appreciation
   during  the  one  year restriction was  enforced.   The
   investors  so  enjoyed the gains they  made  that  even
   after  restrictions were lifted they did not sell their
   shares.  Perhaps they expected the shares to appreciate
   further.   Today  the KLCI is well above  the  disaster
   levels of the currency crisis.
   
   7.    Capital flows help the economy of a country  only
   when  the  flows are inwards.  When capital is suddenly
   pulled  out  for  whatever  reason,  the  effect  on  a
   country's   economy  can  be  disastrous.    Admittedly
   capital  will not flow in if it cannot get  free  exit.
   But  speculative or manipulated capital  flows  benefit
   only the capitalists.  Countries do not exist solely to
   enrich investors.  The Governments of countries have  a
   duty  to their citizens, their workers and their  local
   businesses.   There is a peculiar assumption  that  the
   world  must  be  made  the cash cow  of  the  investors
   exclusively,  whatever the cost.   This  is  what  free
   trade and globalisation seems to be about.  There is no
   reason  why  the  countries and the people  who  suffer
   should subscribe to this assumption.
   
   8.    Capital  still  flows in Malaysia's  risk  averse
   environment,  i.e. serious capital intent  upon  making
   long-term  investments for the production of goods  and
   services.  The flow may be smaller but it is much  less
   disruptive.   The economy benefits steadily  from  this
   serious  flow  even when it flows out.   There  are  no
   sudden  twists  and  turns, no distortions.   Dull  and
   unexciting  perhaps, but good for developing  countries
   especially.
   
   9.    Government  intervention is a necessary  part  of
   business, even in a free trade environment.  Why is big
   international  business pressuring their government  to
   force through globalisation?  If government should  not
   intervene  then  the  free  traders  should  go   about
   establishing globalisation purely by their own efforts.
   But  they demand international agreements, a rule-based
   trading  system,  and government enforcement  of  these
   treaties  and  laws.  Globalisation  actually  involves
   more  government  intervention in business  than  less,
   i.e. the powerful governments.
   
   10.   Of  course when disaster strikes them  and  their
   countries  they  demand that the government  interfere,
   bail  them out.  If they say that business does  better
   in  an environment of risk, then they should accept all
   risks.  We were told that we should accept risks,  they
   are  good  for  us.   But we see  that  when  the  risk
   translates  into  business disaster, the  advocates  of
   risk  taking are quick to ask government to  bail  them
   out.
   
   11.   Malaysia finds no difficulty in managing  capital
   flows   of  the  serious  kind  in  our  risk   minimal
   environment.  Malaysia's economy has suffered from  the
   economic  downturn in the U.S. simply because the  U.S.
   is  our biggest trading partner.  Of course after  11th
   Sept.  things got worse but Malaysia has suffered  less
   than  other  countries exposed to financial and  market
   risks.   We will survive and when the world learns  how
   to  manage terrorists, we expect to recover faster than
   others, God willing.
   
   12.  In the meantime we are injecting government funds,
   stimulating  local  investments  and  facilitating  the
   growth  of  those  areas which  are  still  capable  of
   growing.  We have been extremely careful about managing
   our  finances and we have minimal need to  borrow  from
   abroad.  Having a saving rate of 40% of the GDP  helps.
   We  think  managing  capital flows  in  a  risk  averse
   environment is entirely possible and easier than  in  a
   chaotic risky environment.

   Sumber : Pejabat Perdana Menteri