Oleh/By : DATO SERI DR MAHATHIR BIN MOHAMAD
Tempat/Venue : RENAISSANCE HOTEL, KUALA LUMPUR
Tarikh/Date : 07-03-2002
Tajuk/Title : ASIA ECONOMIC SUMMIT
Versi : ENGLISH
Penyampai : PM
FUTURE OF ASIA IN THE 21ST CENTURY:
REDEFINING AN EAST ASIA ECONOMIC GROUPING
I would like to thank the organiser for this
invitation to speak on a subject of such significance
to Asia, in particular East Asia in the future.
2. To predict the future we must study the past, at
least the recent past and of course the present
situation. Obviously the past and present will
influence the shape of things to come, the future.
3. The end of the Pacific War saw almost all the
countries of Asia and East Asia in particular in a
moribund state. China, Japan and Korea suffered most
from the Pacific War. The countries of Southeast Asia
reverted to colonial rule, having largely changed hands
from western colonial powers to Japanese colonial rule
and then back to the Western power. Under colonial
rule these countries were not free to develop and the
colonial powers confined these countries to the
production of primary commodities to be exported to
their countries, converted to manufactured products and
re-exported to them and to other countries. The war
destroyed even these commodity-producing economies.
4. Japan was devastated. Its industrial capacity was
destroyed and its trade negligible. China had to
fight a civil war while Korea was torn into two by the
Allied forces and the Communists.
5. Such was the confidence of the victors that the
defeated eastern countries would never recover that a
condition imposed on Japan was that it must not spend
more than one percent of its G.D.P. on its military
forces. The G.D.P. of Japan in 1945 was minute. But
today one percent of Japan's G.D.P. is higher than the
budget for arms of most of the developed countries.
6. We know today of how Japan rebuilt itself in
record time to become the second most powerful economy
in the world after the U.S. South Korea then followed
suit, appearing almost from nowhere to become a great
manufacturing and trading nation. The hermit country
is hermit no more.
7. The Southeast Asian countries adopted their own
way towards growth and development. Bereft of capital,
know-how, management and trading expertise, they
invited foreign investors to help change their
agricultural economy into a manufacturing and trading
economy. Making use of their low labour cost and the
skill of their workers they helped in making largely
Western enterprises to become competitive again, to
challenge the Japanese juggernaut. Not to be outdone,
the Japanese, the Korea and even the Taiwanese invested
in the Southeast Asian countries. And so these mainly
ex-colonial territories seemed set to give the
Europeans and the Americans a run for their money.
8. Such was the progress of the East Asian nations
that many industries of Europe and America had to close
down. Steel, shipbuilding, automotive industry, etc.
of the West folded up unable to compete with the high
quality low priced products of East Asia.
9. An unprecedented prosperity was experienced by
nearly all the East Asian countries. Indeed it seemed
a matter of time before East Asia would dominate the
economy of the world.
10. China remained insular at first and refused to
join in the Asian industrialisation programme. But
Deng Xiaoping dragged the country into the world of
competitive trade and within a few years China became
an industrial giant.
11. There was talk that the 21st century was going to
be the century of Asia. There seems no stopping Asia.
The millions of hard working skillful and highly
intelligent work force was set to churn out all the
manufactured goods of the world at a fraction of the
cost.
12. Japan had set the example. Whereas the West
believed in low volume and high margin of profits,
Japan opted for high volume, low margins and dominant
market share. As soon as the Japanese mastered the art
of making quality products their market share grew
until there was practically no room for the products of
the West.
13. When the Koreans, the Chinese and even the
Southeast Asians also adopted the Japanese strategy,
the signs on the walls for Western countries became
ominous. Perhaps there was no concerted action to stop
the Eastern juggernauts. But whether there is or not,
the fact remains that certain actions were taken to
curb the Eastern challenge.
14. When South Korea looked like becoming a second
Japan, a new term was coined to describe its economic
performance. It was called a Newly Industrialising
Country. It was a flattering acknowledgement of its
success but Korea soon learnt that as a NIC, it must
face restriction to its trade. It was accused of all
kinds of malpractices and it was subjected to
countervailing acts.
15. Japan had been accused of public/private sector
collaboration, termed Japan Incorporated by its western
competitors. This was regarded as unfair. But it was
too late to act against Japan. Now Korea adopted
nearly the same approach. Through strong support for
certain corporations Korea was able to build up huge
conglomerates known as `chaebols', the Korean
equivalent of the Japanese Zaibatsu. These corporations
were hugely successful and their products were able to
compete in the international markets.
16. A press campaign against the chaebols was mounted
and certain countries openly condemned the `chaebols'
as cronyism. The nature of the Korean political system
came under attack, as were its strategies for
development. Political and labour unrest were
encouraged.
17. Independence was once sacred. After all many
countries fought to free themselves from the colonial
yoke in order to rule their own countries themselves.
For a time their independence was respected. But soon
these countries were accused of all kinds of
misdemeanors and abuses. There is some substance in
this accusation but if anything is to be done it is the
international community that should do it. Instead
certain countries which were in the past guilty of
exploitation of the former colonies had taken upon
themselves to act against the allegedly guilty
countries. In particular the focus was on labour
practices and human rights.
18. Despite the harassments, the countries of East
Asia continued to grow and to compete successfully with
the old industrial countries. Although it was said to
be unintentional, the downfall of the East-Asian
countries was finally achieved by devaluing their
currencies and insisting on adoption of certain
prescribed business practices. Public/private sector
cooperation was made out to be almost criminal and
government officers found helping the private sector
were actually charged with corruption for doing what
they had been doing always in the past.
19. Between the currency devaluation and the so-called
campaign for good corporate governance, the recovery of
the East Asian economy was effectively hampered.
Admittedly, corporate governance should be more
transparent but the suddenness of the imposition of
stringent rules and regulations governing business
practices have made recovery of the corporations
difficult. Indeed many of East Asian corporations were
unable to recover and had to be sold off to foreigners.
20. Today one hardly remembers the halcyon days when
the East Asian countries looked set to conquer the
world. All of them are in distress and some apparently
cannot recover, try as they might. Why is it that
these countries which had so successfully risen from
the ashes of World War II, are now so incapable of
repeating their past performance, repeating the magic
that propelled their devastated economies to become
economic tigers and dragons, admired for the miracles
they performed.
21. The answer lies in their loss of self-respect and
self-confidence. Almost without exception they believe
that they were guilty of unacceptable practices when
they rebuilt their economies after the devastation of
war or the dead weight of colonial rule. They believe
that to gain respect they must do everything the way
the western countries are supposed to do. Even when
they discover that in fact their detractors were
actually far from practising what they preach, they
cannot bring themselves to do their own thing. They
struggle on to reform the way they are told they
should. They accept the remedy prescribed without
questioning whether it is suitable for them or not.
22. On the surface of it, the reforms prescribed are
good. But as always there is no one prescription for
all illnesses. The countries of East Asia are
culturally very different from each other and so are
their business practices. It is not necessary that
reforms should take only one form. There should be
other ways, which can make business and economic
management acceptable and yet not be so disruptive.
23. One thing is certain. Sudden changes in the way
of doing anything are disruptive. No matter how good
is the reform, instant adoption will disrupt and damage
rather than yield the expected results. We should
therefore always be circumspect when adopting new ways
of doing things.
24. The difference between what we have been doing in
the past and what we are told to do now is centred on
the concept of free market. The idea that a free
market is good has become not only an obsession but has
been made sacred. No one must question the rightness
and the goodness of the free market.
25. The free market we are told is the ideal way to
determine what is right and what is wrong, to regulate
itself accordingly and to ensure that only the best
will serve human society. The free market will
determine who should drop out and who should go on to
succeed. The free market will ensure the survival of
the best. The free market will discipline itself and
it will discipline the governments.
26. The most important factor which ensures that the
free market delivers the best is free competition. The
winner will survive and the loser will be eliminated.
For competition to yield this result the playing field
must be level, i.e. the rules of the game must be
applied to all, big and small, established or new.
With the field level the competition would yield the
best result.
27. But is this really true? If a level playing field
is all that is needed, then why is there a rush to
become the biggest and the most powerful competitor in
the field? Why do we see mergers and acquisition and
more mergers and acquisition until the players become
enormous and dominating the field? Obviously it is
because in a level playing field the size of the
contestants counts, counts so much that competition
will actually be prevented.
28. We are familiar with the Japanese and Korean
conglomerates. They are big and present a formidable
force against competitors. But they are big not
through acquisition or merger. They are big because
they decide to expand in related directions through
setting up their own subsidiaries. All of them expand
in practically the same direction and they and these
subsidiaries compete with each other and with the rest
of the world. They are not monopolies. They are big
but not overwhelmingly dominant.
29. But today, mergers and acquisition are leading to
a situation, if not of monopoly, certainly oligopoly.
The weak has been eliminated and no new player can come
in. It would be suicidal for any new player to enter
the automotive industry for example. In turn, the
number of corporations in one industry is going to be
so reduced that a practical monopoly will emerge. Will
this be good for the world, for business, for the
economy of countries, especially the weak countries?
30. Competition is good but in actual fact we are
working towards the elimination of competition. It is
doubtful that the need to do better will influence
companies when they have become too powerful or they
monopolise.
31. The free market demand that there be deregulation.
The airline industry was doing quite well and serving
the public satisfactorily until the industry was
deregulated. Any airline can fly anywhere with any
standard of service. It was believed that service
would improve because of strong competition.
32. The only thing that happens was a lowering of
standard in the service provided and even in the
maintenance of aircrafts. Several crashes were
attributed to low maintenance standard. And many good
airlines went bankrupt, losing huge sums of money and
creating social problems. Even before Sept. 11,
practically all the airlines were losing money due to
cutthroat competition. Is it really true that
deregulation will bring about better service for more
people?
33. There should be competition of course. But the
private sector cannot be really responsible. When
failure is imminent the corners will be cut and good
practices will go out of the window. I need not
mention the examples.
34. Today, business is not about making real profit or
accumulating assets but is about creating market
perception of the value of companies. Share price is
all-important. It need not reflect the profitability
or real worth of the company. If there are buyers for
the shares then the demand will push the price up and
vice versa. If the money invested will not yield any
worthwhile profit it does not matter as long as the
shares can be disposed at a higher price and capital
gains made.
35. Thus the dot com companies had their share prices
so inflated that there is no way for the profits of the
company to compensate for the investment. When
suddenly the lack of viability of some of these
companies became evident, the shares were dumped and
panic followed. Billions of dollars were lost and
contributed towards recession in even the most powerful
economies.
36. We see also how share prices can be manipulated
through short selling. There is nothing sacred about
short selling that it cannot be banned or regulated.
37. Now we have globalisation. But it is interpreted
to mean only the unrestricted flow of capital.
Obviously it can only benefit those with capital most.
It is fine when the flow is inwards. But we have seen
how sudden outflows can destroy the economies of
countries and even regions.
38. Of course globalisation also leads to the
manipulation of the currencies of nations. Perfectly
good economies went into a tailspin because their
currencies were deliberately devalued by selling non-
existent currency holdings.
39. Prior to the ascendancy of the free market,
deregulation and the retreat of governments, the
economy of the world was doing rather well. We have
noted how countries devastated by war had recovered and
gone on to unprecedented prosperity.
40. The world was experiencing unprecedented economic
growth, world trade increasing and many countries were
prosperous. Admittedly the advances in technology, in
particular the speed of jet travel and information
technology brought with them new and widened
opportunities. But opportunities for whom? And must
the opportunities be translated only in terms of
capital flows? Cannot there be other ways of
exploiting the new technologies, ways that can benefit
most of the people in this world instead of just those
with capital?
41. The EAEC was proposed not as a regional economic
bloc but as a consultative group involving the East
Asian nations. The idea was to critically study common
problems and the new ideas coming out of the West. No
one has a monopoly of wisdom. The East Asian Nations
have as much capacity as anyone else to examine and
formulate new ideas to modify or to reject what is
presented before it.
42. We could have avoided the disastrous financial
crisis of 1997-8 if we had dared to oppose currency
trading and manipulation. It is one of those totally
unproductive business activities. Malaysia alone lost
almost 300 billion USD for a profit of at most 5
billion made by the currency traders. It is a case of
wealth distribution on an enormous scale merely for the
currency traders to make a few billion for themselves.
The social cost is even worse.
43. The EAEG, if it is prepared to be critical and to
initiate an East Asian solution to regional and world
economic problems can contribute much to the regions and
the worlds economic recovery. The East Asian countries
have sufficient clout and have shown a capacity to
contribute much towards the wisdom of the human race. It
would be a pity if the voice of East Asia is stifled or so
distrusted that the countries of the region may not speak
to each other without the presence of people outside the
region.
Sumber : Pejabat Perdana Menteri
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