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Oleh/By : DATO SERI DR MAHATHIR BIN MOHAMAD
Tempat/Venue : THE GRAND BALLROOM,
PUTRAJAYA MARIOTT HOTEL
Tarikh/Date : 06/10/2002
Tajuk/Title : THE WORLD ECONOMIC FORUM-
EAST ASIA ECONOMIC SUMMIT 2002
Versi : ENGLISH
Penyampai : PM
"Renewing Asia's Foundations of Growth :
Building on Diversity"
It is both a pleasure and an honour for me to be
with you this evening for this gathering of
distinguished delegates, speakers and captains of
industry who have come from Asia and also from across
the globe. I would like to thank the organisers for
this opportunity to speak to this distinguished
gathering.
2. World War II and the Pacific War were economically
speaking disastrous for everyone. At the end both the
victors and vanquished were devastated and
impoverished, although for the victors the damage was
slightly less.
3. Mindful of the negative results of punishing the
defeated by forcing them to pay reparations, the
victorious U.S. and its allies set out to resuscitate
the world's economy including those of their late
enemies. While those who were allied to the victors
were positively helped through the Marshall Plan, the
principal enemies were indirectly helped to recover and
to rebuild. Japan in particular gained tremendously
from the lessons they got from the former American
enemies on the need and the benefits of quality in
their goods.
4. Whether it was because of the necessity to ensure
the former enemies did not join the Communist bloc or
it was due to the understanding of strategy or just
pure good naturedness, the fact is that the victors
allowed and even helped the defeated enemies to
recover. And recover they did.
5. The world was to be reshaped and governed by
international law with the United Nations providing a
forum for one and all to play a role in creating a just
and peaceful world. While the Soviet Union was
reassured through its power of veto, it was also to be
curbed by the veto power of the four other big powers.
The United States would be the nation to oversee that
justice and fair play was enjoyed by all.
6. Trade needed a proper International Financial
System. At Bretton Woods the international community
decided on pegging currencies to gold so as to ensure
the values of currencies are properly backed.
7. It was a caring world anxious to rebuild a new
world from the ashes of war. Colonies were freed one
by one and allowed to rule themselves any way they
like.
8. It was in this atmosphere that the countries of
the world recovered, became prosperous mainly through
the production of goods and services and commodities
traded across the world and within each country. The
countries were left very much to themselves to work out
the political and economic systems which they believed
would help them to recover and prosper.
9. There were failures of course but by and large the
countries of the world were able to rebuild themselves
and to grow economically. World trade grew. The old
manufacturing giants regained strength and grew, while
new giants appeared on the scene, notably in Germany
and Japan.
10. The Japanese in particular adopted a strategy of
increasing market share through low margins. They
succeeded in penetrating and even dominating world
markets in some businesses and products. But the
Western countries were not too badly hurt for they with
their inventiveness and ingenuity were also recovering
and prospering.
11. The poor in the poor countries also benefited as
the low prices of Japanese products enabled them to
afford household appliances, small cars and trucks.
12. Seeing the Japanese doing so well the countries of
East Asia also made their bid. They too went for
export driven growth, producing quality goods at low
prices and generally reducing the cost of living not
only in the poor countries but in the rich countries as
well.
13. By the 1960s, the whole world seemed set to
prosper. The outlook seemed even better when the
Communist system collapsed and the Cold War ended. Now
everyone could focus on economic growth without being
bothered by ideologies and blocs.
14. But unfortunately it seems that some among the
victorious capitalists saw little need to curb their
avarice any more. They felt that the world no longer
has the option to defect to the other side. There was
no more other side. The winning side was free to
exploit the world without restraint.
15. Making money through the production of goods and
services and trading in them was rather slow. This way
would take many years, the profits rather small, and
off and on there would be failures and losses. Surely
there were other ways of making money quickly. Greed
was not a bad thing. Indeed at least one of them
believed that greed was great and gave lectures on the
greatness of greed.
16. And so in the 1970s, pressure was applied on
countries to go off the Gold Standard and the fixed
exchange rate. Henceforth the market i.e. the currency
traders would determine the rate of exchange of
currencies. It was not too bad at first. The
fluctuation was not too wide and businesses could live
with them. A new business developed to help business
deal with the uncertainties of the exchange rate. For
a fee, the businesses could hedge. It increased the
cost of doing business but the market could take it.
The hedge funds made money on their currency insurance
business.
17. Meanwhile the production of goods and services
continued. Some failed. And along came the early
saviors of failed businesses. They simply bought the
businesses, stripped them of their assets and left the
minority shareholders gasping. The asset strippers
made a fortune before the authorities stepped in.
18. Then came the junk bond peddlars. Failed or never-
do-well companies had their shares bought and the
prices pushed up. Some great names appeared on the
scene, dealing in junk bonds and ripping huge profits.
Again the authorities stepped in and some notable
traders ended in the chill.
19. But the itch to make quick profits gave birth to
new ideas. Short-selling shares was one of them. It
was speculation at first but when it became
manipulation some countries disallowed short selling.
Even ordinary share trading was regulated to prevent
insider trading and the collapse of stock markets or of
companies.
20. By then the interest had moved almost completely
away from the performance of business, i.e. the
profits, the assets and the potentials. The only thing
that mattered was share appreciation or capital gains.
The companies can be quite useless but it is possible
even for failed businesses to have their shares pushed
up and capital gains made. Then the shares would be
dumped and the funds moved elsewhere.
21. I need not go into how the funds pushed up share
prices or depressed them, or how CEOs with share
options helped them. I am not a businessman. I don't
play the market. But the fact is that the market Index
has become more important than the Company Annual
Report including the accounts. The Stock Market Index
determines whether the people in the world feel good or
not, whether they buy things or they don't, they take a
holiday or not. The production and sale of goods and
services had become irrelevant. The main business of
the world is the selling and buying of shares.
22. There was a time when traders tried to monopolise
the trade in commodities. It made money for some but
it was costly and it was dangerous. The quantities to
be cornered was too big. This game did not progress
very far.
23. Then someone thought of the idea of cornering the
currency market. It was costly but hedge funds had
made arrangements to have huge sums at their disposal
and even more that they could leverage from the
friendly banks. And so began the rampage of the
currency traders. Any country was fair game, but most
of all the newly emerging economies, rich enough to be
fleeced but not powerful enough to fight back.
24. I need not bore you with what they did and how
they precipitated the Asian Financial Crisis which
became in effect the world financial crisis. Countries
which were doing well, suddenly became poor,
destabilised and intractably problematic. Some barely
managed to survive and recover but some went through
repeated crises, sinking more and more deeply each
time. Perfectly good countries with enormous resources
can be truly and really bankrupted.
25. All the while these countries were condemned for
their incompetence, their corruption, their cronyism
etc. The currency traders who sold down the currencies
of these countries were never blamed. Indeed they
became great philantrophists. No one bothered to look
at the damage they caused, the poverty, the starvation
and deaths they left in their wake while making their
money. Robin Hood stole from the rich to give to the
poor. These hoods stole from the poor and gave a
minute portion of the ill-gotten gains in order to be
known as philantrophists.
26. Look at the world today. It is not the
prosperous, growing world of the post-war years,
especially of the sixties to the eighties. It is a
world of economic malaise. Even before September 11,
the downturn was already evident. The dot com
companies precipitated this. One could say that it is
part of the usual economic cycle. Is it really true
that the boom and bust cycle is inevitable? Isn't it
possible that the world's economy is being mismanaged?
27. The fact is that we are not doing business
anymore, real business that is. We are not producing
goods and providing services. Yes, we are still
inventing and developing and marketing new products and
also improved version of the old products. But such
business activities have become secondary.
28. What the world is interested in today is quick
money, money that comes from speculation and
manipulation; overnight money. The greedy have taken
over the economy of the world. They can only see quick
profits for themselves regardless of what happens to
national and international economies, regardless of the
pain and suffering of people, regardless of the turmoil
and collapse of nations.
29. For the greedy speculators what matters is
immediate returns, huge profits. Selling goods take
too long. But selling shares and selling currencies
promise huge instant profits. Overnight a billion can
be made through the various forms of short selling. No
real money is needed. No real transactions need to be
made. The deals are made on the computer. They
involve mere figures of fictitious commodities i.e.
shares and currency that they claim they have for sale.
The buyers buy the figures on the screen. Huge amounts
change hands. Suddenly, in an instant in fact, someone
becomes hugely rich, making millions and even billions
for themselves largely, and also for their greedy
clients. What happens to ordinary investors in the
companies matters not at all. They can become suddenly
rich or they may become impoverished and bankrupt. The
companies and even the countries can become bankrupt.
That is their fault. They are not open enough; they
are guilty of corruption, of crony capitalism etc.
Their Governments are to be blamed for not letting the
market to manage their economy and their wealth.
30. No new companies are being started in order to
produce goods and supply services. Companies are
simply taken over, through mergers and acquisitions.
Huge sums are paid. Where does the money come from?
There are banks of course but there are clever ways of
doing this without resorting to bank loans or money
even.
31. And so overnight huge new corporations appear on
the world scene. They are powerful, extremely
powerful. Their strategy is simple. Become so big
that no one else can compete. The small must either
allow themselves to be swallowed or suffer failure
very quickly.
32. The big corporations are great. They are supposed
to be more efficient, to bring costs down and quality
up. But are they? We see a number of them cheating.
They cook their books, and the auditors help them with
attractive figures. And of course they pay their cooks
well, giving them huge salaries with private jets and
yachts, and share options.
33. Sometimes, and sometimes only the cooking is
discovered. Then their cronies in the government who
may also have invested in them would bail them out.
When this cannot be done, the law seems to be applied.
But the law is an ass and asses do not move fast. And
so many continue to enjoy the good life. The rest of
the world can suffer. The rest of the world can
decline economically, experience turmoil and the
collapse of whole governments and an increase in
poverty even among the well-endowed.
34. I know this sounds like the ranting of a
frustrated politician whose knowledge of finance can be
written on the back of a postage stamp. But I would
challenge anyone to say that it is real business, the
business of making and selling things that has brought
the world's economy into this dire state. I may be
wrong in places but I am not completely wrong.
35. If the Asian economy is to be revived, Asians must
look beyond their continent. They must help bring
about a return to sanity. They must do so by ganging
up against the greedy who are already shaping the
world's economy and finance through the World Trade
Organisation.
36. We need to relook very closely at the
interpretation of globalisation, the proposed regime
for World Trade and Finance. What is being cooked up
is a recipe for the exploitation of the world by the
few and the greedy. They will destroy the world for a
few billion dollars in their pockets.
37. We should resuscitate real business, the business
of producing things, of providing service. Money
should be invested in this and not in buying and
selling shares alone or in speculation and manipulation
of currencies.
38. The IT business held great promise. The Dot. Com
companies accordingly sprouted like mushrooms.
Unfortunately there was more stress on selling off the
business to gullible investors at phenomenal prices.
There were some potentials in the business of the dot.
coms but only if the value was commensurate with the
potential products. But no one cared for the true
value of the products. Through deliberate and
intemperate hypes the companies were sold in the market
at fantastic prices. Then when real business was
tried, the returns did not justify the prices paid for
the companies.
39. Once that was realised, panic did the rest. All
the dot. com companies collapsed, leaving the gullible
investors high and dry. Again the dot. com business
was not business. It was share value all over again,
totally unrelated to assets value or potential profits.
Now people are wiser. Setting up dot. coms is no
longer as attractive as it was before. It is hoped
that they will now do real business.
40. The world is changing. There can be no doubt that
jet speed and instant sound and image communication
require changes in the perception of things and in the
way business is done. The question is are we doing the
right things in the changed world that we are living
in. We don't seem to be handling things well. Some of
us are convinced that we are but the results so far
have been dismal. The healthy world economy of the 60s-
80s have all but disappeared to be replaced by ill-
health that is intractable. And we are still unable to
reverse the trend.
41. Even in the handling of modern terrorism we are
not doing well. Today a year after Sept. 11 2001, the
situation is really worse than immediately after. Not
only do people fear flying and traveling, but traveling
is being made deliberately more difficult by security
checks. The cost of doing this is draining even the
richest treasuries. And invariably this fear and the
subsequent reactions are affecting economies, making
the already regressing world economy to shrink further.
42. We don't seem to be doing the right things. If I
may say so the world has lost its way. The Malays, not
the greatest business people in the world, have a
saying, "when you lose your way go back to where you
started." Others call this going back to square one,
back to the drawing board.
43. We need to go back to the status quo ante, to the
good years of the world's growth, to the 60s, 70s and
80s. We must not be afraid to admit that we have gone
wrong and go back to doing real business. Stop the
quick profits of assets stripping, of short selling, of
speculation and manipulation of currencies, of
monopolising world business, of the efficacy of size.
If we cannot stop them completely, regulate them.
44. Forget the idea that markets should self-regulate,
should discipline governments. Governments have not
become anachronistic. They are still relevant. They
have a good incentive to do the right thing by
everyone, including the very poor, simply because
democratic or authoritarian they know they will be
thrown out if they don't care for the people's welfare.
The market is about making profits, not about caring
for the people and the country, not even about
business.
45. Do business, real business. Stop the gambling on
the share market and the currency market. Use the
stock exchange as a place for raising capital, not
making quick profits. Stop preaching to others. Stop
examining the shoes of hundreds of millions for the
hundred or so terrorists but look instead for the
causes which move people, normal family people, to
blast themselves to smithereens, and eliminate the
causes.
46. Asians must lend a hand. Asians must make their
voices heard in the fight to return to sanity. Not
everything that comes out of the West is ideal and God-
given truth. How many times have their ideologies and
their systems failed? How many times have they
rejected their own ideologies and formulas in order to
replace them with yet another perfect and infallible
formulas? The replacements will fail again. The
present theory and interpretation of globalisation
will, in time, go the way of all the ideologies and
systems which they now discredit.
47. Asians must formulate their own solution to suit
their particular situations. Asians must be pragmatic;
willing to ignore ideological principles in favour of
results. The Asian civilisation has survived longer
than other civilisations. We must be brave enough to
go our own way. If they follow, fine. If not that is
fine too.
48. I have been asked to talk about "Renewing Asia's
Foundations of growth: Building on Diversity". I
think I have done just that, I hope and pray that you
will think so too.
Sumber : Pejabat Perdana Menteri
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