Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	THE NIRWANA BALLROOM, HILTON HOTEL, 
			KUALA LUMPUR 
Tarikh/Date 	: 	15/03/82 
Tajuk/Title  	: 	THE SECOND INTERNATIONAL SYMPOSIUM 
			ON THE MOBILISATION OF PERSONAL 
			SAVINGS IN DEVELOPING COUNTRIES 




Dr. Helmut Geiger, President, International Savings Banks Institute; His
Excellency Mr. David Wirmark, Ambassador of Sweden to Tanzania and Advisor
to the Swedish Savings Banks Association; Dato' Seri Syed Nahar
Shahabudin, Chairman, National Savings Bank of Malaysia; Distinguished
Delegates; Ladies and Gentlemen.

I am very pleased to welcome all of you to Malaysia.

It is not often that we have in Kuala Lumpur such a large and
distinguished gathering of experts in the field of savings. I am
particularly proud that our National Savings Bank, a relatively new member
of the International Savings Banks Institute, has been accorded the honour
to co-organise this important international symposium which, I am told, is
the second of a series of three meetings to review research undertaken in
the area of personal savings in developing countries, with the objective
of seeking ways to promote the mobilisation of savings for national and
international development.

2. I cannot emphasise too strongly the significance of this symposium,
which forms part and parcel of a global programme to intensify efforts in
the developing countries to mobilise savings and to accelerate their
economic development. Indeed, our ability to raise adequate domestic
savings to finance our development efforts is a necessary precondition, if
we are to succeed in re-structuring our economies to cope with the rapid
transformation that is taking place in the world economy today.

3. As I see it, the attainment of the common objective to raise living
standards by the developing countries can no longer depend on the "North",
that is the highly developed industrial nations. The 1980s began with a
predicament for the developing countries like Malaysia which have to face
an increasingly hostile international environment of increasing
protectionism and frequently negative growth in the major industrial
economies and consequently poor demand for our primary commodities. On the
other hand rapid inflation in the developed countries has resulted in
steep price increases of the capital goods needed by the developing
nations. There are few signs that meaningful structural adjustments are
being made in the major industrial countries to overcome the effects of
stagflation of the 1970s that they have transmitted to the rest of the
world. If they refuse to adjust, the impact on the rest of us will be very
severe. It has been projected that the non-OPEC developing countries will
probably be able to increase their average GNP growth by only 4 per cent
per annum, or even less, in the 1980s, as against 6 per cent and 5 per
cent per annum in the 1960s and 1970s respectively. Such a slowdown will
occur amidst significantly dampened prospects for expansion in
international trade and of official development assistance to the
developing countries, thereby creating real difficulties. For most
developing countries, particularly the least developed, balance of
payments problem will be intolerable.

4. Even for the handful of developing countries which have access to
international commercial borrowing to supplement their needs, the
prospects have become poorer. The international banks are becoming
increasingly more reluctant to enlarge their exposure, especially in the
light of recent developments in Eastern Europe. This tendency should not
be surprising once we bear in mind that the world's major capital markets
are situated in the industrial nations and we borrow at their pleasure
even though, ironically, much of the funds which they mobilise to on-lend
are the reserves of the third world, especially those of the oil-exporting
countries. Moreover, the high borrowing rates as well as their already
large outstanding debt will discourage potential developing countries from
increasing significantly their borrowing from private sources in order to
avoid serious debt servicing problems.

5. All these point to the need for us in the developing world to help
ourselves. The continuing uncertainties surrounding the changing
international environment necessitate urgent re-thinking on the future of
domestic economic management. Central to this process must be the
promotion of a higher rate of domestic savings to finance greater
investment outlays in order to stimulate growth and undertake the
necessary underlying structural transformation. Past experience has shown
that inflows of long-term foreign capital, while important in helping to
finance the required imports of capital goods and in attracting foreign
know-how and technology, cannot be relied upon to finance significantly
the investment and development process in our countries. Indeed, they are
not a reliable source of funds; often, they are not forthcoming when you
need them most. The 1981 World Development Report of the World Bank states
that foreign capital financed less than one-seventh of the total
investment in the non-OPEC developing countries in 1975-78. The limited
role of foreign investment should drive home the point. It brings to the
forefront a fact of life, that despite the talk and widespread publicity
on foreign assistance, be they official development aid or foreign direct
investment, we have all along been depending on ourselves. In a sense, we
have within our control, the nucleus of both the means and the capacity to
guide the destiny of our economies in the new world environment. We shall
need to build on this foundation in partnership with foreign private
expertise and technology, whenever necessary, in order to meet national
aspirations. We have always been helping ourselves; the only difference
now is for us to co-operate among ourselves more, while at the same time,
be more self-reliant.

Ladies and Gentlemen.

6. In the mobilisation of domestic savings, household savings are of
particular significance. I am reminded that among the three income-earning
sectors of a national economy, namely, the government, the corporate and
the household sectors, it is usually the individual households which have
surplus savings. Governments, regardless of whether they are of the
developing countries or the developed countries, are characteristically
net spenders. By the same token, normally, no well-managed companies have
funds in excess of their own needs. Therefore, the growth of the
government and corporate sectors are dependent critically on the amount of
savings that can be mobilised from the household sector, and to a lesser
extent, from abroad and how they are rechannelled through the financial
system for their use. In developing countries which have yet to develop
fully their financial system and where a sizable part of the population is
less sophisticated in the ways of handling money, personal savings are not
mobilised as effectively for productive investment. It is your task here
to come forward with new ideas on how best to foster the development of
the savings habit and the manner in which the process of personal savings
mobilisation can be accelerated and made more effective.

7. Appropriately, the central theme of your discussion should not be
confined only to the mobilisation of personal savings, but also on how
such an increased flow of savings can be channelled effectively to those
who do not normally have ready access to credit, such as the small-scale
agricultural, industrial and handicraft enterprises. Admittedly, an
equitable allocation of credit is a difficult one, particularly since the
small man does not usually have adequate collateral to be "bankable" in
the traditional sense. Even in a country like Malaysia, where a reasonably
good financial intermediation network exists, it has become necessary for
the Government and the Central Bank to intervene, in partnership with
private enterprise, to ensure that small-scale enterprises and the
financially disadvantaged do have access to their due share of the credit
which they would not otherwise have in a completely free market
system. From the view-point of development policy, their development is
vital because in the final analysis, it is the small agricultural and
non-farm enterprises as well as the poorer segment of our population that
need to be strengthened, in order to generate the higher productivity that
is so very essential for the upliftment of their living standards. It has
become clear that potential productive investment cannot be fostered by
relying on the "informal or black" market, where extortionate interest
rates are imposed on the most desperate. The mobilisation of savings and
the channelling of these funds to the small enterprises must form an
integral part of any development programme. The function of any sound
financial system should not only be to intermediate between the savers and
the investors, but also to ensure that the less advantaged groups have
access to adequate credit at reasonable cost. Not unlike everybody else,
financial institutions thrive on growth.

Ladies and Gentlemen.

8. Before I conclude, I would like to touch on a matter which is of
concern to all of us. Certainly, it is of special interest to us in
Malaysia. Since most developing countries are dependent heavily on the
growth of exports, the efficiency and equitability of the international
trading and financial system is vital. When we look closely at
international economic relations and the world trading system today, many
inequities exist. In particular, while there is no way by which we as
consumers can influence the price levels of our imports of capital and
manufactured goods the prices of our primary commodities are set by
conveniently labelled "supply and demand forces" located in the industrial
countries. Historically, the marketing and pricing of our commodities are
entrusted to a select few of the self-styled "market makers". Large
consumers also influence the price levels so as to remain in their
favour. When for one reason or another the market manipulators face a
loss, they have no compunction in changing the rules. Some even consider
the holding of large stocks for the purpose of depressing prices as a part
of the free market system. But the moment others dump products in their
market there is a loud protest and all kinds of tariff and non-tariff
barriers are raised.

9. History, particularly recent history, has shown that it is not only
efficiency and the ability to produce cheaply that counts. To get a fair
deal some involvement in the market place for the purpose of ensuring
fair-play is also necessary. The developing countries must seek ways and
means of gaining entree into the market place. They should do so not
individually but in cooperation with each other.

10. My purpose in going beyond the savings field is not to divert from the
subject of your symposium. Rather, it is to remind ourselves of the
broader perspective, which ultimately has such an important bearing on the
growth of domestic incomes and savings in our countries. The developing
countries will need to learn to co-operate more among ourselves in all
fields so that we may create for ourselves in time, new international
arrangements in trade, finance and investment that will work directly for
our benefit and not be exploited by traditional methods and markets, which
we have learnt through bitter experience work ultimately to our detriment.

Ladies and Gentlemen.

10. I have said a lot that may or may not be relevant to your
discussion. I do so because there is a need for experts like you to know
not just the technical aspects of the problem of savings but the
background against which you are working.

11. I hope the background will be useful. The third world or the south or
the developing countries or whatever else you may call them are trying to
find ways and means to help themselves. Savings is certainly one of the
ways. We therefore look forward to the results of your deliberations s.

We are sure that they will come in useful.

12. Now I have great pleasure in declaring open the Second International
Symposium on the Mobilisation of Personal Savings in Developing countries,
and I wish you every success.