Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	:  
Tarikh/Date 	: 	07/05/84 
Tajuk/Title  	: 	ECONOMIC SYMPOSIUM, SPONSORED BY 
			THE AUSTRALIAN FINANCIAL REVIEW AND 
			THE NIHON KEIZAI SHIMBUN 




 It is a pleasure to be here this morning to address this Economic
Symposium, sponsored by the Australian Financial Review and the Nihon
Keizai Shimbun in association sense of the possible. It is always a
delight for me to address practical people as you no doubt are. I am sure
that none of you would pay to come and listen unless you are going to get
something from this symposium. In other words, you most likely regard
attendance as an investment which should bring commensurate return sooner
or later.

2. This meeting is timely because the growing importance of the Pacific
region makes it imperative that ASEAN meet with the two giants which flank
it to the north and the south, to ascertain how best to work together for
mutual benefit. This meeting is also timely because there is a critical
need now for ASEAN to seek out new frontiers, in partnership with its
immediate neighbours, to promote sustained growth since the old
established industrial nations can no longer be relied upon exclusively to
provide the engine of growth in world trade. During the recessionary
period of 1981-83, the ASEAN region has demonstrated its dynamism by
expanding its combined average GNP at close to 5% in real terms
annually. Most of the ASEAN economies are now on the way to resuming their
pre-recession growth paths. What is important is to ensure that this
growth process is sustained. The people in the ASEAN countries have come
to expect this. ASEAN cannot allow world recession to adversely affect
this growth. Even if there is the faintest possibility that economic
interaction with countries like Japan and Australia will contribute
towards ASEAN's economic health, this must be examined and worked at.

3. ASEAN is a major supplier of natural resources to the world. We produce
and export the bulk of the world's supply of natural rubber, tin, tropical
hardwoods, pepper, copra and palm oil. We are also a major producer and
exporter of petroleum, gas, rice and other food products. In return, we
buy manufactured products, especially from Japan. We are in a hurry to
develop, to industrialise with the help of modern technology and to raise
the standard of living of our people. It is our aim to become an important
grouping of developed nations as soon as possible. To achieve this goal
the ASEAN countries have tried to complement each others effort. But this
is not easy because the ASEAN countries have always been each others
competitors. Consequently intra-ASEAN trade has not been
significant. Despite vigorous promotion, intra-ASEAN trade now accounts
for only about 15% of the total ASEAN trade with the world.

4. Until such time when the ASEAN countries learn to complement each other
and increase the volume of intra-ASEAN trade, ASEAN will have to depend on
the rest of the world for its market. For some time now the Asean
countries have been trying to improve export performance by adding
manufactured goods to the string of primary commodities that they
export. But this has made no significant impact. As the pace of
development increases, ASEAN imports of manufactured products keep on
outstripping the value of the exports. In 1983 the combined trade deficit
of the original "ASEAN 5" was U.S.$11 billion. Even import restrain has
not been able to reduce the adverse balance. To find an answer 

5. ASEAN trade with Australia is small, amounting in 1982 US$200
million. The bulk of ASEAN exports to Australia, totalling US$1.5 to $2
billion, is made up of primary commodities. About 60% of Australia's
imports from ASEAN comprised petroleum, mainly from Indonesia and
Singapore. Excluding the petroleum trade, ASEAN's trade deficit would
reach US$1.1 billion. However, ASEAN's manufactured exports accounted for
only about 3% of Australia's total imports of manufactured goods. On the
other hand, ASEAN imports mainly food, manufactured goods, machinery and
equipment from Australia.

6. ASEAN trade with Japan is far more significant. In 1982, about 25% of
the total trade of the original "ASEAN 5" was with Japan. As a group,
ASEAN had a trade surplus of US$800 million with Japan in 1982, due to the
hefty surplus of Indonesia, mainly on account of petroleum exports. The
other ASEAN members, namely Malaysia, the Philippines, Singapore and
Thailand, all experienced deficits with Japan. The composition of this
trade is a familiar story. We export mainly raw materials, largely
unprocessed, and import a wide range of manufactured goods as well as
plants and equipments. As in the case of Australia, Japan imports only a
negligible amount of ASEAN manufactures.

7. It is quite clear that ASEAN's trading relationship with Japan and
Australia requires review. Not only should the volume of trade between
these close neighbours be increased but there should be greater balance in
the trade. The trend that we see is that the balance would favour
Australia even more when more coal and iron are bought for new plants in
the ASEAN countries. As for Japan, with oil prices at present levels and
manufactured goods not only continuing to increase in price but also
increasing in variety and sophistication, the balance may change in favour
of Japan in the near future.

8. So what can be done. If Australia and Japan would like to sell more to
the ASEAN countries, they will have to help the ASEAN countries earn more
foreign exchange. Obviously they will have to buy more from
ASEAN. Commodities have low added value. An increase in the import of
ASEAN commodities would not enrich the ASEAN countries much. But if those
commodities are processed into manufactured goods and exported, the ASEAN
countries would make substantial earnings. Malaysia for example, has
ambitions to become the biggest producer of rubber tyres in the
world. With the advantage of lower raw material and labour cost, together
with the economies of scale possible for a world supplier, it is not
impossible for Malaysia to capture a substantial portion of the world
market. If for a start Australia and Japan buys tyres from Malaysia, then
not only will the balance of payment be corrected, but the two countries
will not be just importing raw materials from Malaysia. In addition,
earnings from higher value exports would enable Malaysia to buy more goods
from Japan and Australia. There is no way by which Malaysia could become
so industrialised that it will not need to import manufactured goods from
Japan and Australia.

9. This is, of course, only an example. It may be just a pipe dream on the
part of Malaysians like me. But dreams should not be dismissed simply
because they seem far-fetched at the moment. Now if this example is
multiplied by six, with different commodities of course, the volume of
trade between the ASEAN countries and Australia and Japan could be greatly
increased -- and, of course, would be better balanced.

10. Another approach would be to make the ASEAN countries a half-way house
where intermediate processes are carried out. Australian iron ore is at
the moment processed in a sintering plant in the Philippines and then
shipped to Japan. Singapore refines crude oil from the Middle East for
many countries in this region. This is something that can be repeated many
times with numerous raw materials coming from Australia destined for Japan
and other countries. If we consider how rich in energy and labour some of
the ASEAN countries are, it follows that this half-way house intermediate
processing can in fact be an approach that will benefit all the three
partners. If seems to me that everyone will gain and no one will stand to
lose.

11. A third approach is the relocation of certain industries which are no
longer suitable for Japan and Australia. Obviously labour intensive
industries should no longer be located in these two countries. They would
do better in the ASEAN countries. Low technology industries where the
value added is not high would form another group. Energy intensive
industries too come within the category of industries that should be
relocated.

12. In all instances it is worthwhile to remember that ASEAN countries are
among the most stable in the world and they all welcome foreign
involvement in their economy. Its good business to do business with them.

13. If all these fanciful ideas are put into effect and the linkages
between ASEAN, Australia and Japan become a reality, what would be the
effect on the trading patterns of with other parts of the world will be
affected. But the most likely scenario would be accelerated prosperity of
the region which, if the present interest in South East Asia is any
indication, would result in a rush on the part of developed countries to
do business with this group. Indeed the new prosperity would spill over to
the rest of the world. Despite Japan and Australia, there would still be a
need to buy sophisticated products from the developed countries and also
goods and other products from other developing countries. In other words,
extensive economic cooperation between Japan, Australia and ASEAN, along
the lines mentioned earlier, will benefit the economy of the world much
the same way as the American economy affects the world. Indeed the worlds
economy would not have to depend so much on that of America or of
Europe. A new economic dynamo in the West Pacific would be able to take up
the slack.

14. Having indulged in this flights of fancy, let me come down to
earth. What in fact is the relation between ASEAN, Australia and Japan?. I
have mentioned that ASEAN is largely a supplier of raw materials to Japan
and Australia. Sentiments in both Japan and Australia favour
protectionism. This is a strange sentiment considering that both countries
are affected by American and European protectionism. One would think that
being victims of protectionism, both would syampathise with the ASEAN
countries' infantile steps towards exporting manufactured goods. But the
fact is that protectionism is very strong especially in Japan.

15. If there is to be meaningful economic relations between Australia,
Japan and ASEAN, then protectionism must be reduced or modified. Tariff
and non-tariff barriers should be gradually dismantled. Instead there
should be positive efforts made to ease the entry of manufactured goods
from ASEAN into both countries. Where manufacturing is done by
joint-venture companies involving either Japan or Australia with ASEAN,
buy-back arrangements should be encouraged in order to provide ready
markets which in turn will support large scale production.

16. Next comes the problem of shipping. ASEAN countries must be given a
fair share in the carriage of goods between them and Japan and
Australia. Earnings from the carriage of freight are very substantial. If
we are going to avoid excess shipping tonnage, some form of joint
operations of shipping lines should be contrived at. Ships plying between
ASEAN and Japan, and ASEAN and Australia should be pooled and manned by
mixed crews. There will be problems of course, but the shipping industry
should learn from airlines how to cooperate when competition is mutually
damaging.

17. Air services should be liberalised. There should be more landing
rights and more joint operations. The kind of rigid criteria for landing
rights which is normally applied to airlines of developed countries should
not be applied to the developing countries of ASEAN.

18. The world is getting smaller and more interdependent. There is no way
by which we can isolate ourselves, whether we are developed or
developing. Since we have to live and depend on each other, the best
things to do is to accept the fact and make the best of it.

19. I have tried to highlight some areas where interdependence can be
utilised for mutual development. I am sure that you, as practical
businessmen, would be able to identify much more practical areas for the
conduct of good economic relationship between the developing ASEAN
countries and the developed nations of Japan and Australia.

20. Malaysia, and I believe all the other ASEAN countries are keen to
develope mutually beneficial relations with Japan and Australia. We will
be watching this Symposium with great interest and we hope that it will
not be just an academic exercise but a true enquiry into practical matters
which are implementable.

Thank you.