Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	HOTEL SHANGRILA, KUALA LUMPUR, 
Tarikh/Date 	: 	19/08/85 
Tajuk/Title  	: 	MAJLIS MAKAN MALAM TAHUNAN 
			INSTITUSI-INSTITUSI 
			KEWANGAN MALAYSIA 




Yang Berhormat En. Daim Zainuddin, Menteri Kewangan; Yang Berbahagia Tan
Sri Basir Ismail; Dif-Dif Kehormat; Tuan-tuan dan puan-puan.

Saya mengucapkan terima kasih kepada Ahli Jawatankuasa Penganjur Majlis
jamuan Makan Malam Tahunan Institusi-institusi Kewangan Malaysia, kerana
telah sudi sekali lagi menjemput saya dan isteri saya ke Majlis ini.

2. Before I touch on banking and finance may I talk generally about human
society. A society exists because the members can relate to each other,
can interact and coexist. Whether the particular society prospers or not
depends on the quality of the members, that is the values they believe in
and, more importantly, they practice.

3. For some time now we have been at pains to promote certain human values
for our society in particular 'amanah' or trustworthiness. For the banking
community no other value is more important than trustworthiness. Without
trust banks simply cannot function.

4. Banks hold in trust vast sums of money belonging to individuals,
businesses and the state. We, of course, have rules and regulations and
laws to ensure that the money is properly managed. But as we have seen,
these are full of loopholes for the crooked and the criminal-minded. The
basic need is still trustworthiness. The only way the banks can function
well is for them to be manned by trustworthy people. Then and then only
can the wealth of the nation be entrusted to them.

5. The unfortunate thing is that we have no substitute for banks in modern
times. Certainly there is none which can handle the wealth of the
community without relying on trust. We have therefore to inculcate this
important value called 'amanah' among bankers.

6. The question is how do we do this. It is relatively easy to teach
children the correct values. But the habits and values of adults have
already set in. Nevertheless, we believe we can do so, at least to some
extent. We formulated the slogan 'Bersih, Cekap dan Amanah' because we
believe that by constant reminders we can sow good values. We will also
punish mercilessly those who abuse the trust we place in them. We would
also like to teach by precept and by example.

7. This is where the senior bankers have a role to play. You must show,
like Caesars wife, that you are beyond reproach. You must take your work
seriously. You must be responsible. You must be completely trustworthy.

8. Perhaps some might say you don't have to tell us all these things
because we know it. But we also know that there are more than just a few
in the banking business, particularly at the less exalted levels, who have
not been any where near as trustworthy as we would like them to be. Their
behaviour is not their responsibility alone. Their superiors at all levels
are equally if not more responsible, for their behaviour. We don't expect
you to commit hara-kiri or seppuku when your subordinates fail. But you
must not neglect the supervision that is required of you and certainly you
must try to inculcate the right values among your staff.

Ladies and Gentlemen, 

9. Next I would like to speak of a disturbing trend in Malaysian
society. Malaysia's prosperity has spawned a number of self-made
millionaires, some of whom really make it in the classic rags to riches
saga. Unfortunately this has brought about a 'get rich quick'
mentality. Even the penniless now think that they can become millionaires
overnight without any effort.

10. This is an unhealthy frame of mind. It leads to acts which frequently
verge on the fraudulent. Indeed fraudulent means are often resorted to. A
prosperity built on fraud is not durable. It will collapse and then the
price to pay will be horrendous.

11. Not so long ago a British whiz-kid went on a rampage, acquiring
companies and stripping them of their assets. He left a trail of corporate
corpses all over the world including the Far East. Now in Malaysia we have
people who acquire what they call a 'listed vehicle' and then inject
assets, revalueing and merging with other companies to form a business
empire. Through revaluation and capital gains money is made.

12. The fact is that in most instances no real business is done. There is
no increase in productivity or manufacturing or sales or exports. The only
thing that has happened is that the assets has been revalued but have
stayed where they are and as they are. The public is often taken for a
ride by the inflated value of the shares.

13. This paper wealth is no substitute for real wealth. Wealth cannot be
increased by calling one cent one dollar. Similarly a share that is worth
$1/- is still worth $1/- even if priced at $10/-. It is only when assets
really accumulate and productivity is increased that enhanced share values
have any significance.

14. Bankers are the guardians of the wealth of the nation. While they
should not obstruct genuine mergers and acquisitions where the intention
is to do business, they should be very careful that they are not innocent
accomplices in what could be termed grey operations.

Ladies and Gentlemen, 

15. I said just now that I want to talk a little about human society. I
have enumerated two items which can have a profound effect on the success
or otherwise of human society. These items relate to the interaction
between the bankers, the Government and the public.

16. I would like to think that bankers appreciate the dangers posed by
both the 'get rich quick' mentality and the manipulations involved in
certain corporate games business men play. It is your duty to discern the
genuine from the false. Your decisions as bankers will determine whether
our society grows and prosper or we deteriorate economically and
ultimately politically as well.

17. Now let me move from gross generalities to the particular although I
will have to be very general still.

18. As the Fourth Malaysia Plan draws to a close, we all stand at the
threshold of an uncertain era. That uncertainty has been manifested in
many forms, both political and financial. I believe that Malaysian
pessimists are truly like the proverbial 'Katak Bawah Tempurung' or 'frog
under the coconut shell'. They sing loudest when they think the sky is
getting dark, but they forget that Malaysia remains a light in the
darkness of the world recession. Despite a slowdown in world economic
growth, Malaysia has been able to maintain its pace of growth above 5 per
cent annually. Our inflation has declined to negative levels. Thanks to
the austerity drive by the Government, the fiscal and balance of payments
deficits have been reduced and even reversed, and external reserves of
Bank Negara rose by nearly $1 billion ringgit since the beginning of this
year.

19. On the policy front, the Government has done as much as it can to
chart a steady course for the economy and to make Malaysia Incorporated a
reality. We have reduced taxation including income tax, cut electricity
and communication rates, increased tariffs to assist key domestic
production and improved the foreign equity participation terms in our
industries. In addition, we have succeeded in cutting back wasteful public
expenditure, lowered interest rates, and reduced red tape and deregulated
all round. And lately, we injected 1 billion ringgit into the capital
market to enable lower interest funds to be made available for key sectors
of the economy. But, of course, the moans and groans go on.

Ladies and Gentlemen, 

20. There is no question that the slowdown in the industrial countries,
which has reduced commodity prices significantly in the last twelve
months, has dampened business confidence all round. With an over-supply of
high-rise property, the business community has begun to feel the cash flow
pinch and has become too obsessed with selfpity to realise that now is the
time and opportunity to putour own house in order. We are all aware that
efficiency and productivity remains the basis of competitiveness and
vigour, and yet many Malaysian businesses have been reluctant to upgrade
their technology and cut wastage in order to stay in front. Many devote
their energies instead to seeking more subsidies and tariff protection
from the Government. Let me just say that the Government has no intention
of continuing to support inefficient industries. We will give protection
only where protection is due but we would like to see real efforts made to
increase productivity and improve the quality and efficiency of Malaysian
management. There is always a howl if Government employ foreign
consultants or contractors. But Malaysian businessmen who regularly leave
most of their own business to foreigners and foreign countries consider it
a matter of right.

21. What role can the financial sector play in this environment? The banks
have not escaped the effects of the rumour mills, with the rush at some
banks a few months ago as a result of the collapse of a bank in Hong
Kong. Throughout the world, banking fiascos are almost daily in the
news. Bad management and fraud have caused the collapse of banks in Hong
Kong, Europe and the United States of America. And as in Malaysia,
Governments have been forced to rescue these banks in the interst of the
public. The sensitivity of public opinion to confidence in the banking
system illustrates how important a role the banking system plays in our
economy. The banks are, as I have said earlier, the guardians of our
assets and the sources of our liabilities. The safety of the flow of our
savings and the continuity of resources for our borrowers through thick
and thin are the lifeblood of our economy. The bankers may not be the
major bread-winners in our economy, but they certainly help to keep our
planters, farmers, miners, manufacturers a nd traders supplied with
sufficient funds to increase their output.

22. Over the last few years, the banking industry has continued to grow
despite the sluggish environment for other industries. Total employment in
banking rose on average 9 per cent annually in the 1980s, and the branch
network by 6 per cent. Value added in the financial sector had grown by
over 7.5 per cent between 1981-84, and is expected to be maintained at
about 6.5 per cent for this and next year. Despite all the grumbles, the
net profits after tax of the domestic banks in 1984, excluding the special
circumstances of Bank Bumiputra, increased by 5 per cent, while that of
local banks grew by 9.4 per cent. The banking industry is obviously both
profitable and sound.

23. I cannot end this address without saying a few words about the process
of deregulation in banking. Some of you may consider that the tightening
of discipline in the industry calls for further regulation by the
authorities. In a sense that is true. But to understand deregulation, one
must view the process of change within the environment of changing
technology and greater competition. Malaysia intends to open the avenues
of change by allowing institutions to be more flexible in what they can
do. In practice, deregulation means that institutions can be more free to
move in areas previously prohibited by regulation, to compete more
vigorously to provide better service for the public, and to break new
grounds of bank profitability. Hopefully, deregulation will produce both a
more efficient financial system and more responsible standard of behaviour
by the banking community. The changes of the future can only come about
through the adaptation and evolution of the banks themselves to the new
environment. I believe that the most constructive contribution that can be
made by the authorities is to be more liberal in their approach, ready to
accept that the convenience of many traditional demarcations and ways of
doing business may have to be set aside so that new energies and
enterprises can be released.

24. The Government will not compromise in the crack down on abuses of the
ethical standards in banking, and this is where prudent regulation has in
fact increased rather than decreased. The Government is basically saying
this to the banking community: you will be freer to venture in many new
areas of business, but you will not be allowed to breach the boundaries of
banking prudence and integrity. In other words, we have widened the field
of banking business and encouraged competition by more players, but have
also demarcated the boundaries more clearly. The sum total of all this is
that, our financial institutions face some very exciting opportunities
which, if they can be effectively grasped, will greatly benefit both the
banks and the nation at large.

Ladies and Gentlemen, 

25. What I wish to say tonight is that we should not be overawed by the
uncertainties of the future. We must grasp the opportunities today, of a
stable nation, abundant natural resources and a young work force, to build
a better future. If we wallow in our own miseries, we have only ourselves
to blame if, as the old Malay saying goes, "kita baharu capai pengayoh,
orang sudah tiba ke seberang." 

26. Once again, I thank you for a most pleasant evening.