Oleh/By : DATO' SERI DR. MAHATHIR BIN MOHAMAD
Tempat/Venue : HOTEL SHANGRI-LA, KUALA LUMPUR
Tarikh/Date : 05/09/88
Tajuk/Title : MAJLIS MAKAN MALAM TAHUNAN
INSTITUSI-INSTITUSI KEWANGAN
YANG KE-10
Yang Berbahagia Tan Sri Basir Ismail,
Pengerusi Jawatankuasa Penganjur;
Yang Berhormat Datuk Paduka Daim Zainuddin,
Menteri Kewangan;
Yang Berbahagia Tan Sri Jaffar Hussein,
Gabenor Bank Negara;
Dif-Dif Kehormat;
Tuan-tuan dan Puan-puan sekalian.
Saya mengucapkan terima kasih kepada Ahli Jawatankuasa
Penganjur Majlis Makan Malam Tahunan Institusi-Institusi
Kewangan Malaysia kerana menjemput saya dan isteri saya ke
Majlis ini.
2. Ini adalah kali yang ketujuh saya menghadiri Majlis
Institusi kewangan ini. Pada majlis-majlis yang lalu saya
mengambil kesempatan untuk memberikan pandangan dan pendapat
saya mengenai keadaan ekonomi serta peranan dan prestasi
institusi-institusi kewangan di negara ini. Seperti dahulu,
saya bercadang untuk meneruskan amalan tersebut dalam Majlis
pada malam ini.
Ladies and Gentlemen,
3. When I spoke to you a year ago, the feeling of recovery
was already in the air. And yet, barely six weeks later, we
were faced with the October 19 world stock market crash,
which changed the whole scenario. However, having already
gone through the Pan Electric crash and the co-operatives
crises of 1985/86, we took the October 19 meltdown within
our stride and with very little adverse effects. In fact,
we ended the year with a record trade surplus and a 5.2%
real growth rate.
4. Looking back on a year of solid achievements, it is
with pleasure that I address you tonight in the midst of a
strong and hopefully, sustained economic recovery. Aided by
a long overdue rebound in commodity prices, a steady but
definite increase in private fixed investment, particularly
in the manufacturing sector, we have been able to achieve
once again the strong growth of the late 1970s, with real
GDP growth in the first half of 1988 in the order of 9%,
together with little inflation. Indeed, the second quarter
growth rate was about 10.5%.
5. The pundits will argue that we have achieved all this
with lots of luck, because Malaysia is a lucky country, and
because commodity prices turned in our favour. Let me say
that we all have our share of good luck, and bad luck as
well, but our long-term prosperity is dependent not so much
on luck, but on the hard work and resilience of our people,
and the sound but tough and frequently unpopular policies of
the Government. Those of you who are more adept in
economics would have noticed that the recent recovery has
been achieved completely without public sector expansion.
Indeed, growth has come mainly from the private sector at a
time when the public sector is still going through a tough
and highly painful adjustment towards fiscal balance and
greater financial discipline. It would seem that at long
last we have been able to make the private sector provide
the impetus for economic growth. It just goes to show that
the private sector can do it when it has to.
6. Throughout the recession of 1985/86, the Government had
to take many necessary, but as I said politically unpopular
steps, to put the economy back onto a firm and competitive
footing. Having seen our export incomes cut drastically by
more than $10 billion ringgit, with all our achievements in
social progress over the last decade set back by the
recession, the Government boldly set out to address the key
issues of competition and efficiency. We slashed many
programmes of subsidies instituted in the 1970s. We took
the unprecedented step of reducing the growth in civil
service expenditures. We managed a fiscal adjustment
programme that cut the deficit by more than 8% of GNP in
three years, an achievement unprecedented amongst the
developing and developed world. But, through perseverance,
we turned things around. We restored our external payments
until we achieved the first current account surplus in a
decade. We stemmed and overcame the threat of financial
disorder manifested by the failure of the deposit-taking
cooperatives and irresponsible and even criminal management
of banks. We have only just begun to see the fruits of the
steps taken to encourage foreign investment, particularly in
the manufacturing field. All these have been tough
medicine, but we should now begin to reap the benefits of
financial prudence and fiscal discipline.
7. To me, what has been most important has been the fact
that the rural incomes have begun to rise once again, and
that the large number of graduates we have been producing
are now beginning to find jobs again. With rising incomes
and profits for business, and consequently improved
revenues, the Government will be able to afford higher
operating costs and certain desirable infrastructure
projects that have been shelved because of the recession. I
am optimistic that the real GDP growth for 1988 will surpass
all earlier expectations, and that this will generate its
own momentum well into 1989.
8. The time has come for us to dwell no longer on the
problems of the mid 1980s, but to look forward to the next
millenium, the twenty-first century. The possibility of
making Malaysia an industrialised nation is no longer a pipe
dream. It can be a reality. Indeed, it has to be if
Malaysians expect to have a better life. Production of
primary commodities can grow by so much and no more. But
there is really no limit to what we can manufacture. As
expectations rise we will have to move into more
sophisticated and more value added products in order to earn
more. Skills and technology can be acquired if we really
want to. The limiting factor is our will to work hard and
to compete.
9. It is our ambition to be an industrialised country.
But we are not going to forget commodities. We have done so
well with them and we can still do a lot. However, broad
trends to the year 2000 are discernible, and it would be
useful to have a look at what the scenario can be by then.
Ladies and Gentlemen,
10. As Malaysia begins to move into the ranks of the
industrialising countries, it is relevant to ask what type
of manufactures we wish to produce. Given the small size of
our labour force, and the present level of research and
development, we cannot compete with Japan, Korea and Taiwan
in the high end of technology and engineering. We have to
be a niche player, going for the high value-added products
that can be competitively made using our natural resource
base and comparative advantages. Even with rapid growth,
our total production will not be a threat to anyone.
Malaysia's annual export of manufactures is smaller than the
United State's annual consumption of toys! What is
beginning to happen in the world market today is that the
consumer wishes to have greater choice for basically the
same product. The consumer would like one made to his
choice of colour, size and shape. Given the right
incentives and encouragement, I am sure our entrepreneurs
can find the right products to fill the right market niche.
We only need to see how our manufactured exports today can
exceed even our oil exports, to realise the potential of
industry. Increasingly, we are becoming part of the network
of manufacturing activities that spans the world, with a
single product being sourced from around the world before it
is assembled and sold in its final market.
11. We must also not forget that the world of the next
millenium will be increasingly a service-oriented market.
It has been estimated that travel, food and beverage,
medical and health care, and personal services will be
growing markets relative to consumer durables. World travel
alone is estimated to grow annually by 3.5% up to the year
1995. Tourism will certainly be a major force of the
future, with world travel accounting for at least 15% of
world trade in services by the mid-1990s. Malaysia has not
even begun to touch this market. In 1987, Thailand earned
$4.8 billion ringgit from 3.4 million visitors, while
Malaysia's intake was only $1.8 billion ringgit from 3.3
million visitors. The tourist and service sectors can be a
major provider of employment, and would allow us profitably
to preserve and display our rich cultural and natural
heritage.
Ladies and Gentlemen,
12. This time last year, I stressed the role of bankers in
turning around those ventures which had suffered from the
collapse of prices due to the recession. "Bankrupting all
our entrepreneurs simply because the recession has rendered
them incapable of servicing their loans will not help
anyone; neither the borrower, nor the bank nor the nation."
These words are still true today.
13. I have often been asked why is it that investment by
domestic entrepreneurs has not risen as fast as that by
foreign investors. The answer is that many of the domestic
entrepreneurs are still completely tied down by their
non-performing loans, and few banks are willing to lend to
them to embark on new ventures. If this happens, how can we
encourage the growth of domestic entrepreneurs? The secret
of success of any business is that during the good days, you
must prepare for the storms, and during the storms, you must
prepare for good weather. Still it is unrealistic to insist
that the farmer should spend all his time during the good
weather to repair his roof. Where will he then get the rice
to feed himself during the next storm? This is the
perennial dilemma. Bankers cannot live in a world of their
own. Bankers have allowed deposit rates to fall.
Consequently, the burden on the borrower should not be so
heavy. This is not because the market does not favour the
saver, but because the market recognises the strong inflow
of liquidity from our bouyant exports, thereby enabling
bankers to help nurture and support our breadwinners during
times of difficulties. This help must be forthcoming.
Banks must pass on these benefits to their borrowers.
14. The time has now come for the banks to be proactive, to
be forward looking in their approach. One key lesson from
the recession is that bankers need to be more
businessmen-like, and the businessmen need to behave more
like bankers. By this, I mean that banks have got to know
the business of their customers better, and should now
evolve procedures and mechanisms to help them get out of
their difficulties. To a large extent, Malaysian banks may
have to adopt the more innovative part of the German model
of banking, where the bankers use their professional
expertise during the reconstruction period to finance and
rebuild German industry. We do not expect banks to become
property developers and manufacturers in competition with
private entrepreneurs, but I am sure that they would welcome
the banks financial and managerial expertise in
rehabilitating abandoned housing projects, factories and
estates.
15. It is clear from the lessons of our recent past that
traditional methods of lending have not prevented the
escalation of non-performing loans. Tough times need bold
action. The bankers and insurers will have to be more bold
and innovative to support the pioneering efforts of our
entrepreneurs in new markets with new products. Whilst the
essence of banking should continue to be prudence, financial
institutions should adequately address the realities - the
realities of business. Prudence may be the staying power of
banking but prudence should not be exercised to the
exclusion of everything else. All businesses must involve
risk and bankers must accept that the lenders must share a
little of that risk. In this context, I commend, for
example, the recent banking payments agreement signed
between the Central Banks of Malaysia and Iran, which allows
Malaysian businessmen to worry more about selling than about
financing and collection problems. Let me take another
example. Despite our good record of successes in the estate
field, we have yet to develop crop insurance policies to
help facilitate increased agricultural food production and
encourage intensive cultivation of new crops. Venturing
into agriculture involves highly unpredictable risks,
especially from natural calamities and disease. Enterprises
can effectively absorb the production and commercial risks.
But they need protection from risks which they are quite
helpless to prevent. Financial services must be fostered to
meet new demands through new products.
Ladies and Gentlemen,
16. The Malaysian industry should be restructured by
emphasising supply to both the domestic and external
markets. With the increasing spectre of protectionism, our
strategy should be the redirection of our resources to
search for new markets and to develop new products. The
assistance and support of the financial community in this
endeavour is, as always, critical. The private sector
should not hesitate to operate on low margins with the
purpose of gaining a greater market share. It is not
expected that the financiers should extend 'kamikaze' loans.
With resources of over $200 billion ringgit available in the
financial system, a figure that is nearly three times the
size of the country's gross national product, there is
tremendous scope for bankers and financiers to channel these
resources into worthwhile productive investment.
Ladies and Gentlemen,
17. Like the business community, you have undoubtedly
undergone trying times and like the businessmen you finance,
those times had been cushioned, largely by the Government.
The time will come when that cushion will be withdrawn.
Like the businessmen, you are now undergoing a period of
consolidation and recuperation. Like some of your clients
who are resorting to the $500 million ringgit Enterprise
Rehabilitation Fund, some of you are undergoing a period of
rehabilitation while there may well be others in need of
restructuring. As we approach the end of the old era, banks
and businessmen alike should stifle the instinctive and
overwhelming impulse to request for Government help the
moment they get into trouble. Just as recuperation is
dependent a lot on the patient's will to get better, the
success of rehabilitation is heavily dependent on those who
really want to help themselves.
18. As in the past, I risk outstaying your hospitality
tonight by lecturing you on your own business. But then I
am a politician and a politician gets lectured to or advised
on his work all the time. I am sure that bankers too have a
lot of advice for me, only some I do not get to hear. So I
hope you do not mind my lecturing you at least once a
year. In the spirit of Malaysia Incorporated we have to
work closely together to make our homeland not only livable
but also prosperous. And there is no doubt that bankers and
politicians have a lot to do with whether we are prosperous
or not. There is no harm then in our advising each other
openly. I wish you happy lending.