Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	SHANGRI-LA HOTEL, KUALA LUMPUR (K.L) 
Tarikh/Date 	: 	07/09/90 
Tajuk/Title  	: 	THE ANNUAL DINNER OF 
			FINANCIAL INSTITUTIONS 




 Encik Ahmad Mohd. Don,
     Chairman of the Association of Banks of Malaysia;
The Honourable Dato' Daim Zainuddin,
     Minister of Finance;
Tan Sri Jaffar Hussein,
     Governor of Bank Negara;
Excellencies;
Ladies and Gentlemen.
    I would like to thank members of the organising commit-
tee  of  this  Annual  Dinner  of  Financial Institutions of
Malaysia for inviting my wife and I.
2.   This is the ninth time I am attending this august gath-
ering of the bankers and insurers of the nation.  I must say
that I feel much flattered and a great deal gratified that I
have been asked again to talk to a very specialised group of
people in society, the money people.
3.   As you know quite well I have no training in economics,
much less in finance.  Any training that I had  was  in  at-
tending  to  the  frailties  of the human body, the physical
frailties and perhaps the  mental  frailties.    The  latter
might come in handy in the treatment of all groups of people
but  I  do not think you want to hear me discuss such a sub-
ject here, even if it might be relevant.
4.   Not being an economist or a financial expert, I  always
feel  inadequate  when dealing with this subject.  I am sure
you will find me quite naive.  But being a  politician,  the
only  profession that needs no diplomas or degrees, the idea
of speechifying is always irresistable.   Even  if  one  may
sound  absurd,  one  feels that an opportunity to speak must
not be allowed to pass.
5.   Since I am without formal training in economics and fi-
nance I have to fall back on the oldest logical approach  to
understanding  a  subject  or  problem  i.e.  by reductio ad
absurdum.  It has always proven, at least to me, a  formida-
ble weapon of logic and almost never fails.
6.   It  is a means of reducing things to basics in order to
understand and to extrapolate from there.  There is a saying
in Malay "Jika sesat jalan, balik ke pangkal" -- if you  are
lost, return to the beginning.  My economics is consequently
very  basic  and  I  hope  you will excuse me if sometimes I
state the obvious as if it is some  new-found  and  original
discovery.
Ladies and Gentlemen,
7.   By  any  measure Malaysia has done very well.  The Gov-
ernment would like to claim that we are the  sole  cause  of
the  remarkable  economic  recovery and performance.  But we
would like to admit though, that Government policies and di-
rections alone would not achieve results.  It would be  like
clapping with one hand.
8.   I  am  not  saying this out of modesty.  It is to avoid
and to discourage "the Government should do something"  kind
of mentality.  The Government can do something but the vari-
ous  sectors  of  the  economy must do something also, or at
least, respond positively to Government policies and  initi-
atives.
9.   When we experienced the severe recession of 1985-86 the
public did not panic.  Indeed, in the 1986 elections held at
the height of the recession, the Barisan Nasional Government
was  returned with much more than two-thirds majority.  As a
result the Government dared to formulate  policies  directed
at turning around the economy.
10.  If the Government had been returned with a marginal ma-
jority  it would not have dared to do anything.  It would be
too busy trying to stay in power as the defections of a  few
could  bring it down.  The economy of the country would have
been left to fend for itself.  But the people  helped  them-
selves and the Government by giving it a resounding victory.
11.  The  first thing the Government had to tackle after be-
ing reelected was the ongoing recession, the most severe ex-
perienced since independence.
12.  The old approach of increasing public  sector  spending
in  order  to  sustain  economic growth had not worked.  The
only thing that  happened  was  growing  Government  indebt-
edness.  And so a policy of reducing Government spending was
adopted.    Intake of Government servants was brought almost
to a standstill while development projects  were  postponed.
Only projects which could help revive the economy were given
any allocation of funds.
13.  At the same time structural adjustments were made.  For
long there had been talks of letting the private sector make
the  major  contribution to growth.   But little was done to
induce the private sector.  Now new incentives for the manu-
facturing sector were offered and bureaucractic red-tape re-
duced.     The  highest   policy-makers   and   implementors
agressively  courted  investors.   Restrictions and red-tape
were reduced considerably.
14.  By 1987 the results began to show.  Growth  at 5.4% was
registered despite the world economy not having fully recov-
ered.  Growth accelerated to almost 9% in 1988 and 1989.  It
is worth noting that growth was not entirely due to external
factors.  Domestic sources of growth began to  play  a  more
dominant  role.   Now, one can say with some confidence that
all the elements are in place  for  sustained  growth  which
even the Gulf crisis is not likely to dampen.
15.  The  Banking  sector generally reacted with sensitivity
to the recession.  As can be expected,  a  great  number  of
people  went bankrupt.  Many companies were in grave trouble
and some were bankrupted.
16.  You may remember the Government urging the banks not to
foreclose and bankrupt their clients.  After all when  banks
lent  money  they  are in a way investing.  They must accept
the risks and the losses that  can  occur  in  any  business
transaction.  But a few banks not only imposed penalties but
exacted their pound of flesh.
17.  The Government is not asking the banking system to save
spendthrifts  who  misused their loans.   But in cases where
failures were due to the recession, entrepreneurs and  busi-
nessmen  should not be penalised forever by being made bank-
rupts.  Bankrupts are not only unproductive but are  also  a
burden to society.
18.  I  think  there  are still debtors who can be rehabili-
tated by the banks.  I believe in banking prudence but being
self-serving is not synonymous with prudence.  Banks must be
good corporate citizens too.  After all banks are  more  re-
silient  than  other businesses.   In the first half of this
year alone, banks made nearly 900 million  ringgit  in  pro-
fits.   Banks are much better placed to take advantage of an
economic recovery.
Ladies and Gentlemen,
19.  We are witnessing interesting changes in the  Malaysian
corporate  scene.   In the past practically all local compa-
nies were family-owned.  They seldom survive after  the  de-
mise of the founders.
20.  Public  limited  companies  on  the  other hand are not
meant to vanish with their founders demise.   They are  more
permanent and survive the loss of their founders.
21.  Recently  Malaysian  family  companies  have started to
seek public listing.  Apparently everyone has  become  aware
that  through  listing  public funds can be tapped and rapid
growth achieved.  Unfortunately the founders of these compa-
nies are loath to part with the personal control  they  have
over  their companies.  They consequently seek majority con-
trol.
22.  Perhaps this is a good thing, for  the  drive  and  the
astuteness  of  the founder is after all what made one's en-
terprise succeed and another fail.  But the fear is that  it
will follow the fate of the family companies with the demise
of the founder and family squabbling undermining the running
of the companies.
23.  The need now is to develop skillful professional manag-
ers,  responsible  directors and knowledgeable shareholders.
The Government has taken steps to ensure that banks are  not
controlled  by  any  one  group.    By limiting single share
holdings in banks to 20% it is hoped that  a  more  reliable
and  durable corporation is created.  In such a set-up it is
the best interest of the bank that will be upheld,  not  the
best interest of the majority shareholder.
24.  While  the  Government  is  not proposing to force non-
financial companies to break up majority share holdings,  it
would  be  wise for the culture of the Malaysian public lim-
ited companies to change.  The reliance on founders and  ma-
jority  shareholders  should be gradually replaced by proper
and truly corporate management structures based on responsi-
ble internal or external  directors,  professional  managers
and knowledgeable shareholders.
25.  The banks can contribute here.  Banks have been allowed
to  take  up shares in non-banking business.  They have more
clout than others when they sit on company boards, and  they
should  use this clout to ensure that majority stakes do not
lead to absolute domination.
26.  Unless a public limited company culture  is  developed,
there   is   a   very   real   danger   of  the  corporation
disintergrating with the demise of the founder, just as fam-
ily companies do.  The phenomenon of family companies  gain-
ing  listing  and  becoming public listed companies is still
new and we have as yet not seen them  grow  old  enough  for
their  founders  to fade away.   But it is important that we
anticipate this happening and prepare for it.  In any  case,
public  limited companies must be just that -- public listed
companies run by the shareholders through professional  man-
agers.    Listing should not be looked upon as a way of get-
ting access to cheap capital and capital gains  while  still
remaining effectively private companies.
Ladies and gentlemen,
27.  The  share  market  has  been quite active lately.  The
listing of a number of attractive companies has drawn  added
interest   not   confined   to  the  usual  market  players.
Oversubscription by large multiples  has  again  become  the
norm.
28.  An  active  stock  exchange is indicative of the health
and sophistication of a country's economy.  Speculations  in
stocks and shares are normal in any share market.  But, like
everything else, excesses are bad for the health.
29.  We  are  seeing once again excessive speculations which
push up prices to unrealistic levels  where  there  will  be