Oleh/By		:	DATO' SERI DR. MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	THE HYATT SAUJANA HOTEL, SUBANG 
Tarikh/Date 	: 	18/09/90 
Tajuk/Title  	: 	THE DIRECT REDUCTION PLANT CONTRACT 
			SIGNING CEREMONY 




 Distinguished guests;
Ladies and Gentlemen
    I would like to thank the organisers for inviting me to
this  gathering  and  to congratulate PERWAJA, Ferrostaal AG
and MAN GHH AG for coming together to pool  their  resources
for the growth of PERWAJA.
Ladies and gentlemen,
2.   When  the  global  recession  hit  Malaysia, we were as
badly hit as anyone else, but we very quickly took steps  to
modify  policies  and  approaches to expedite recovery.  The
measures we took were apparently effective  and  today,  the
Malaysian  economy  is  stronger  than ever and Malaysia has
been acknowledged as one of the Pacific Rim countries  where
economic  growth  is expected to be among the highest in the
next decade.  Our manufacturing industries like  other  sec-
tors  recovered  from  the  recession and went on to achieve
vigorous growth.
3.   Like most industries, PERWAJA during the period of  re-
cession ran at a loss, its financial problems further aggra-
vated  by  an  unexpectedly  rapid  appreciation of the Yen.
Without expanding a single ringgit more, the capital and the
loans doubled, reducing the original feasibility study to  a
meaningless scrap of paper.  On the top of it the Direct Re-
duction  (DR) plant failed.  PERWAJA applied stringent meas-
ures to cut costs and increase production, especially  after
Tan  Sri  Eric Chia took over and reorganised the management
and the philosophy of the company.  The result was a remark-
able turnaround which restored confidence in PERWAJA.
4.   Today, although PERWAJA is "young" in  age,  it's  per-
formance  ratings are moving close to world standards of ef-
ficiency.   It is  a  measure  of  the  renewed  and  strong
confidence  in  the  viability of PERWAJA and its management
that the total finance package of over 800  million  ringgit
for  its  expansion has been raised by a consortium of banks
without any Government guarantee.  And now, with the  direct
reduction  plant  which  is  to be resuscitated and a new DR
plant that is to be built, thus doubling  the  original  de-
signed  capacity, PERWAJA is set to enter the first phase of
its expansion.
5.   When the new plants come into full operation, the total
production will be increased to 1.2 million tonnes of sponge
iron per annum.   The directly reduced  iron  which  the  DR
plants  will be producing will be used as feedstock and this
will enable the billet plant to  produce  a  wide  range  of
steel -- from the very highest quality to the standard range
used  for  construction.    With the availability of quality
steel at competitive prices,  together  with  the  efficient
infrastructure, investment incentives, a record of political
stability  and  a  youthful  and well disciplined workforce,
Malaysia will present a  highly  attractive  proposition  to
manufacturers  of  downstream steel products especially from
those highly industrialised countries where costs have esca-
lated.
6.   This opens a whole new era of opportunities for PERWAJA
in various downstream activities.   For the nation  it  will
mean  that  the true age of industrialisation has begun, for
no country can really be considered as industrialised if  it
lacks  a  reasonable  capacity to produce and process steel.
Although many new materials are  used  in  modern  products,
steel  remains  the basic material without which most modern
capital and consumer goods cannot be produced.  It is there-
fore important for  Malaysia  to  acquire  the  capacity  to
produce  steel and to be efficient at it.  The latter is es-
pecially important because many old steel producers are  go-
ing  out  of  business  due  to poor efficiency.   PERWAJA's
future depends not only on availability of plants  but  more
importantly  the  skills  in  managing and operating them at
maximum efficiency.
Ladies and gentlemen,
7.   When Malaysia decided to go into heavy industries there
was scepticism all round.   To-day that  decision  has  been
vindicated.    Apart  from  PERWAJA, the motor-car industry,
tin-plate plant, cement plant, motor-cycle engine plants  as
well  as  the  Heavy  Industries Corporation or HICOM itself
have become successful and very profitable.  And now PERWAJA
too has posted its first profitable  financial  year.    The
move into heavy industry was essentially correct but Govern-
ment  apparently overestimated management capacity to handle
these sophisticated capital intensive industries.  The  mis-
takes  have  been well learnt and whether privatised or not,
management skill must be given serious priority  if  we  are
not to fail again.
8.   Up till now the public sector has played a leading role
in  financing the development of heavy industries either di-
rectly or through joint ventures with  the  private  sector.
However  greater private sector participation in such indus-
tries will be encouraged in future.  The government will en-
courage such participation through  privatisation  or  joint
ventures  between  local and foreign investors.  We hope the
public sector participation will  be  reduced  just  to  the
level of project identification and the creation of opportu-
nities for private investments.
Ladies and gentlemen,
9.   All  of  you  present  today have a role to play in the
success of PERWAJA.   It is the flagship  of  our  country's
entry  into  the steel industry.  It is my sincere hope that
everyone will give PERWAJA all the support it needs to  make
it a success.