Oleh/By : DATO SERI DR MAHATHIR BIN MOHAMAD
Tempat/Venue : KAMPALA, UGANDA
Tarikh/Date : 20-08-2001
Tajuk/Title : GLOBAL 2001 (SAID / LID)
SMART PARTNERSHIP
INTERNATIONAL DIALOGUE
Versi : ENGLISH
Penyampai : PM
"Enhancing the Climate for FDI through Smart
Partnership"
I am indeed honoured to be here among such a
distinguished group of people. The image created of
the African continent as a location for foreign direct
investment (FDI) may be less favourable compared to
other regions of the world, but there are a number of
positive but little known facts about Africa, such as
the considerable improvements by African governments of
their FDI policy frameworks and the vast resource base
that is yet to be tapped.
2. Foreign investment is now widely perceived as a
formidable force in today's world economy. As such it
is important that we discuss this subject in the
context of a changing global landscape and the
emergence of what is commonly referred to as the New
Economy. Besides, FDI has in recent years undergone
significant changes in terms of size, form and impact.
FDI is apparently linked to globalisation. But
globalisation is yet to take its final form. Indeed,
like all ideas and concepts, it will change and change
again as the players try to extract the best from it.
3. Let us first look at some indicators. Developed
countries have always received the bigger share of the
FDI. For instance in 1999, global FDI inflows reached
US$ 865 billion, of which only about one-quarter or US$
208 billion went to developing countries.
Multinationals or MNCs as we know them, undertake most
of the FDI - the driving force behind the deepening and
broadening of international productive capacities. The
MNCs, now numbering some 63,000-parent firms with
around 690,000 foreign affiliates and a plethora of
inter-firm arrangements, span virtually all regions,
countries and industries. But a small segment is
contributed through cross-border or bilateral
investment arrangements which can also help in
enhancing economic growth. Thus we see today many
growth triangles and regional economic groupings where
countries invest in each other through largely commonly
owned corporations.
4. The world's top 100 (non-financial) MNCs, based
exclusively in developed countries are the principal
drivers of international production. It is estimated
that their foreign affiliates employ over six million
people, have US$2 trillion in assets and their foreign
sales are of the order US$2 trillions. They are mainly
concentrated in electrical and electronic equipments,
automobiles, the petroleum industry, chemicals and
pharmaceuticals. If one were to include the financial
and services sectors as well the figures would be so
huge as to be mind-boggling.
5. Developing countries have made every effort to
create the basic conditions to attract FDI such as
ensuring political stability. Virtually all developing
countries, through changes in their regulatory
environments, have facilitated the expansion of
international production. In the last decade or so
more than 90 percent of the changes, in the laws
governing FDI, have created a more favourable framework
for foreign investment. Complementing the more
welcoming national FDI regimes, the number of bilateral
investment treaties - concluded increasingly between
developing and developed countries - has risen from 181
in 1980 to 1,850 by end 1999. Double taxation treaties
have also increased from 719 to almost 2,000 during the
same period. In addition, at the regional and
international levels, an increasing number of
agreements are helping to create an investment
environment more conducive to international investment
flows.
6. Developing countries unfortunately are not always
consistent. The implementing personnel often entertain
ideas different from those of the Government. They may
be too nationalistic and do not agree with the terms
afforded the foreign investors. Dilatoriness in
processing applications may be due to lack of skill or
lack of understanding. Sometimes corrupt practices
hold up approvals. Another major problem is due to
international agencies wanting to have their own way.
They have considerable clout and they can and often do
throw considerable spanners into the process.
Investment projects may be prevented from taking off if
the international agencies have other interests in
mind.
7. And finally there is the problem of changes of
Governments due to the democratic or undemocratic
processes. The new Governments often reject the
decisions of the previous Governments. This results in
agreements under which foreign investors had invested
being changed or even thrown out. This will deter new
investors from coming as they fear another change of
Government might result in the investment not being
honoured by the new Governments. Nothing deters
foreign direct investors as the uncertainties caused by
political changes. If foreign investors or even
domestic investors are to be persuaded to invest, they
must be assured that political changes will not affect
the conditions under which they had invested. If new
conditions are found necessary then they should be
applied to new investments, not to investments already
made.
8. With the information age comes globalisation. As
all forms of communication improve, the relations
between countries and people have become closer. It is
now so intimate that there will soon be no single-
ethnic countries. All countries will have multiracial
populations. But before that happens the isolation and
insulation of countries in terms of the economy and
politics would become more and more difficult.
9. Already we are seeing the spread of democracy as
the only acceptable form of political ideology. No
other system is allowed. Punishment will be meted out
to those countries which disobey. Admittedly democracy
is the best political system ever devised by man. But
it is not perfect. It works in some countries but it
has destroyed many countries also. But democracy has
become such a religion that the destruction of
countries by democratic processes is acceptable while
the development and prosperity of undemocratic
countries are condemned i.e. unless the country is a
friend of the powers that be.
10. Even as they fumble with democracy, the developing
countries are expected to handle globalisation. In its
present form, globalisation simply means opening
markets to capital and imports. There must be no
conditionality which may stand in the way of free
movements of capital. In East Asia, the economic
tigers have now been so well and truly disabled by the
activities of speculative capital that they cannot seem
to recover. Indeed they are now hardly independent,
having to obey the dictates of the so-called
International Agencies, instruments of the powerful
countries.
11. Acceptance of the present form of globalisation
means accepting unrestricted Foreign Direct
Investments. The developing countries may benefit
economically, although this cannot be guaranteed. What
is almost certain is that they will lose control over
the economy. If we are only interested in economic
prosperity at whatever cost, we should accept
globalisation. But if we believe that national self
respect, integrity and independence are also important
then we should look again at globalisation.
12. We can still have globalisation but there should
be some Governmental and international regulations.
Globalisation is not synonymous with deregulation. It
is ridiculous to expect the market to regulate itself.
Governments must regulate for only Governments have the
interest of the majority of the people at heart,
especially democratic Governments.
13. The developing countries must insist on having a
say in the formulation and the shape of globalisation.
It must afford sufficient protection for their weak
economies while ensuring that growth can take place.
Their political and economic independence must be
maintained. No way should they be deprived of their
independence, the independence that they had fought for
over centuries and had attained only in the last half a
century.
14. If globalisation is to be meaningful then all
countries must partake of it. Presently many of the
least developed countries; countries with practically
no market to open have been marginalised. In a
globalised world everyone should enjoy some degree of
prosperity.
15. It is considered logical that profits made in a
country must be shared with that country in the form of
taxes - income tax and corporate tax. But we are
seeing foreign investors and businesses being totally
exempted from taxes by developing countries anxious to
attract FDI. It is also common knowledge when the tax-
free period is over the practice of transfer pricing
render taxation by the host country minimal.
16. It is only fair and logical that businesses
operating throughout the world should pay taxes to the
world. All these businesses are based in the rich
countries. Presently they pay taxes mostly to their
own countries on the profits that they make worldwide.
The revenue gained by their Governments go towards
enriching the life of the people in these already rich
countries.
17. I think it is only fair that these countries pay
statutory taxes to the world because they are
considerably enriched by the world. This tax should be
in addition to aid which is not only insignificant but
puts the recipient countries under obligation.
18. The world tax should be for the construction of
needed infrastructures for the poor countries;
infrastructures which can catalyse their development
and access to the world markets. Ports, airports,
highways, canals and rivers, power plants, railways
etc. contribute much towards economic development. Not
only will these infrastructures facilitate the opening
up of these poor countries when completed, making their
exports more competitive and their imports cheaper, but
their construction would create jobs and generate
wealth for these nations. The subsequent maintenance
through the world tax would keep money flowing into
these countries. The great international construction
companies can build these projects while locals can sub-
contract civil works and supplies.
19. A world tax on those countries which derive from
globalisation opportunities to make more wealth for
themselves is only fair. Malaysia has gained by the
activities of its businesses worldwide and would
willingly pay such a tax. I hope that the rich
countries which benefit the most from globalisation and
a borderless world would accept this tax even if they
are already providing aid to some poor countries.
20. The world will be richer because of the physical
opening up of the poor but frequently resource rich and
densely inhabited regions of the world. The already
rich will get richer but the poor would get a little of
the wealth and infrastructural needs of their
countries.
21. I hope the poor countries will not reject this
idea. The rich will not even take note of this
proposal. But if they want the poor to come onboard
with their WTO and Globalisation, they should make
wealth sharing quite certain by agreeing to this World
Tax.
22. While we focus on how to attract foreign capital
and we adjust our economic system to accommodate the
new world economic order, we must not forget the need
for smart partnerships. Within the country there must
be a smart partnership between the Government, the
private sector and the workers. Others including the
media must be brought into this partnership. It is not
going to be a perfect union but it will facilitate
dialogue and adjustments so as to stabilise the country
and make it attractive to investors both domestic and
foreign. It will also take time because sudden changes
even if it is for the better, is always destructive.
23. There is now a lot of talk of "No pain, No gain".
Countries, even developed countries, are being urged to
suffer the pain of changes in order to achieve the
necessary gains. We cannot be too sure that change
would be for the better. We have seen changes being
forced on some countries, changes which were said to be
for their good, only to result in chaos and total
destruction of their economies and their stability. It
is no consolation to be told that the destruction is
caused by good changes. The pain of destruction for
good cannot be better than no change when the situation
is not bad. When something is working well do not
dismantle it and install another in order to make it
work better. It may not.
24. It is far better to make painless adjustment or to
make minimal and less painful change than to suddenly
turn 180ø because of some ideological beliefs. Even if
the ideology is highly moral and appears to have worked
in other places, sudden change can only destruct and
destroy. Remember how many times we have been urged to
accept and practise an ideology developed in some
powerful countries, only to find it incapable of
delivering its promises, and worse still to find that
the proponents themselves in the end rejected it in
favour of a new ideology. Formerly the flavour was
socialism and many of us became absolute believers and
refused to acknowledge the damage that socialism did to
our countries. Today the flavour is absolute
capitalism. Again we are told that it is the perfect
ideology. What is the guarantee that in time the
destructiveness of unfettered capitalism will be
condemned and discarded.
25. While we should not reject outright new ideas and
ideologies, we should not embrace them unthinkingly
either. We should be cautious and adopt them gradually
watching their effects as they are practised elsewhere.
We should be willing to endure pain only if we see pain
results in gain elsewhere. Until then we of the
developing world should tread cautiously. We are weak
and we should therefore work together for strength, so
we may influence the shape of globalisation and the
free market in order to minimise the risk and the pain
that we may have to endure.
26. If we are smart, and smart partnership obviously
requires us to be smart, then we must ensure that
Foreign Direct Investments will result in a smart
partnership between us and them. They are welcomed to
the comparative advantages such as low labour cost that
we have but we should get in return a small share of
the wealth generated and acquire some of the skills
involved.
27. While foreign direct investments should be
welcomed and the red carpet laid out for them it is
important that local investments, small though they may
be, should also be encouraged and incentives given. In
time local investments would grow quite big and can be
relied upon to stay put in times of economic distress.
It is important to remember that local investors are
our true partners. They really have a stake in the
prosperity of the country. They cannot just pull out
when things go bad. They have to stay and experience
the pain; share the pain with us. So Governments must
be smart in dealing with them. Governments must regard
them as smart partners deserving of the best treatment
that partners are entitled to.
28. Workers must come on board in all our smart
partnership endeavours. They must be told of the
benefits of regarding themselves as partners in the
businesses, whether foreign or local owned, which the
Government promotes. There is nothing like industrial
peace to attract investments. Workers must know and
appreciate that more than the benefits to Government,
investments create jobs for workers. There can be no
job without investments. Even Government cannot just
create jobs if the Government coffers are not filled
with revenues coming from investments.
29. To take industrial action in order to increase
wages will only work for a short while. If the
industry fails to make profits it will not expand to
create more jobs. It may even close down and instead
of higher wages, the workers may be thrown out into the
streets. Industrial peace on the other hand will
increase investments which in turn will create a
greater demand for labour. When demand is high the
wages will also increases.
30. The present campaign aimed seemingly at protecting
the exploitation of labour may look sincere and
genuine. But it is entirely possible that the ultimate
objective is to keep investments at home and further
increase the already inflated wages in the developed
countries. While labour should be on the lookout for
exploitation of labour, it must not be carried away by
the power of industrial action and the sense of
injustice to the point of making investments
unattractive. We will be killing the goose that lays
the golden egg.
31. In any case the ways to increase workers income is
through education and the continuous upgrading of
skills. This is especially important now because the
level of knowledge is the determining factor in the
productivity of workers. We cannot do things in the
old way anymore. Information technology requires new
skills and higher knowledge.
32. We all recognise that the private sector's primary
interest is in maximising returns on investment. On
the other hand Governments must care for the well-being
of the people and the interest of the country. Somehow
the conflicting interests of both must be reconciled.
It is not impossible but both sides must appreciate
this. With this appreciation Foreign Direct
Investments will contribute much to the development of
a country.
Sumber : Pejabat Perdana Menteri
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