THE INSTITUTE OF SOUTH-EAST ASIAN BUSINESS ROUND TABLE FEBRUARY 2, 1991
We in Southeast Asia have been witnessing some very profound changes taking place in the world around us. For one, the Soviet Union is now merely a part of history and with its demise much of our received ideas have now to be revised. We can no longer simplify the complexities in the relationship between people and nations in terms of a bipolar ideological conflict. For at the same time, we notice also the major industrial countries of the West and Japan are having to grapple with economics and economy related problems of their own. These must certainly affect us in way or another. But it also remarkable that the dominant mood in Southeast Asia today is optimism in the future, in spite of the uncertainty of the shape of the post - Cold War world order.
In part this optimism is brought about by the expectation of an emerging moral and ethical not just economic, political and military order in world affairs. For instance, there is now a greater consciousness for a more equitable and democratic conduct in international relations. The impending exit of Apartheid will hopefully remove one of the most shameful blots of our time. And closer to home, Indochina is slowly reemerging after more than a decade of instability. But perhaps the most significant is our economies in Asean have been growing from strength to strength in the past few years.
The recent Summit of Heads of Asean government again reiterated the grouping's overall commitment to economic growth by taking concrete steps to enhance trade and cooperation between and among member countries. Indeed Asean has become a respectable model of economic cooperation among developing countries despite obvious differences in economic and political structures. However, these differences are considered of little significance compared to the long-term benefit of a more economically integrated region. Regional economic integration is indeed a worthy objective and its realization needs the combined efforts of not only the governments but also the private sector. In fact, it is the private that must be the prime mover. Governments in the final analysis can only provide the framework and the right environment for freer flow of capital and resources within the region. In this regard we feel that the East Asia Economic Caucus is a necessary and logical development of what is essentially the natural dynamics of our closely-related societies.
Following the measures taken by Asean government towards greater deregulation and liberalization, this region is poised to become the growth centre of the world. Malaysia in particular has for sometime emphasized major structural reforms to strengthen the competitiveness and efficiency of the economy. This includes privatizing key public utilities and deregulation of the financial sector. This strategy has enabled us to sustained economic growth of 9 per cent annually between 1988 and 1991.
For Malaysia, there is no turning back. Having successfully accomplished the goals of poverty alleviation and reducing the disparity between major ethnic groups, our future policy directions will be to sustain the growth momentum. Further improvements in the quality of life of the people can only be contemplated in a context of a growing economy. This includes our commitment to eradicate hard core poverty by the end of the century.
In our experience, private investment responds positively to judicious public spending on infrastructure including health and education as well as to determinants such as profit, projected income and real effective exchange rate. Therefore, our public expenditure priorities will be reoriented to ensure private sector growth. Public expenditure would be increase in those areas where it is needed to stimulate and strengthen private investment. Those component of government spending that retards private sector advancement will correspondingly be reduced. This of course must be taken in the context of prudent management of the resources available to the government.
The government is committed to further progress on privatization. Indeed, a national consensus has emerged concerning the desirability of privatizing public enterprises. The path we have chosen involved a marriage of profitability and efficiency with social responsibility. In the process, private sector management has improved the efficiency of the privatized entities resulting in better services to the public and as well as improved working conditions for the employees.
We have made it a condition for privatized companies to allocate a significant amount of their profits for education and training and research and development activities. Education and training cannot be left government alone and an educated labour force was central to Malaysia's remarkable growth performance in the past and will with appropriate upgrading of skills be crucial in sustaining future growth. We will have to continue to invest in human resources and to promote diversification into high technology and high value added industries as well as services to further modernize the economy.
This is essential as Malaysia becomes more industrialized as the existing industrial structure particularly those export oriented in nature has low local value added content. Thus to prepare for greater diversification we are now reforming our incentive system to encourage high technology and value-added industries in the economy. It is also important that Malaysia given its small domestic market and tight labour conditions maintain its competitiveness and resilience. Its multiracial nature and high expectation to improve the standard of living, make it imperative for us to achieve sustained economic growth and modernization to provide sources of growth and modernization.
In the immediate future, the competition for resources and uncertainty in the industrialized world, pose challenges to the Malaysians to shoulder a greater responsibility to finance economic growth. We need to enhance our national saving rates so as to reduce dependence on outside sources of financing. Our target is to achieve saving rate of about 35 per cent of GNP. It is a matter of grave concern that at present the national savings rate is declining both the public and private sectors must therefore be more frugal.
Finally, we are determined to forge ahead together with our neighbours.