The International Herald Tribune's Conference "Malaysia: Powerhouse of the Nineties", Kuala Lumpur, 16 November 1993
We are very much encouraged by the theme of this conference. However, to describe Malaysia as the "powerhouse of the nineties" is certainly an overstatement. Inasmuch as we want to be so, we are currently embarking on an ambitious target to become a fully developed nation - Vision 2020.
The Prime Minister, in his inaugural speech yesterday alluded to some of our economic virtues. Malaysia has achieved the present level of economic prosperity because of the cumulative effects of three decades of economic development and sustained growth. Even when the Malaysian economy slowed down in the middle of the last decade under the impact of global recession, it rebounded later with greater vigour and dynamism. We are now entering our seventh "fat year," with the economy growing between 8 to 9 percent since 1986.
We have achieved remarkable price stability within this period of high growth. A judicious mix of monetary and fiscal policies had suppressed inflation to below four percent. We are determined to bring inflation to the lowest possible level. We have kept a tight rein on public expenditure, including cutting back on government spending, to control the growth of aggregate demand. Since last year, we have reduced and even eliminated import duties on more than 1,000 items to make their prices cheaper.
It was by no means an easy effort to lift the Malaysian economy out of the mid-eighties recession, to emerge healthier and stronger. We did not choose the popular path of pump-priming the economy. In fact, the earlier expansionary counter-cyclical approach was not only a failure but also expensive. As a result, Malaysia's foreign debt ballooned, and the deficit, both in the balance of payments and government finance, reached chronic proportions. We had to muster the courage to introduce reforms which, among other things included instituting macro-economic stabilization measures to put the economy back in the growth path, this time with the private sector taking the lead. To release the growth potential of the private sector, privatization was introduced, and stifling regulations relaxed. The public sector, whose expansion had caused it to become almost unwieldy, was downsized, or rightsized, to make it more dynamic and responsive.
These measures are now so well-known to the extent of becoming an economic dogma, promoted with zeal by international organizations, for the developing countries. However, their implementation is often not without pain, thus requiring sacrifices. In the case of Malaysia, it was because we always had a strong government that we were able to implement these measures without much difficulty and weather out the initial opposition against them. As the experiences of other high performing East Asian countries testify, political stability provided by a strong government is a necessary pre- requisite for sustained growth.
It is our conviction that the only legitimacy for strong government is to ensure law and order and the improvement in the standard and quality of living for the people. Uninterrupted political stability has enabled us to implement pro-growth policies. Thus the well-being of our people has improved tremendously with rising productivity, incomes and access to better education and health care.
Even while we are pursuing our pro-growth strategies, which is more pronounced since the middle of the last decade, we are not postponing or soft-pedalling our target of social justice and growth sharing. We are ever mindful of the pluralistic nature of our society and the dire social and political consequences of glaring economic inequalities, especially along ethnic lines. But above all, it is a moral imperative to ensure that no particular group is deprived or alienated from the national development process. In the 1994 Budget tabled three weeks ago, we have introduced measures to reduce economic disparities between regions in Malaysia.
While our pursuit of social justice is even more pronounced now, the programmes to achieve that goal will be refined to be more market friendly. It is the good fortune of Malaysia that our past leaders had never been seduced by socialism. Even as the economic policy shifted towards ensuring fairer wealth distribution, it was never directed at displacing or stifling the role of the market as the most efficient way of allocating resources.
We cannot over-emphasize these social and political foundations of our economic prosperity because they are often over-looked and misunderstood by most foreigners, investors and observers alike. The roots of a tree are always hidden from us but they are the ones that make great trees stand erect. Such is the case with our country. Vision 2020 is not only of a Malaysia that is fully developed and industrialized, but also of a Malaysia that is just and caring, technologically advanced and culturally vibrant.
However much we drew from the experiences of the West in economic management the progress of Malaysia, and, I believe, the other seven high performing East Asian economies which constitute the so-called East Asian miracle, will not be a duplicate of the path trodden by the Atlantic societies. In Malaysia, we are pursuing growth within the framework of positive Asian societal values and traditions. We are even more conscious of the need to revitalize those positive values and traditions and to harness them to neutralize the impact of negative elements attendant to economic progress and industrialization. As the experiences of the industrialized societies has shown, the welfare costs of the breakdown of family institutions are tremendous and have kept rising. True enough, as this region grows in prosperity, there will be greater demand for a more caring government and society. But I believe Asian societies can avoid moving towards the welfare state as long as their values and traditions remain intact.
Rudyard Kipling, the poet laureate of high imperialism, is never considered a visionary. But he did grasp the nature of Asian societies when he said: "Asia will not be developed after the method of the West. There is too much of Asia and she is too old." Pluralism will be an enduring legacy of Asia, of which not only the West will have much to learn, but also the Asian themselves will have a lot to rediscover. True, Asia was old and decadent in Kipling's time, but a reawakened and rejuvenated Asia will contribute immensely in the making of the 21st century world.