The 1994 Malaysia Summit Meeting, Kuala Lumpur, 21 November 1994
Malaysia's economy has reached its present state by a series of structural transformations. We have leapfrogged from an agriculture-based economy to manufacturing, and progressed from high unemployment to fill employment. These are fundamental economic indicators, showing a robust economy that continues to charge ahead. Viewed in this light, the Industrial Revolution appears to have proceeded at a snail's pace, compared to the massive leaps experienced by Malaysia and other economies of East Asia. Nevertheless, our greatest success has been the eradication of mass poverty. Twenty-five years ago, about half the population of our country were living below the poverty line. Now, while the population has more than doubled, the incidence of poverty is found in only 8.8 percent of the total population. Still we readily recognize that this percentage of poverty-stricken households represents a serious challenge, and we remain unrelenting in our efforts to liberate every single family from the gridlock of poverty.
Our concern, or if you like, our preoccupation with the eradication of poverty stems from our philosophy that economic development cannot be divorced from overall societal development. Hence we place great emphasis on enhancing the quality of life of the people as a whole. Whilst pursuing economic progress, we are not so much concerned with the macro-economic indicators per se, as with the benefits actually realized. And these are none other than the ready access to health, medical and other social services, intellectual growth and cultural enrichment, meaningful participation in the political process, and the maintenance of societal stability and harmony. Hence we have renewed our endeavours to achieve these objectives and to tackle new problems brought about by rapid industrial development, such as environmental deterioration and moral decay.
Development planning, through our national development plans, clearly delineates the active role of the Government and the free enterprise system where the private sector is allowed to operate with maximum flexibility. The success of this strategy thus far is borne out by the rapid rise in per capita income from US$360 in 1970, to more US$3,400 by the end of the year while keeping a lid of inflation. Inflation averaged 6.7 percent in the 1980's and was reduced to an average of below 4 percent in the last four years. These, together with the reduction in the incidence of poverty and the attainment of full employment, are the fruits of pragmatic economic management rather than chance or the operation of external forces.
We have been able to mobilize domestic savings and foreign direct investments (FDI) to achieve a total investment rate averaging 40 percent of GNP in the last seven years. From being solely an exporter of primary commodities, more than three-quarters of our exports currently comprise manufactured goods. We are now the 18th largest trading nation in the world as a result of export diversification policies undertaken from the early 1980's. Sound and pragmatic labour practices, coupled with continuous public sector investments in education and health, have ensured a sustained supply of skilled manpower to meet the demands of rapid growth.
A key policy shift from the beginning of the last decade, with far-reaching ramifications on the economy, has been effected through privatization. Had we continued with the conventional method of infrastructure development, a massive accumulation of public debt would have been inevitable during the last few years. Through privatization, we have built, among other things, highways, telecommunication networks and power plants. We have combine the positive effects of privatization with prudent fiscal measures to arrive at a balanced budget for three years in a row. It is significant that this has been achieved neither by scaling down development nor by raising tax rates. On the contrary, we have successfully carried out several mega projects while at the same time reducing taxes.
Critics are often quick to point out that privatization tends towards an overemphasis on market-oriented policies, to the detriment of the consumer and at the expense of social justice. From the very beginning we were mindful of the possible adverse side-effects of privatization. Indeed, our policies were formulated precisely to avoid the pitfalls. Now we can say with some measure of confidence that we have proven the querulous sceptics wrong. We have gone even further, that is to utilize privatization as an instrument of social policy, to achieve a fairer distribution of wealth among ethnic groups, narrow the gap between the rich and the poor, and foster a more rapid development of local entrepreneurship.
As Malaysia is an open economy whose growth is contingent on the expansion of our export sectors, we are naturally very concerned with the deterioration of the global trading environment. In this regard, we support APEC in so far as it would truly enhance trade and investment in the Asia- Pacific region, without placing any member nations or potential members at a disadvantage. We are in principle opposed to the creation of any exclusionary trading bloc, although we are not averse to the idea of independent nations coming together on a common platform, to facilitate mutual trade and commerce and to adopt uniform positions on multilateral trade issues. Malaysia will continue to champion a more open and transparent global trading system that will bring prosperity to all. It is our conviction that the dynamism of the East Asian economies can be harnessed for a freer world trading regime.
The successful conclusion of the protracted Uruguay Round negotiations and the establishment of the World Trade Organization should herald a new era for liberalized international trade. Thus we are rather perturbed by the latest the political development in the United States and the consequent pronouncements of the Republican congressional leadership that they will oppose the ratification of GATT. It is our fervent hope that they do not succumb to the demands of protectionist lobbies. Unless all the contracting parties ratify the agreement by the end of the year all our efforts would be rendered futile.