SPEECH BY TUN DR MAHATHIR BIN MOHAMAD IN KHARTOUM, SUDAN ON 1 NOVEMBER 2012
02 November, 2012
KHARTOUM, (sudanow.info.sd)- REFLECTIONS ON MALAYSIA’S DEVELOPMENT EXPERIENCE” ,
Distinguished guests;
Ladies and gentlemen,
I would like to thank the University of Khartoum and the office of the first vice president for this invitation to speak on Malaysia's development experience.
1. Malaysia was a poor country at the time of independence. The per capita was about USD 350/- and the economy depended almost entirely on the production and export of rubber and tin. The rate of unemployment was more than 50%. Poverty was rampant.
2. Malaysia did not believe in any ideology. It was neither socialist nor capitalist. We were and we are pragmatists. We were prepared to copy any part of any ideology if it could help us develop our country.
3. Although we had continued with the market economy introduced by the British colonialists, we had no difficulty in accepting socialists systems. Thus very soon after independence we decided to adopt the socialists’ five-year economic planning method.
4. The five-year plans detailed out the policies, strategies and actions we needed to adopt and take to grow our economy. These plans were properly implemented one after another. Then we introduced long term perspective plans to determine the direction of the country’s development and economic growth. And finally, in 1991 we mapped out a vision plan targeting to become a fully developed country by 2020.
5. While the five-year plans spelt out the various projects including infrastructures that we must put in place, the vision plan was largely about the targets we hoped to achieve. Knowing the targets enabled us to direct the economy and development so as to achieve the vision. Today we have accomplished much of the development needed to make us a developed country by 2020. However since much of Malaysia's growth is through trade with foreign countries, we have become affected by the failures of our markets in Europe and in America. The two regions take up 40% of our trade. We hope to overcome this by developing new markets in other regions.
6. The leaders of the struggle for independence knew that the people expected their life to be improved after we took charge of the destiny of our country. The people themselves indicated the line of action that the government should take. They needed jobs and a reasonable income. To them the only way to make a living was to clear the jungle and plant rubber. But their lack of funds hampered their progress.
7. Taking this cue the government decided to start a land scheme. Identifying suitable forestland the government cleared it and planted rubber. The unemployed were allocated 10 acres each but the holdings were amalgamated and were managed as large estates by trained planters. This scheme has since grown to become probably the biggest estate in the world with one million hectares under one management. Today this land scheme has expanded to include palm oil refineries, shipping, trading and foreign investments.
8. But the growth of the estate was limited by the shortage of land and the need to preserve the forests. There were still a large number of people who were unemployed even after this scheme. The necessity to create jobs remained and the government decided to go into the manufacturing industries. Manufacturing industries create more jobs per acre of land than agriculture.
9. But the government and Malaysians generally had no expertise in manufacturing; no capital, no management knowhow and no knowledge of the market, in particular the foreign markets since the Malaysian market was too small to support the large industries needed to absorb labour and create wealth.
10. thus long before there was talk about Foreign Direct Investments (FDI), Malaysia went against the trend in newly independent countries and decided to invite foreigners to invest in Malaysia. Incentives and tax holidays were given to foreign investors who responded. The government adopted a business-friendly policy. The focus was on labour intensive industries because of the unemployment problem. The government was not interested in making money from taxing these foreign-owned industries.
11. The success of this strategy was such that there were not enough Malaysian workers to man the industries. Foreign labour had to be brought in.
12. With the increased flow of foreign funds into the country and the wages earned by the workers and Malaysian executives, the purchasing power of the people grew. This resulted in the growth of local investments in retailing and the manufacturing of component parts for the foreign industries and also simple products such as food-canning and garments. The transport industry also grew and this eventually lead to the assembly of foreign cars and trucks and ultimately to the manufacturing of the national car to meet the demands of transportation of goods and people.
13. The decision to produce a national car was crucial to the engineering industry. The need to produce parts and components for the national car resulted in small and medium engineering industries being set up. From this came other engineering-based industries. Today Malaysia produces a lot of steel, aluminium and plastic products, which support the fabrication of chemical plants and for the offshore oil production platforms, including specialised boats to support the oil and gas industries as well as specialised vessels and barges for harbours. Many of these manufacturing and fabrication industries now go into the construction industry and one of them fabricate steel structures for high-rise buildings including the Burj Khalifah in Dubai.
14. With the growth of the economy and wealth, private sector vehicle ownership grew strongly, as do transportation equipment. They require better roads and the country had to build expressways, roads, elevated highways to cater to their needs.
15. One of the main projects was a six-lane modern expressway extending from the southern tip of the peninsular to the Thai-Malaysia border in the north, a distance of nearly 900 kilometres. The demand for highways grew and the government had to turn to the private sector to build tolled expressways covering the whole country.
16. The highways leading out of the towns were soon lined with housing estates, factories and shopping complexes. New towns sprouted up all along the new highways.
17. With ease of travel domestic tourism grew quickly. This was followed by an increase in the number of foreign tourists. The service industries grew. Hotels and restaurants were built creating more jobs and increasing the spending power of the people.
18. To meet the needs of this new-found wealth of the people better infrastructure had to be provided. Dams for water-treatment plants and electric power plants were built. The ports and airports were expanded as the travel business grew. Despite the country having no historical monuments to attract visitors, new hotels and resorts were built in the urban centres to cater to the increase in business travellers and on the scenic coasts for rest and recreation. Foreign visitors gave a steady income to the service industries. Tourism became the second biggest industry in Malaysia.
19. As the manufacturing industries grew industrial goods displaced commodities as Malaysia's principal exports. Today manufactured goods make up 80% of the exports, although earning from agricultural and mineral products, including petroleum also grew. The contribution of manufactured exports pushed Malaysia up to 17th place in terms of world trade. This contributed much to the growth of ports, airports and the shipping industry.
The look east policy
20. Early in the 1980’s Malaysia decided to look east towards Japan and Korea in order to emulate their rapid economic growth. These two countries were almost completely destroyed by war. Yet they very quickly became a powerhouse, with consistently high economic growth.
21. Our main focus was to learn the work ethics of these people. We believe that work ethics play a decisive role in determining whether a country would develop well or not. We noticed that hardwork, discipline and national pride are the ingredients required for fast development.
22. These aspects of the value system of the Japanese and Koreans were studied and attempts made to adopt them. We noted that although they had workers union, they seldom go on strike. The workers were very loyal to their employers and the companies, which in turn look after their welfare for the whole of their lifetime. Even during downturns Japanese workers were not sacked.
23. The Japanese have a strong sense of shame. When they fail in their task they would feel such great shame that they would even commit suicide. They don’t do that now of course but they would still feel ashamed if they fail to produce the best products. Today Japanese goods are known for their high quality. Being cheaper than the goods from the west, their quality products soon pushed out western goods from the world market.
24. We in Malaysia wanted to have the Japanese and Korean work ethics and a strong sense of shame if we fail to deliver what is expected of us. Although our workers don’t quite succeed in adopting the eastern work ethics fully but the quality of Malaysian manufactured products improved considerably so that we could enter the international market.
25. We also studied the cooperation between the government and the private sector in Japan and Korea so as to ensure profitability for the industries. We accordingly created the Malaysia incorporated concept in which the government work closely with the private sector to ensure their success and profitability. Bureaucratic delays were minimised and efforts made to prevent corruption. The whole government adopted a business-friendly policy in order to improve interaction between the private sector and the public sector so as to be able to provide better service to the business community.
26. In Malaysia the corporate tax was reduced from 45% to 26% over a period of time. This encouraged investment greatly. This reduction is due to feedback from the private sector. The lower tax encouraged investment and reduced tax avoidance.
27. Many criticised our Malaysia incorporated concept. But as 26% the profit will be paid to the government as corporate tax, we were really working to increase government revenue when profits are made. When companies fail the government could not collect any tax.
28. Not only did we copy the system and practices of these eastern countries but we actually sent our workers to work alongside Japanese worker in their factories. That way our workers learnt to work like the Japanese. We also sent a large number of students to study in Japanese universities. A smaller number of our students were sent to South Korea.
29. To ensure the success of all these strategies we had to provide suitable manpower. Consequently Malaysia spends almost one-fourth of its budgets on education and training. Our people were thus able to build and man all the facilities provided to ensure the success of our growth plans.
30. Success breeds success. As the country grew in wealth and quality of life, both foreign and local investors invested more and more in the country. The result is the rapid growth and development that you see in Malaysia today.
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