Tun Dr. Mahathir Bin Mohammed
former Prime Minister of Malaysia
On: Malaysia in Asia
21 March 2011
“He is qualified with a first class medical degree and then entered into politics. The most important part of his life was the time he was Prime Minister of Malaysia, from 1981 to 2003. He, quite literally, transformed that country in a way that no other leader, east or west, has done to their country. But, I see there are people in the room that know that. When the far-eastern financial crisis broke out, and perhaps Dr. Mahathir will address upon this subject, he had the good sense to tell the royal bank and all the others who were advising him what to do, to go away. He brought Malaysia through the crisis stronger after it than before. There is little else to say. He was the most remarkable leader in the far-east for many, many years and still is a man of great influence. So I give you Dr. Mahathir.”
Dr. Mahathir: “Good Evening, Ladies and Gentleman. Firstly I would like to thank you for this invitation to speak on a favourite subject of mine, namely my own country, Malaysia. The title of this talk is Malaysia in Asia. Malaysia, of course geographically is in Asia. But Malaysia is not quite like the other Asian Countries. We are a multi-ethnic, multi-racial country. We shouldn’t redeem the racists. We are a strong confine to ethnicity, but also through religious belief, language, culture, and also the distribution of wealth, with some communities richer than other communities. And as we know, this is always a cause for a lot of unhappiness and confrontation with your groups. In fact because you know the idea of socialism and communism arose from the fact that people are divided in terms of their possession of wealth. But when you have in addition to the wealth division, you have also differences in race; then the situation becomes absolutely explosive.
When Malaysia was about to gain independence, many inside the country and outside the country felt that this is not a country that was going to last very long. Firstly, because the poor indigenous Malays would probably rob the rich Chinese of their wealth and confiscate them in some way; maybe through nationalization, because it so happens that the indigenous people were actually in the majority. Since we had to doctor the democratic system of government then it is most likely that the government that will be almost entirely Malay, and the things that the Malays would do, being poor people would be to confiscate the property of the rich Chinese.
But this did not happen. Instead the Malay leaders actually decided that since many of the Malaysians of Chinese origin were actually not citizens of the country, and therefore were not entitled to vote during elections. The leader of the Malays, the first prime minister of Malaysia, even before he was Prime Minister decided we should accept one million non-Malays as citizens of the country, without bothering with qualifications; no tests, no nothing. It was required that they would just declare to be Malaysian citizens at that time. That of course reduced the overwhelming majority of the indigenous people, who at that time was made up of 82% of the voters in the country, by awarding these citizenships to the non Malay’s, one million of them. This effectively reduced the majority of the voters who were Malay origin from 82 to about 60 or less.
So actually the Malays were far from taking away the wealth of the Chinese, and offered them to become citizens of the country. One million is a big figure considering that at that time the population of Malaysia was only about 5 million. But that was the measure of the good need that the Malays had for the indigenous, for the Chinese and the Indians in the country. They actually reduced their voting power in order to give the Chinese a sense of belonging to the country.
But still that does not mean that the racial problems did not arise. We had racial problems. But what happened again was the initiative of the first Prime Minister Tunku Rahman. He decided that instead of the majority party honing the government, it would be better if the Malays and their party; the UMNO, United Malays National Organisation; the Chinese with their Malaysian-Chinese Association; and the Indians with their MIC, Malaysia-Indian Congress. The three parties should actually form a coalition so that any race would have a say in the governing of the country. So it was that a party called the Alliance was formed. Made up by these three lease based parties; UMNO for the Malaysians, MCA for the Chinese, and MIC for the Indians.
So each of them had the feeling that they belonged, and they had right to govern the country. But of course, in the system the Malays were in the majority, they had perhaps much bigger representation in the coalition party as well as in the government. Everything was discussed openly and the decisions were made by consensus rule. So it was that the state of having a lot of violence and political instability, Malaysia became relatively stable. And it was due to this great man who was the first Prime minister of Malaysia, Tunku Abdul Rahman. Who incidentally was educated in England. He led the party for 13 years.
Of course subsequently there was a lot of unhappiness within, because the Malays felt that they were getting nothing out of independence. They were still poor, and they felt that he did not give attention to them. As a result there was a party revolt against him. In 1969 there was a general election, and in that election, the alliance party, the coalition did not do so well and it made a lot of people angry, but not enough for them to form the government. It was the alliance who still formed the government but with a smaller majority.
Unfortunately, it was decided to allow people to celebrate and the people that celebrated the most were the opposition parties. Not because they had won, but because they had improved their position. Unfortunately, when you have a demonstration, you do not have complete control over the demonstrators. Passing through the Malays section of the city of Kuala Lumpur, they started yelling at the Malays telling them to go back to their home villages. The country is no longer theirs, and things like that. This was not the policy of the opposition, but they were very boisterous and they felt they could say what they like. This aroused anger among the Malaysians.
The following day the Malays had their own demonstration, there were clashes and a lot of people were killed. The government had to declare an emergency state and rule under emergency procedures. But instead of getting on with more or less authoritarian rule under the emergency, the government worked hard in order to convince the opposition that it is harder not to work together than to fight each other.
So it was that several opposition parties actually elected to join the government party and form a new coalition called the National Front. And in the national front were found most of the opposition, including the Islamic opposition party in the country. As a result, peace returned to the country and very quickly Rhaman was gone, and the next election was to be held as he had been no more obedient when the government of the country was run under emergency law. So when the elections were held because of the growth or expansion of the alliance of the previous National Front, which represents a bigger segment of the people of all races. This party won with the majority and with that representation, the government was able to restore law and order in the country, and to settle the program of rebuilding the country. So that was the political side domestically.
But of course we had problems trying to make a poor country rich. When we became independent, the per capita income was only about 350 U.S. dollars, which essentially at that time was about three Malaysian ringgit to one U.S. dollar. It is still three Malaysian ringgit to one U.S. dollar today. So the figure is quite a query. That is per capita income at that time, 350 U.S. dollars, that does not make us a very rich country. We were basically an agricultural country, with some mining. Because of the increase in the number of unemployed people, who had been educated because we have spent a lot of money on education. It was decided that we had to do something to create an environment of opportunities. We decided that we should industrialize, because agricultural does not breed many jobs.
Industries create jobs, many jobs. Although we had no knowledge of our industry, no capital, no management skills and certainly no technical skill, we decided that we should industrialize the country through inviting people to come and invest in Malaysia. For that we had to be very business friendly and very friendly to outsiders, so that they could come and invest in Malaysia. I would mention that later on of course I became known for a policy called “Buy British Last”. Even then, the Malaysian government was accepted as a very business friendly government and lots of people invested in Malaysia.
This was a time before foreign direct investment. It was very well accepted by other countries. Most countries wanting independence decided that they should nationalize foreign holdings, not bring in more foreigners. They had a period of foreign rule and they did not want to have anything to do with foreigners. But Malaysia went the other way. Instead of nationalizing foreign holdings, we actually expanded foreign investments in Malaysia. This was known as FDI, Foreign Direct Investment. By the time that we did this and we introduced it, it was simply because we needed to create more jobs for our people.
We knew even then, that if people had no jobs, they would create problems for the government. So we created so many jobs, that in the end Malaysia had to import foreign labour. A lot of people from Indonesia, from the Philippines, from Thailand, from Bangladesh and elsewhere, came to work in Malaysia. This is not a very common thing for a developing country. Most developing countries find their own people going to other countries to work. But here is a developing country which has created so many jobs that we had to depend upon foreign labour. Then we decided that we could not have foreign workers because they are sending their earnings, and that is not a good thing to have your money flowing out of the country. So we did not want this to happen. We should go for high tech investors, which would mean a lesser number of workers, but they would be better trained and better able to earn through their skills. So that was the policy which enabled the country to remain stable, to be attractive to foreign investors and of course in the process have our economy grow.
Today we are earning about 7 to 8 thousand U.S. dollars, but in purchasing power terms it is about 14 thousand U.S. dollars. So the country has done quite well.
But along the way we had problems. We had problem with the communist insurgency. We had to spend a lot of money fighting them. We had problems of course keeping the different races working together, living together. This is a problem because the difference is not just about race, it is also about religion. And religious differences can lead to tremendous amounts of problems. Differences are also with language and culture. Above all are the differences in wealth of the different communities. We tried to correct many of these differences. Since we cannot change peoples race, we decided that we should change the divisions classified by the disparities in wealth. We introduced affirmative action and that has solved some of the problem, though not all.
So we grew, and we had to piece together a lot of problems with regard to policies involving foreign countries. We had a confrontation; or rather the Asians confronted us in the beginning. We had to solve the insurgency problem. We had periods of depression in the country. And so on. I inherited the good situation that was left by my predecessors, the first three Prime Ministers. Although, at the time I became Prime Minister, the country was going through one of these periods of depression. We had to tackle that problem, and we did.
Then there were problems with our neighbours, because of overlapping claims. We had to go to the world court for that. We had a number of incidents involving our neighbours, but we tried to be friendly to everyone. We do not care with what the ideology was. Because initially we were very anti-communist. The first Prime Minister was really anti-communist, and he had reasons to feel that way about communists.
But, later on we decided that what people’s beliefs are, is none of our business. What we wanted to do was be friendly with them. This is extremely important for Malaysia because this is basically a trading nation. Our wealth can only grow if we can increase our trade. Therefore we are forever looking for new markets for our products. How we produce and run our raw materials like rubber, and tea and barbed wire and cocoa, pepper, and things like that.
So we had all of these natural products to export, but when we decided to industrialize, we knew the market in the country was too small. We had to industrialize and produce goods that are desired by the rest of the world. So we spent our time going abroad looking for new markets and being friendly with people. That way we became at one time, the 17th biggest trading nation in the world. For a country at that time that was less than 50 million, we think it was a great achievement for a developing country. We had to face problems that were international practices which somehow or another did not seem to be suitable for our country. We had been accused of having a Dictatorial government. Not giving them the freedom that the democracies had. We hope people will understand that running a country that is new, not very familiar with democracy, and divided by different races and religions, is not the easiest thing in the world. There were times when we had to result to less democratic means in order to prevent outbreaks of racial conflicts in the country.
We were quite careful about running the country down south with finances. We borrowed money, but not much. Then of course came this attack on our currency by the currency traders in 1997.
I was on a holiday in England at the time and this thing broke out just as I returned home. And we had to deal with this thing. Now currency was being devalued, and it was half its original value. What that means is that we had become poor. Poor by half what we were before. People were quite miserable. Banks were having problems. Businesses were having problems, people were going bankrupt and we had to deal with this.
We were being advised of course by the experts in the World Bank and the IMF. They told us to do certain things which we thought would only worsen the situation. So we opted not to accept their advice. They wanted us to achieve surplus budget every year, which means we had to cut our funding of the ministries in order to achieve surplus budget. We had surplus budget before but because during the period when the currency is devalued, it is extremely difficult to achieve surplus budget. Then they told us to shorten the period for declaring that a loan is non-performing from six months it should be reduced to 3 months. Again this would mean that people and businesses would be bankrupted, and the banks also would be bankrupted. Many of the advice given to us seemed to not be in the interest of our country. Because we would be worse off if we followed them. Of course all of our neighbours were following their advice. But they were getting into trouble because they followed the advice of the IMF and the World Bank. We were bailing out countries and banks. They said that is the wrong thing to do. You must allow banks to go bankrupt, you must allow businesses to go bankrupt. If they are not efficient, they should go. Why are you trying to help them? Possibly being known that they are bailing out companies and banks with not the amounts that we use, but with billions of dollars, hundreds of billions of dollars.
Now I think we understand that better, we appreciate that. But in the end of course we decided we would do the unorthodox thing. Malaysia is fond of doing things that other people think is wrong. For example, we had a policy to look east. When people were looking west, we looked east. Then we decided that if Japan Incorporated is helpful for Japan, then we should have Malaysia Incorporated. As you know, Japan Incorporated was criticized by a lot of lending economies. You should not have any corporations or business within the government. We thought otherwise. We thought well the government is also responsible as citizens of the country, so are the business people. What we do in the government to give them hobbies will eventually come back to the government because our income tax rate at that time was 45% so it made their business profitable. We stood to gain 45 cents out of every dollar that they made so we asked the question why shouldn’t you work with the private sector?
We sat down with them and told them these are the things that you must do you must abide by the law and the laws and regulations. But we would like to see you make a lot of profit. Because the more you make, the more revenue we will collect from you. We are not working for you, we are working for ourselves, because 45% of your earnings belong to us. So we decided that we should have Malaysia incorporated which means the government would work very hard with the private sector and it did help Malaysia grow much faster than most of the other countries.
A possible solution to the crises was to instead of letting the market fix the exchange rate, we decided that the government would fix it, and that no one should trade in Malaysian ringgit. They said that we would go bankrupt and that if we do that, it would be a black market. People will forsake the ringgit. But actually we recovered much faster than the other countries affected by the currency crisis.
So that is part of the history of Malaysia. We believe in being friendly with all countries. We believe that in exercise of our rights to free speech we should criticize whoever we feel we should criticize. Whether they are powerful countries or not, that does not matter; because we are covered by freedom of speech. There will be no freedom if you cannot criticize the rich and the powerful.
So we annoy a lot of people, because we criticize them. But I think this is something that is good in terms of our reputation with smaller countries. There is somebody who is there to speak for us, because we are very friendly with the small countries. We spend a lot of time visiting small countries. Making friends with them, rather than making friends with the rich and the powerful.
When I became Prime Minister, of course you would have expected that I would make the pilgrimage to Washington. The American ambassador was very busy arranging a visit. I did not ask him, but he came to me about how hard he was working. So I had to tell the foreign office, please tell his Excellency that I have no intention to visit Washington anytime soon. Well I would not see anywhere I need to meet with the rich, except to Mecca. As a Muslim I make my own pilgrimage to Mecca of course. But I would make the pilgrimage to Washington. I went there only 3 years after I became Prime Minister. During my time, I felt there was a need for us to exhibit our independence. We were colonized for 450 years. Being independent must be meaningful. If you are independent and yet you still have to call out to other people then you are not independent. So despite warnings that another crisis would happen to Malaysia and to me, we decided to pursue our independence.”