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Remarks by H.E. Dato' Seri Abdullah HJ. Ahmad Badawi
H.E. Dato' Seri Abdullah HJ. Ahmad Badawi *
California Centre, September 17, 1998
Speeches and Transcripts: 1998
Ladies and gentlemen
I am pleased and honoured to be here this morning. I am pleased because I am in the company of old friends. I am honoured because I know am in the company of very illustrious and important persons. Besides being members of the Pacific Coast Asia Society you also represent other important companies and organisations. As members of the Pacific Coast Asia Society you form particularly important " bridges" between Asia, including Malaysia, and the United States of America. Though the mountains are high and the oceans are wide, it is a small world after all.
2. You have requested me to address you on the Malaysia–U.S. bilateral relations. I am happy to oblige. I think it is a good time to exchange views on the subject . A lot has happened within the past year that has significant bearings on the relations between our two countries.
3. There is a lot to talk about and this has made the selection of the proper approach not an easy task. Nevertheless, I have decided to talk on Malaysia–U.S. relations and the challenges. I shall confine myself to the following: common values and systems, areas of regional and international cooperation, areas of bilateral cooperation, the current Asian economic crisis and the challenges ahead.
Ladies and gentlemen
4. Before I proceed, allow me to state at the very outset that the relations between Malaysia and the U.S. are in many ways unique and for us in Malaysia they are of enduring importance.
5. Now permit me to say some words on our common values. Perhaps not many of you realise it but among the critical factors that cement the relations between Malaysia and the U.S. are shared values and systems that exist between us despite having different core cultures and religions. Both our countries practise democratic political system and the free market economic system. We also share common adherence to pluralistic societies characterised by tolerance towards different races, different religions and different languages.
6. While there is no single model of democracy, no one can seriously doubt Malaysia's credentials as a democratic country. There is currently a total of twenty–seven (27) political parties and three (3) of them are in the opposition. The opposition parties, though small are very active. General elections and internal party elections are always held in a free and fair manner.
7. Indeed we can reasonably claim that democracy in Malaysia is well established, with strong roots, though its history may not be as long as that in the U.S. Some of you may be able to recall that Malaysia fought and won the fight against communist terrorists in the " emergency" period, from the end of the Second World War until 1961. Our situation today could be less favourable had Malaysia not prevailed against the communists during the " emergency" period. Our strong democratic tradition and practice of tolerance are major factors that had contributed and continue to contribute towards a virtually unbroken period of peace and stability in Malaysia since its independence in 1957.
8. Malaysia's belief and adherence to the free market economy is equally well rooted. Indeed Malaysia had embraced the free market economy from its very birth. Malaysia's trade liberalisation and privatisation measures were also undertaken much earlier than even many Western European countries.
9. In regard to the concept of pluralism, it is interesting to note that Malaysia and the U.S. are amongst the first few countries to seriously institute affirmative action to promote their national development with equity and justice.
Mr. President
Ladies and gentlemen
10. Besides having common values and systems, the relations between Malaysia and the U.S. are also characterised by the existence of close and cooperative collaboration in a number of regional and international organisations. The two countries are members of the Untied Nations and its specialised agencies, the Asia Pacific Economic Cooperation (APEC), and the World Trade Organisation (WTO) among others. The U.S. is one of the dialogue partners of the Association of Southeast Asian Nations (ASEAN) and both are members of the ASEAN Regional Forum (ARF).
11. The two countries cooperate closely and actively in all these fora. though they do not always agree, the convergence of views is very high. The two countries share common concerns and adopt similar positions on major issues such as peace and security, drugs, environment, terrorism and disarmament. The two countries' peace–keeping personnel have served side by side in Bosnia and Somalia. In regard to the situation in the Korean Peninsula, Kuala Lumpur had the honour to act as the venue for the negotiations between the U.S. and the People's Republic of Korea on the question of the supply of light water nuclear reactors to North Korea under the framework of the Korean Peninsular Energy Development (KEDO) in May–June 1995.
12. Malaysia and the U.S. also work closely within the framework of ASEAN. In the context of the ASEAN–U.S. Dialogue, Malaysia and its ASEAN partners and the U.S. have developed a number of cooperative projects related to information technology, human resources development, science and technology and the environment, among others, in order to enhance the socio–economic development of the countries of ASEAN. As members of the ASEAN Regional Forum, Malaysia and the U.S. along with the other members of ARF have established cooperation for the promotion of durable peace, stability and security in the region through various measure such as confidence–building measures and preventive diplomacy. Though it was established only as recently as 1994 it is no exaggeration to say that ARF has contributed significantly in reducing tension and enhancing peace and stability in the region.
13. Being members of the Asia Pacific Economic Cooperation (APEC) Malaysia and the U.S. work closely for the promotion of greater economic cooperation among the Asia–Pacific countries especially in the areas of trade, investment, human resources and technology. Our two countries do not always share the same vies on the pace of cooperation but there is a strong agreement on the need for such cooperation. Both countries are committed to the complete liberalisation of trade in the APEC region, by the year 2010 for the developed members and the year 2020 for the developing members.
Mr. President
Ladies and gentlemen
14. What I have just mentioned are only some of the areas of cooperation in the regional and international arena between our two countries. Now I would like to move on to the areas of bilateral cooperation.
15. The areas of bilateral cooperation between Malaysia and the U.S. are multifaceted and substantive. They cover trade, investment, education, air services, tourism and defence cooperation.
16. The U.S. is Malaysia's biggest trading partner as well as the biggest source of direct foreign investment. The total trade between the two countries for the year 1997 amounted to US$20.6 billion (using the exchange rate of US$1=RM3.8) with exports by Malaysia to the U.S. amounting to US$10.8 billion making the latter Malaysia's second export market. Imports from the U.S. stood at US$9.7 billion, ranking the U.S. as the second biggest source of imports for Malaysia. For the period between January–July 1998, the total bilateral trade was US$16.6 billion.
17. The U.S. ranked as the second largest investor in the Malaysian manufacturing sector for the period 1993–August 1998, with total U.S. investments amounting to RM12.6 billion (US$3.2 billion) in 232 projects. For the period 1997–August 1998, the U.S. was in fact the largest investor in the Malaysian manufacturing sector. Based on existing survey data, as at the end of 1997, there were 321 projects in production with American investment amounting to RM$7.4 billion (US$1.9 billion). U.S. investments are largely in electrical and electronics and the petroleum products including petrochemicals sector followed by the chemicals and chemical products, fabricated metal products, rubber products, plastic products and machinery manufacturing sectors.
18. While Malaysia is not among the U.S.' major economic partners it is not an insignificant one either. It ranks 12th among U.S. worldwide trade partners and is the 17th largest export market for U.S. manufactured goods. Malaysia buys more from the U.S. than Russia, India and Indonesia combined. This is no small feat for a country of only 22 million people.
19. Besides trade and investment, there is also a considerable exchange between our two countries in the area of tourism. In 1996, about 50,000 Malaysians visited the U.S. and over 101,000 Americans visited Malaysia. Though the total number in both cases is relatively small the trend is encouraging, pointing towards increasing inflow both ways. The signing of the Agreement between Malaysia and the U.S. on the open skies policy in June 1997 and the subsequent operation of the Malaysian Airline (MAS) flight from Kuala Lumpur to New York, in addition to the Kuala Lumpur–Los Angeles flight, will further facilitate the tourist exchanges between our two countries.
Mr. President
Ladies and gentlemen
20. The bilateral relations between our Malaysia and the U.S. are not confined only to economic fields but also extend to the non–economic areas. Among these important areas is education. Over 100,000 Malaysians have graduated from U.S. universities and currently there are over 9,000 who are still studying at the various institutes of higher learning in the U.S. At this peak, in the mid–1990s, the total population of Malaysian students was about 13,000. This is quite a big number for a small country.
21. Currently there is also a small group of U.S. citizens studying in Malaysia's institutes of higher learning. Twelve of them to be exact. Though the number is small the development is very encouraging as it makes the flow of students between our two countries more a two–way traffic than just one way. The flow of students into each other's country constitutes an important link between our peoples, particularly the youths who are potential leaders of tomorrow. Such a development should be further enhanced in the future as Malaysia pursues its policy to turn the country into the educational centre of excellent in Southeast Asia.
Mr. President
Ladies and gentlemen
22. Now I would like to touch on the subject of the current Asian economic crisis. When the crisis first emerged in July 1997 following the flotation and subsequently the devaluation of the Thai currency, the baht, most observers thought it was going to be over quite soon, within a year or two. The West including the U.S., if I am not mistaken, had thought that the crisis would only affect the weak Asian economies and their own would be left unscathed. How wrong they have been! There is now virtually a unanimous view that the crisis is worse than expected. It is also not going to be confined only to Asia but threatens to impact the whole world.
23. The damage the crisis has wreaked on the economies of the region varies from one country to the other but it has been devastating nonetheless, in each case.
24. While Malaysia has been badly affected it has not been as severely as the other countries because of her strong economic fundamentals. Unemployment is still low (2.7% in 1997) with no massive retrenchment, even though it is rising. Overall, the banking system is still very much intact. Nevertheless, its currency has been depreciated by more than 40% against the U.S. dollar and its stock market values have been reduced by more than 60% from its pre–crisis level. GDP growth has contracted by 1.8% for the first quarter of 1998 and by 6.8% in the second quarter against a positive growth projected earlier. A further but smaller contraction is expected before it will record a modest positive growth in the first quarter of 1999.
25. The impact of the crisis on some other countries of the region has been truly devastating. According to one report the economy of Indonesia has shrunk by almost 80%, that of Thailand by 50% and South Korea 45%. This in turn has led to serious socio–economic problems. In Indonesia alone more than 20 million people have been rendered unemployed. About 100 million are expected to live below the poverty line by the end of 1998, almost half of the total population. This will lead to millions being in danger of serious malnutrition and starvation.
26. The crisis has even affected the strong " tiger economies" of the region such as Taiwan, Hong Kong and Singapore. All three economies have experienced significant depreciation in their currencies and contraction in their GDP growth. The threat of a further depreciation of its currency and further fall in the prices of its shares has forced the Hong Kong Government, noted for having one of the most open economies, to take the unprecedented measure of intervening in the market to protect its currency and stock market.
27. The crisis has not spared even the strongest economy in the world, the U.S. economy. The recent report by the U.S. Government indicated that due to the Asian economic crisis U.S. industrial production, as in June, fell by its steepest rate in five years; its exports declined to its lowest level in fifteen months; and its trade deficit rose in May to a record level to US$15.8 billion from US$14.3 billion in April 1998.
28. The contagion is indeed beginning to infect more and more economies of the world. Should the crisis further worsen it could even affect the world economy as a whole, with increased protectionism and recession. As the situation in Indonesia has demonstrated the economic downturn could also lead to a political crisis. Such a political crisis could in turn lead to serious regional and international instability.
29. The important question now is what has been done to stop the downward spiral and whether the measures taken thus far are adequate and effective.
30. In Malaysia we are doing all we can to overcome the crisis, as much as possible through our own means and resources. We are doing this single–mindedly but at the same time with due openness, transparency and pragmatism. The urgency we attach to solving the crisis is reflected in the establishment of the National Economic Action Council (NEAC) which has been created specifically to deal with it and is headed by none other than the Prime Minister Dato' Seri Dr. Mahathir Mohamed. The NEAD has proposed a six–objective recovery plan. The six objectives are:
31. While all six objectives are important, the focus, at this stage, is on restoring the stability of the currency and the capital markets and strengthening of the financial markets and economic fundamentals. Among the measures to restore market confidence are: to improve transparency and regulatory environment, to increase consistency of policies, to establish rules for assisting industries and companies in trouble and to adopt liberal and market–based policies. To ensure that the economy does not contract too much and lead to massive retrenchment and unemployment several measures have been undertaken to revitalise the economy. These measures will incur a total cost of RM57 billion. Out of this sum, RM25 billion goes to help the ailing companies, RM16 billion to recapitalise the banks, RM5 billion for infrastructure funding and RM7 billion for socio–economic related activities. Helping the ailing companies does not mean that we are bailing them out. Bailout means helping badly managed companies. But we are not going to do that. Help will be extended only to well–managed companies that are being hit by the crisis.
32. In addition to the above measures, Malaysia early this month introduced a number of measures which are aimed at regaining its monetary independence and insulating itself from the prospect of further deterioration in the global economic and financial environment. Among these measures are the stoppage of the ringgit as a tradable commodity, effective 1st October 1998, and the introduction of a fixed exchange rate for the currency (ringgit). The introduction of these measures does not mean any lessening of Malaysia's commitment to the market mechanism and the trend toward liberalisation. These measures are last resort and temporary in nature. Malaysia will return to the previous arrangements of floating exchange rate and free capital flows once our economy recovers convincingly.
33. We are confidence that the implementation of these measures will help the economy to recover. The most important factor that has contributed towards Malaysia's development is its political stability engendered by the unity of its people. Despite the present economic crisis the people stand united behind the Government. Such support from the people enables the Government to concentrate on the task before it.
34. The crisis, now becoming worldwide in nature, requires action at the international level as well, particularly by the major players such as the U.S., Japan, China, and the IMF and the World Bank. With the IMF now admitting openly in its Executive Board's Annual Report released in Washington recently that its approach to Asian economic crisis is wrong (and now you know why Malaysia does not want IMF to help solve our financial crisis), and with the call by U.S. President Clinton for a special meeting of G7 and G22 to devise long–term solution to the present international financial crisis and that President Clinton had hinted that he favours lower interest rate, I hope our need for a stable world financial market and exchange rate mechanism with positive regulation, control and transparency will be realised. We recall many international organisations such as NAM, ASEM, G15 and ASEAN plus China, Japan and South Korea Summit have called for such measures.
35. The U.S. has already taken some measures and I would like to take this opportunity to express my appreciation for the measures undertaken by the U.S. Government, the U.S.–ASEAN Business Council and the Institute of International Education and some universities to assist Asian students, Malaysian students included, affected by the economic crisis. But in spite of these measures, I believe the U.S. should do more if the Asian economies are to recover more rapidly. It should continue to open its markets and make available the necessary funds to bring stability and confidence into ailing Asian economies. Direct foreign investments from the U.S. are particularly welcome. With the depreciation of the ringgit, such investments in U.S. dollars would bring more returns now than before the crisis. By helping the Asian economies to recover, the U.S. in fact is also helping its own economy. A rich Asia will make the U.S. richer while a poor Asia will make it poorer.
Mr. President
Ladies and gentlemen
36. Malaysia agrees to the need for reform at the national and international levels. In fact it had begun to take some of the measures now being suggested even before the crisis. But at the same time Malaysia would insist that any reform of the international financial system must take into account the interests of all the countries of the world including the developing countries. For any reform to be meaningful and effective it cannot be imposed by a few on the rest. It must take into account the benefit that such reform would bring on the countries concerned and the ability of these countries to implement them. The international financial system must also scrupulously practice what it preaches. There must not be a double standard and inconsistency in implementing its policies. Unless the reform really takes into account the interest of the developing countries there is a real danger that globalisation will further marginalise the developing countries. This could lead to disappointment by the developing countries on the open market economic system and a retreat to more nationalistic and inward looking position. Such a trend would be disastrous for every country in the long term.
Mr. President
Ladies and gentlemen
37. With the current Asian economic crisis, what are the challenges ahead in the 21st century? I am very sure that after the crisis is over there will be plenty of challenges and opportunities in Asia. The affected Asian economies, particularly that of Malaysia, are going to come out of the crisis much stronger. In addition to their strong economic fundamentals such as a high saving rate, educated and easily trainable workforce, positive work ethics, pro–business government and good infrastructure, they would have sound financial sector and the economy as a whole. Such an environment will provide particularly interesting challenges and opportunities for business especially for U.S. investors.
38. In Malaysia there will be plenty of opportunities particularly in the areas of high technology and value added industries. Specifically, there will be plenty of opportunities in the information technology industries as Malaysia continues to develop its Multimedia Super Corridor project, which is aimed at the development of an area (15 by 150 kilometers) exclusively for the production of information technology related products and services.
39. Another interesting area will be education. In line with its policy to develop Malaysia as the center of educational excellence in Southeast Asia, foreign institutions of higher learning are welcome to explore the setting up of branch campuses or establish twinning programmes with their Malaysian counterparts.
40. I would like to call upon U.S. investors to seize these opportunities now while their dollars still command a lot of mileage. They should not wait too long. If they wait too long, they will miss many opportunities. By investing now the U.S. would help restore confidence and promote economic growth.
41. Besides the restoration of confidence and the promotion of economic growth the next major challenge for those having interest in the region is the continued maintenance and enhancement of regional peace and stability which are under threat from the current Asian economic crisis. Without peace and stability there will be no economic growth and prosperity just as the reverse is equally true.
42. Durable peace and stability largely rest on the strength of regional resilience but the legitimate role of the major powers must also be taken into account. In view of this the regional players as well as those with legitimate interests in the peace and stability of the region must play their legitimate roles. Our common pursuit ought to be directed at the promotion of peace and stability be identifying potential friends rather than potential enemies. Conflicts or potential conflicts should be solved through negotiations and peaceful means. To prevent conflict from arising, efforts at building confidence should be continued, at a pace comfortable to all members.
Mr. President
Ladies and gentlemen
43. The challenges of peace and development are never so clearly identifiable and the targets are constantly changing and moving. But we are more likely to meet them successfully if we face them early with a win–win approach than if we wait too long. Let us, therefore, act now and concertedly in facing the twin challenges before us. Durable peace and stability and sustainable economic development in the region will ensure enduring, substantive and mutually beneficial relations between Malaysia and the U.S.
I thank you for you attention.
Endnote
* Dato' Seri Abdullah HJ. Ahmad Badawi is the Foreign Minister of Malaysia. Back.
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