Thursday, 2 June 2011

Malaysia: Rapid Modernisation and Economic Growth

Rapid modernisation and economic
growth of Malaysia

Dr. Mozammel Haque

Dr. Mohammad Mahathir, the former Prime Minister of Malaysia, navigated his country through all the difficult times during his Prime Ministership for 22 years from 1981 to 2003 and brought Malaysia’s rapid modernisation and economic growth through a series of bold infrastructure projects, and through the prices stronger than before. He had the good sense to tell the World Bank and all the others who were advising him what to do and he told them to go away.

When Malaysia was on the verge of gaining independence many inside the country and outside felt that the country is not going to last long. Malaysia has three different distinct nationalities, the Malays, Chinese origin and the Indian origin. It is very important to learn how the country overcomes those racial and ethnic differences and remained a stable and prosperous country. Naturally, these are the stories people are eager to know and it is no one better to tell us than Dr. Mohammad Mahathir who spent 40 years in the political field of his country and was Prime Minister of Malaysia for 22 years. Dr. Mahathir lectured on the “Role of Malaysia in Asia” at the Grand Committee Room of the Parliament House of the United Kingdom on 21 March, 2011.

There are so many issues and problems before Malaysia at the beginning just after the independence. These are not only confined to ethnicity, religious belief and culture; there were also the problem of “the distribution of wealth” and also the differences in races. Along with these, “There are issues of distribution of wealth and also differences in race and if these issues are not properly tackled, then, said the former Prime Minister, “the situation becomes explosive.”

Since Malaysia’s indigenous people, Malay, are in majority and at the same time, they were poor, it was thought after independence, it is most likely that the government would be entirely of the Malay and the Malay poor people would confiscate the property of the rich Chinese. The former Prime Minister of Malaysia said that this did not happen; rather the quite opposite thing had happened. The Malaysian leaders found that since many of the Malaysians of the Chinese origin who were actually not the citizens of the country then they were not entitled to vote during elections.

Chinese origin granted citizenship:
A Sense of Belonging
“The leader of the Malay, the First Prime Minister of Malaysia, even before he becomes Prime Minister decided that we should accept one million non-Malays as citizen of the country without bothering about qualifications, no tax. Nothing was required. They were just declared to be Malaysian citizen. That, of course, reduced the overwhelming majority of the indigenous people who at that time made of about 82% of the voters in the country by giving this citizenship to the non-Malays, one million of them. This effectively reduced the majority of the voters of the Malay origin from 82 to about 60 or less. So the Malays, apart from taking away the wealth of the Chinese, actually offered them to become citizens of the country – one million is a big figure considering the number at that time the population of Malaysia was about five million.” That was the measure of good will that the Malays have for the indigenous Chinese and Indian in the country.

Another decision the government of Malaysia took immediately after the independence was not only to adopt the democratic type of government but also to give every race a feeling or a sense of belonging to the country by offering them a say in the governance of the country. The Malays actually reduced their voting power in order to give the Chinese a sense of belonging to the country. But the former Prime Minister said that does not mean that racial problem does not arise. We had racial problem.

Race-based Coalition government
The three races had their own political parties, Malays their United Malays National Organisation, Chinese their Malaysian Chinese Association and the Indian had their Malaysian Indian Congress. The first Prime Minister decided that instead of the majority party in the government, it would be better if the Malays and their party, the party of the Chinese the Malaysian Chinese Association and the Indians with their Malaysian Indian Congress should form a coalition to run the country so that every race should have a say in the governing of the country.

Dr. Mahathir said, “An Alliance was formed made up of the three race-based party, known as M for the Malay, C for the Chinese and I for the Indians, MCI each of them had a feeling that they belong and they had a right to govern the country. But of course, since the Malays in the majority, they had perhaps much bigger representation in the party, in the coalition party as well as in the government but everything was discussed openly and decision was made consensuslly. Thus, instead of lot of nuisance and political instability; Malaysia became very stable and it was due to this great man who was the first Prime Minister. He was incidentally educated in England. He led the party for 13 years.”

National Front Government
Subsequently there was lot of unhappiness. The Malays felt that they were not getting due attention; they still remained poor and as a result there was party revolt against him. In 1969, there was an election and in that election the Coalition did not do so well. Still the Alliance party formed the government but with a smaller majority. But the people celebrated those who were in the opposition party not because they had won but because they had improved their situation, said Dr. Mahathir and mentioned, “This aroused anger as a result there was mass demonstration, clashes – lot of people killed and the Government had to declare emergency rule.”

Instead of carrying on this authoritarian emergency rule, the government started a talk in order to convince the opposition party that it is far better to work together than to fight each other. Dr. Mahathir said, “Several opposition party actually joined the government party and formed a new Coalition Party called the National Front. Dr. Mahathir said that in the National Front, we found most of the opposition party including Islamic party in the country and as a result peace returned to the country very quickly; the Parliament was recalled and the next election was actually held when the country was ruled under the emergency.”

That was the political side of the history of Malaysia. Dr. Mahathir then spoke on the economic side of the history of Malaysia and gave an idea how Malaysia becomes a high-tech industrial country from an agricultural country.

Industrialisation of the country
i) Industrialise: In the field of economy, the government of Malaysia took right type of decision at the right moment; though it is an agricultural country, within a decade it became the high-tech industrial country due to government decision to cope with the changing situation and demand. Initially, Malaysia was trying to make the poor country rich. Malaysia spent a lot of money on education, there were educated people but the country was facing an increase of unemployed people.

“We decided that we should industrialise the country through inviting people to come and invest in Malaysia. But then we had to be very business-friendly, very friendly to some so that they could come and invest in Malaysia. Malaysian government was accepted as a very friendly government and lots of people invested in Malaysia,” said Dr. Mahathir.

Though Malaysia was advised to nationalise foreign bodies and not to bring more foreigners, but the government did otherwise. “Instead of nationalising foreign bodies we actually dependent on foreign investment in Malaysia. We introduced this simply because we need to create more jobs for people. We knew even then that if people had no jobs they would create problem. We created so many jobs,” said Dr. Mahathir.

ii) High-tech industry: In the end, Malaysia had to import foreign labour. Lots of people from Indonesia, Philippines, Thailand, Bangladesh and elsewhere came to work in Malaysia so many jobs that she had to depend upon foreign labour. But Malaysian government realised that there are too many foreign people earning and as a result money flew out of the country. Then Malaysian government decided to go for high-tech industries.

Dr. Mahathir said, “We decided we should go for high tech industries in which case we need lesser number of workers but they would be better trained better skilled and that was the policy followed that enabled the country to remain stable and to be attractive to foreign investors. Today we are earning about 7 to 8,000 US dollars. So the country has done quite well.”

World Bank and IMF
Malaysia had a good experience dealing with World Bank and IMF as a developing country. This should be an eye-opener for other developing countries. The former Prime Minister of Malaysia gave a vivid picture of his experience about borrowing money from World Bank and IMF. Dr. Mahathir said, “We were being advised, of course, by experts in World Bank and the IMF. They told us to do certain things which we thought would only worsen this situation. We opted not to accept this advice. They wanted us to achieve surplus budgets every year; that means we have to cut funding of ministries in order to achieve surplus budgets. We had surplus budget before, but of course during period when the currency devalued, it is extremely difficult to achieve surplus budget. Then they told us to shorten the period for declaring that loan is non-performing from six months to three months. Again this would mean, people, businesses would be bankrupted and the banks also many of them advised given to us seems to be not to be in the interest of our country; people would be worse off if we follow them.”

Malaysia, in the end, decided to look to the east. Dr. Mahathir said, “We decided to look to the east.”

More revenue-work with Private sector
“We asked ourselves why we should not work in private sector. We would like to see you make lots of profits; the more profit 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 earning belongs to us. So we decided that we should have Malaysia incorporate them; which means the government will work very closely with the private sector,” said Dr. Mahathir.

Speaking about Malaysia’s solution to the financial crisis; Dr. Mahathir said, “We decided instead of letting the market fix the exchange rate between the Malaysian ringgit and US dollar we decided that the government will fix it. That no one should trade on Malaysian ringgit.”

“There would be no freedom if you cannot criticise. We annoy lot of people because we criticise. No one will go bankrupt; we recover faster than the other countries,” he said.

Questions & Answers Session
Buying British last policy
Dr. Mahathir mentioned in his speech that he was known for his policy called Buy British Last. Replying to a question on this policy, Dr. Mahathir explained, “It was during the early years of my being Prime Minister of Malaysia we felt that British took us for granted; this was one of those countries normally silent and they did not talk much in the Commonwealth meeting or wherever, .we felt that kind of perception of us should be changed that we are not taken to be granted and we found an occasion to act.”

In this connection, Dr. Mahathir mentioned about the “Concorde flew over the Malaysian airspace” “not bothering of asking for permission”. He also mentioned about “UK raising the fees for university students coming to study only in the UK. This affected us very badly because in those days we had only two Universities in Malaysia. We had a great demand for University education and we looked to the UK to provide this University education. But they raised the fees and incidentally they did not raise the fees for the European students. We felt that you do not care much about the Commonwealth, about past relations etc. So just to remind you that we are there and we can have our own opinion. We decided that we should buy the British last.”

Looking to the East
In answering to the question on looking to the East, Dr. Mahathir explained, “As to looking to the East, actually I have been in Japan many times and other countries as well. I noticed that the Japanese economy was growing very fast; it was a very dynamic country. There must be something right in their doing. You will not do any harm to learn from the Japanese how to grow your country. In their case, they had just gone through very disastrous war and yet the war-recovering is very very fast. They must be doing something right. So we decided lets look to the East.”

“That does not mean that we will not look West at all; we kept on looking West but we should not look fully to the West; we should look to the East also and not only to the East but East also; which means we are looking both at the West and also the East and Malaysia has benefitted much, argued Dr. Mahathir and said, “Much of our growth has been attributed to the Japanese work ethics in particular. They work very hard and we find that in England at that time people did not work very hard.”

No comments: