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Dato' Seri
Abdullah HJ. Ahmad Badawi
Remarks
by the Foreign Minister of Malaysia
at the Asia Society California Centre
September
17, 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:
(I) stablilising the ringgit;
(ii) restoring market confidence;
(iii) maintaining financial market stability
(iv) strengthening economic fundamentals;
(v) continuing the equity and socio-economic agenda; and
(vi) restoring adversely affected sectors.
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.
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