REBUILDING MALAYSIA
by Creating A New Beginning

Dear YAB Dato Seri Dr Mahathir

Thank you for leading us the past 17 years as our Prime Minister. Thank you for sharing your life and visions with us. We want you to know we appreciate you for all that you’ve done for us. Yes, these are challenging times for us. But we know "Tough Times Never Lasts But Tough People Do!"

Today we celebrate our 41st year of independence. It is an auspicious occasion as our nation enters the threshold age of forty-one. On this very day, we also confront the severest challenge to our prosperity since our nation's birth, putting us all to a real test of resilience.

So much has happened to us and to the world in the last one-year. We accept that it is not only useless but also counterproductive to look back. In a volatile global environment, we have to be realistic about the state of our conditions and our expectations.

Here’s our pledge to you and to our country Malaysia: Starting today, we chose to face the future with a commitment to regain control of our destiny. Our immediate focus is recovery, before growth.

We are prepared to face the world with a new pair of lenses and to begin rebuilding the nation on a clean slate, with new mindsets and new attitudes. This is a time the government and us, the people -- need to communicate new expectations and better understanding of each other.

Given the present political and socio economic conditions, all development efforts in Malaysia must reconcile the political imperative of achieving economic equality among us as well as maximizing economic efficiency in this integrated, yet competitive environment. There are neither race, creed nor religion for we are all ONE -- Malaysians first. There are neither contradiction nor conflict in these objectives - they are in fact in alignment.

We need to seek refined ways in our new efforts; included are efforts to conduct honest and open dialogues among the people on the present harsh realities. In all that we do, we must bear efficiency in mind.

YAB Dato Seri Dr Mahathir, we know it’s terribly lonely at the top. As fellow Malaysians, we thought we offer you a helping hand. We would like explore our ideas with you:

To get back on our feet, drastic measures may have to be tried. These measures can be likened to taking a public corporation private. We need time and privacy to retreat to do some repair and housekeeping. Get the nation prepared and keep the world informed of our intentions. Give them our assurance that these are temporary contingency measures necessary to restart our economic engine. Implementing measures to address confidence of local Malaysians should gain more priority over other objectives.

Address the following 3 imperatives:

1. Macro economic stability

Filling the hole burnt in our banking system by non-performing loans. External debts included, the total outstanding loan of $590 billion, is 213% of our 1997 GDP. This is too burdensome and disproportionate for our economy even with a high saving ratio of 38%. With a worse case scenario contraction of 5% in 1998, our ability to repay the loans will be severely hampered.

• While new funds to recapitalize the banks are raised, we immediately plug all possible leakage from the system. While the experts work out the detail mechanisms, we explore the following general bold measures:
  1. Impose capital control. All non-tradable currency transaction to be regulated; so as to discourage, defer or delay transactions, and to reduce further leaks from the system.

  2. Seek external debt moratorium. Seek relief for our private businesses to strengthen.  Foreign bankers may demand a partial IMF package -- we may have to have flexibility on this front.

• Stimulate economic activities by
  1. Continue to lower interest rate to enable productive businesses to raise funds to continue, thereby safeguarding jobs and protecting families.

  2. Inject liquidity. Second to accepting foreign investment into our banks, the only other way is to increase money supply. This is a rather risky measure. However, if we have to, the new money must be managed prudently.

  3. As far as possible, pursue the preferred option of joint ventures with foreign banks. This option brings an added benefit to help this nation leapfrog to global standards in addition to more innovative products and services at more competitive prices.

  4. Consider the international demand for funds Recognize that foreign investment may be slow in coming.

• Devise a stable foreign exchange rate for the tradable sector and manage them with vigilance. Brace for a further fall of the ringgit. Malaysians should not panic. In a region of highly devalued currencies, restoring the value of the ringgit will not help our competitiveness. For export, there is no business case to strengthen the ringgit in a sea of weak baht, rupiah and pesos. Furthermore, asset deflation has eroded so much so that any further fall in the ringgit will have little difference.

  With a weak ringgit, we must be prepared for higher inflation. With the ringgit reaching 5 to the US dollar, inflation could climb to the region of 10%. The rural folks are still buoyant by commodity prices. For them, it will be less painful. Urban Malaysians will have to adjust their lifestyles. Social unrest is a distant risk, we are confident that the government can handle the situation gently and carefully.

2. Focus on strengthening the productive sectors

• Be firm on where the new public spending will go. Japan's experience in this regard has lessons for us. After spending US$500 bn on futile public projects, the state of their economy deteriorated.

  No single ringgit committed to activities that will not create reasonable multiplier effect on wealth with a minimum benchmark yield in the short term. Make do and maximize existing infrastructure, which is already excellent. In reallocating, revisit the viability of existing projects and iron out any policy contradictions. Physical infrastructure aside, it might be more productive to channel some of this money into training of specific skills and the marketing of Malaysian tourism and long term foreign direct investments.

• Continue to step up FDI driven migration up the value chain of existing industries. This can only happen with the upgrading of our workforce. Malaysia's international standing as an investment destination is excellent: our growth spurred by foreign direct investment, international dynamics confirmed this is the route to take. Helpful to reaffirm our commitment to welcome foreign investment and our readiness to integrate with the global economy. In this regard, capital control measures must address this sensitivity.

• Tourism will bring us the much-needed cash flow quickly. Tourism promotion requires passionate and sustained efforts. Seek assistance from a good marketing firm and harness the best marketing expertise from around the world.

  Let's add more meaning (and dollars) to "patriotism." Malaysian Airline, hotels and tourism promotion agencies can leverage on Malaysians' overseas network in a national bottom up promotion approach.

  An example is the network of Malaysians students' abroad. In the last 41 years with a guesstimate 400,000 Malaysians having studied abroad, if each is incentivized to conduct a personal campaign to invite their former classmates --Hypothetically, if one can bring in 10 tourists with an average spending of $1000 each, some $4 billion new revenue could be in sight. (Most efficient through email with links to MAS, hotel and tour packages on the web).

• Support Malaysian SMI's with technology, marketing and management. A home grown SMI industrial cluster is our only stable and viable route to national self-reliance. Immediately pay greater attention to follow up and follow through on the assistance programs announced under previous development plans. A productivity centre modeled after the Japanese or Taiwanese counterparts is instrumental to develop and push SMIs, from OEMs to own brand manufacturing.
  Organize training courses in major languages, including mandarin and integrate Chinese SMIs with mainstream businesses. Speed up immigration and visa procedures for consultants with specific expertise and their stay made easier. Encourage SMI owners to attend industry meetings and trade shows overseas.

• Agriculture based industrialization: Just like tourism, enlist assistance of private consulting body to devise a blueprint to expand and nurture a long-term defensible agro-based industrialization. Higher value added commodity-based manufacturing; such as using palm oil in health and beauty care products is an example.

  Undertake farming and the production of foodstuffs to reduce the $9 billion food import bill. Existing real estate companies encouraged to re-channel their focus into this area. Changes to our management of land and the way we incentivize our farming sector be explored. Successful experiments elsewhere have proven that incentivizing at the end, i.e. rewarding result, is the only way that works.

• Educate and educate. Retrain and retrain. The downward trend in productivity shows the depth of our challenge in skills and efficiency.

  Create a new learning culture: Learn or Perish. Understand that we owe it to ourselves to stay employable.

  Change the mindset: Training of the workforce is a survival imperative and is not lip service or a regulatory requirement.

  To achieve this, deregulate management of the skills development. Let companies decide what they need and freely use their own resources. Change the skill development fund's guidelines to reflect the government's faith -- private businesses know best what they need most. It is to their best interest and their survival after all.

  Immediately allow the very best foreign campuses to open in Malaysia to accelerate the competition and improvement of quality of education in Malaysia. If private education today takes half of the annual household income of an average two income family (around RM24, 000 a year for a three year degree course), it will take ages to emerge from the state of a developing country.

  Moreover, if only the affluent can be educated, the risk of ending up with a class of elite's remote from reality and unwilling to dirty their hands may be created. Japan's earlier success and Taiwan's secret to competitiveness rest on their ability to make private education affordable and popular among the people.

  Close the gap between local and global standards. Undoubtedly, some local operators will suffer from such competition, but the nation will gain by having more competitively priced, better and more up-to-date curricula.

3. Stop all-unproductive activities that hinder efficiency and development of a healthy work culture.

Given the recessionary spiral, rebuilding will be hard and painful. However, the working of economics is such that it is either a virtuous or a vicious circle. If we start generating the positive energy today, we will see a rebound soon.

• Eradication of corruption.  Hong Kong took several decades to clean up. We accelerate our efforts.

• Tough regulation and enforcement. Securities Commission strictly monitor the performance standards and conduct of public companies.

  The Malaysian stock market has been abused from its intended use as a mechanism to raise capital for productive enterprises. We attracted hot money partly because we have a miserable-yield but high capital growth market. High efficiency of capital achieved by our companies will attract long-term serious investors who are interested to grow with us. Malaysian corporations must change their ways, improve on ethical standards and practice corporate governance.

• Prepare Malaysians for the full impact and risk of an open information society. While accelerating our acceptance and use of the global information architecture and to benefit from its enrichment and opportunities, we must recognize that we need a new set of skills to make more critical judgements.

• Engage and pay the best talent, from around the world to help in the daunting and difficult business of running the civil service and government.

• That first and the easy part of our development are now over. Seeking short-term gain through unproductive activities is not only unsustainable, it also put us at risk long term besides losing the harvested fruits of our past efforts.

• Severe short and medium term pain is inevitable. Only with endurance, perseverance and determination will we have a brighter future ahead.

• Our continued prosperity comes from our ability to keep moving, changing and improving. We need to build a real economy on solid strength: comprising of knowledge, intelligence, diligence, creativity, disciplines and management know-how, and managing surplus generated from profits.

• Work smart not hard, learn diligently, and manage carefully and prudently. In a very short time, Malaysians have to close the gap between the world class best and us.

• We can’t do it alone. Teamwork is the key. Bridges must also be built and partnerships formed with like-minded mutual interests from around the world.

• We must prepare ourselves for the free market environment and learn to navigate inspite of its turbulence. We will learn to achieve prosperity on the principles of the free market and open competition. And to phase out inefficient and badly managed enterprises.

• We must redirect resources from poorly managed (or ill conceived) to productive enterprises. We strive to build an efficient system to creatively generate wealth on a sustainable basis, accepting the fact there is nothing to redistribute if we can not create.

• Change and development come gradually, and the government is no superman with a cure-all for everything. We will be realistic about what the government can do for us, and mindful of what we can do on our own, and work harder to achieve what we can do together.

• In the years ahead, we need to be extremely patient, and keep our focus. Past good times have somewhat resulted in a weakening of our self-reliance, independence, responsibility and accountability. These must be reversed now.

Most importantly we will find time to think of all the possibilities to get us out of this rut, and be ready to listen to others and each other more closely.

 

Happy Birthday Malaysia! Yours truly Your Fellow Malaysians Foong Wai Fong Megatrends Asia Pat Lu, President & CEO RAYMA Management Consultants (M’sia) Sdn Bhd Peter Tseng, General Manager Robotics Malacca Sdn Bhd Su Chin Hock, Managing Director Perfect Food (M) Berhad (in alphabetical order) August 31, 1998