A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (49 page)

When I took over I discovered that Approved Permits (APs) to import reconditioned foreign cars were being given to Malays because they were unable to get into the business of selling cars. The principal agents for the major vehicle manufacturers and distributors were not willing to appoint Malays as dealers or sales agents for their cars. Nor could Malays import cars, as by agreement with manufacturers, the sole agents controlled all imports. But secondhand cars did not come under the control of the sole agents, so APs could be given for the import and sale of reconditioned secondhand cars. This was how Malays could get into the car-selling business, as reconditioned secondhand Japanese cars, for example, were almost as good as new and had a strong market.

Unfortunately, the Malays who were issued the APs did not import the cars themselves. They sold the permits to the Chinese, who did the actual importing and selling. The profits were so substantial that each AP would fetch as much as RM8,000. As Malay applicants could get as many as 10 APs a month, they could make as much as RM80,000. Only a few of them, however, did the actual honest work of importing and selling motor vehicles.

When I came to the Ministry, I stopped APs from being given freely to those who had no evidence that they were importing and selling the cars themselves. I had our staff check whether these applicants had showrooms and if they did not, I instructed the staff not to issue the APs. Loud protests followed. The individuals concerned wanted to demonstrate against me, but I called their bluff and they backed off. Doing this was politically risky as many of them were UMNO supporters and employees at the party headquarters. Some Malays were, however, above-board. Individuals like Tan Sri Nasimuddin Amin of Naza Motors, who passed away in 2008, had showrooms but they were in the minority. I was willing to give any number of APs to applicants like these.

There was another category of people I gave APs to: those who wanted to import cars that were not already being brought into the country. Under this permit, each person was allowed one car in a lifetime and it had to be for his own use. Usually these were very expensive prestige models and not too many of these APs were given out. Malaysians living abroad could also import the cars they had been using. The AP system is a sound one and it did help a few Malays to break into the automotive business. Eventually, when the national car company Proton began to produce cars, more Malays were able to set up agencies to sell Proton.

Soon after I retired, I was to disagree with the way the Ministry was giving out APs to those who I suspected were not conducting legitimate car businesses. This led to a falling out between me and the then Minister Tan Sri Rafidah Aziz, which the local Press front-paged for weeks. In all fairness, she was very good at what she did and was promoted to the post precisely because of her ability to perform. But she was intolerant of criticism and, unlike most Malays, not afraid of being blunt. During Cabinet meetings, nobody dared to criticise her because they were wary of the heated arguments that would invariably follow. If you criticised her, even courteously and in good faith, her retort was always to point out how much worse you yourself were. It was all very unpleasant. For my part, I kept her in the Cabinet because she was an able negotiator and wasn’t afraid of anyone. Because of this, she was able to obtain favourable terms for Malaysia in many trade agreements. Not without reason did those on the international trade scene call her “Rapid Fire Rafidah”.

But there were occasions when she agreed to conditions which were not in our favour. The most glaring case was for countries under the ASEAN Free Trade Agreement (AFTA) to reduce taxes for motor vehicles that had 40 per cent local content. At the time, Proton had 90 per cent local content, so naturally the price of Proton cars was higher because of the built-in costs of design and development. When I discovered this, I was concerned that we would not be able to sell Proton cars either locally or in other ASEAN countries. I told her to inform AFTA that we needed to postpone the date of implementation from 2003 to 2005.

Today, because of that AFTA agreement, there are huge numbers of foreign cars in Malaysia, but only a few Protons in Thailand or other ASEAN countries. Our inability to compete is largely because we do not have the economies of scale. There are ways of overcoming this, but the Proton management at that particular time had not found the answer. They also apparently do not have the capital despite the huge cash reserves the company had earned earlier.

The Thai automotive industry consists largely of assembling foreign cars. Admittedly, they use components made in Thailand, but they only need to have 40 per cent local inputs to benefit from the AFTA agreement. These are crucial economic issues which the public does not know about, or does not care to know. Contrary to what critics said, Proton was a profitable venture that helped in the development of engineering capabilities in the country. But it now needs a miracle to survive. The misuse of APs and under-declaration of import prices of foreign cars have played a large part in its unfortunate decline.

When I was Minister for MITI, I tried to encourage foreign investments with Malaysian participation. The idea was for foreign investors to bring in funds so that there would be a net capital inflow. Much later, when I was already Prime Minister, I learnt that little capital was brought in since much of it was borrowed locally.

Nevertheless the increase in foreign investments helped to create jobs and so lowered the unemployment rate, which was high at the time. Our approach differed from those of Japan and Korea, where the preference was for acquiring foreign technology for investment by the locals. We did not have local entrepreneurs with the money or the willingness to invest in industries they were not familiar with. It was only after many years that Malaysians acquired the knowledge and industrial skills to invest in manufacturing. Thus it was through FDI that we succeeded in converting our agricultural economy into an industrial economy and eventually solving our unemployment problem.

Industrialisation in Malaysia began under the stewardship of Tun Razak. I helped to speed the process by actively promoting it myself and introducing a climate that was friendlier towards investors. I led many investment promotion delegations to Japan, Europe and America. Investors came in droves once they heard about Malaysian stability, our easily trained workforce, low inflation rates, our liberal attitude towards the expatriation of profits and generally good financial administration. In those days, other newly independent countries were unwilling to allow foreign involvement in their economies.

Malaysians were less sophisticated then than they are now. They certainly did not possess the aggressiveness that is sometimes necessary in business. They preferred to sell their products to Singapore, which then acted as a distribution centre and made a tidy profit marketing products obtained from Malaysia. They exported those same products—like orchids—to other countries, or sold processed raw materials back to Malaysia for a much higher price. Singapore agencies invariably included Malaysia as part of their own territory. It was my fervent desire to see Malaysians do the marketing themselves, as there was so much to be gained from cutting out the middleman.

In the beginning, when I went looking for foreign investments and new markets, I found that it was difficult for foreign investors to accept Malaysians as their partners. The only company that responded—very much earlier in the 1960s—was National, the Japanese electronics giant. National had aggressive plans to expand and it was willing to accept certain conditions in order to do so. The company wanted to sell its products in Malaysia so one of the conditions we set was they had to give us a share of the business. They eventually set up a factory in Subang Jaya, a suburb near Kuala Lumpur. Later we did away with the requirement for Malaysian participation if the products were meant for export.

It took time to introduce Malaysia, as few people had heard of our country then, and far fewer knew where in the world we were. Many thought we were in Africa. In New York, we arranged for Citibank to sponsor a seminar on investment in Malaysia, and we also had other banks and organisations join as sponsors. They agreed as they had branches in Malaysia and there was a possibility they would receive a piece of any resulting foreign investment. These seminars were very well attended. Once we experimented by bringing in a trade unionist to try to explain the labour situation, but he ended up talking about the need for good pay and better working conditions. Although his underlying principle was acceptable—that as investments increased wages would also increase—talking about these issues certainly did not encourage investment, without which the demand for labour would drop. Consequently, wages were not likely to rise. I had to drop the idea of bringing in trade union leaders as speakers as their militant approach served neither the country’s interests nor their own.

I am pragmatic in such matters, as Tun Razak was. Like him, I was willing to borrow ideas from anywhere, even from the communists. One of the communist ideas that Tun Razak borrowed was having five-year plans for Malaysia’s development, as he believed it would be a useful mechanism for speeding up development. But we also believed that the basis of communism—that workers should own all the means of production—was not logical or practical. The facts were glaring—workers in capitalist countries were better off than in communist countries. Owning the means of production had not benefited them.

Equality is a fine principle, but as an economic practice it is flawed. In a workers’ government, the workers would want better deals and wages for themselves and this would result in costs going up and profits going down. If everyone is a worker and the country produces luxury goods, who would buy them? You would effectively impoverish the local market and would have to sell the products to wealthy people in capitalist countries.

During a trip to Venice I was shown an antique table that was beautifully made and embedded with pearls and precious stones. Why were people able to make such costly things in the old days? Because there were very rich people who were able to buy them. In any society, there are inevitably the wealthy and the poor. If everyone was rich, wealth would be made quite meaningless. Purchasing power is what counts, and this is determined by what money can buy. If everyone, including the workers, have to be rich, then the cost of production and therefore the cost of goods and services would be high. The purchasing power of everyone would be low.

As the country grew wealthier, our imports also grew. We tried to get the best from our trading activities. Learning about the offset programme, we insisted that big suppliers to Malaysia give us something extra to sweeten the deal. When we bought Sukhoi fighter planes from Russia, for example, we also asked them for help to train Malaysian astronauts. When MAS purchased aircraft, we insisted that the suppliers also sourced aircraft components from us. This was how we got into the manufacturing of composite parts of the large commercial aircraft manufactured by Airbus. The value of the parts came to hundreds of millions of dollars. Today the company Composite Technologies and Research Malaysia is regarded as a very competent manufacturer of aircraft parts.

As Minister of Education I had rarely travelled outside of the country, but at MITI, I had to visit many industrial countries to promote Malaysia as a location for investment and a centre for trade in Southeast Asia. This gave me the experience to deal with foreign officials and business people. The lessons I learnt were invaluable when I later became involved in foreign policy and international relations. My duty in MITI was to find new markets, and I went to many parts of the world that were unknown territories to us at that time. I had realised that Malaysia was too small a country to support large-scale industries and we needed foreign markets for our goods. In order for Malaysia to export directly, without going through Singapore merchants, our businessmen had to find potential markets and trade with those countries. The effort yielded results and today Malaysia is a big trading country with exports of over USD100 billion. At one time it was the 17th biggest trading nation in the world, although it has since fallen to 25th place.

I learnt many lessons during my time as International Trade and Industry Minister, but even as I felt that I was making some headway in my new portfolio, it was my position as Deputy Prime Minister that proved to be unexpectedly frustrating.

Being made Deputy Prime Minister meant much more than just having added responsibilities and authority—it also marked the first time that I had any reasonable certainty of one day becoming Prime Minister. As the heir apparent, you are perceived to be head-and-shoulders above other members of the Cabinet. I assumed that Tun Hussein would hold office for at least as many years as the Tunku had, so I concentrated on fulfilling my duties as Tun Hussein’s deputy and establishing the best relationship I could with him.

It was not easy. I served with him for five years and we were never as close as I had hoped we would be. Tun Hussein did not open up readily and his interaction with people was rather stiff. He was a serious person and though he had a dry sense of humour, he was not the type to crack jokes and laugh. Tun Razak had been much more relaxed and had laughed more and enjoyed company, though he was not given to joking. Tun Hussein was more of a loner.

I too did not make friends easily, nor was I in the habit of telling jokes and laughing heartily with him. It was always strictly business between us and I did not meet him unless it was to discuss something official. The only one who seemed to be able to get his personal attention was Tengku Razaleigh, who had always been skillful at getting close to whoever was Prime Minister. I sometimes had to gain access to Tun Hussein through Tengku Razaleigh and this was not something I appreciated. It did not enhance my position as Deputy Prime Minister. Still, for certain matters in which Tengku Razaleigh was also involved, I had to use this approach. At other times, I had to make use of the Secretary to the Cabinet, Tun Abdullah Salleh.