A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (60 page)

In 1983, our Government officially adopted the Malaysia Incorporated concept. By doing so we undertook that the Government would consult the private sector regularly before formulating policies and drafting laws affecting the country’s economy, in particular those governing investments, incentives and taxes. The private sector was to participate in the promotion of the country for investment and trade and its people were to join Government delegations visiting foreign countries for this purpose. At home the Government would actively help Malaysian businessmen and companies to achieve profitability. Because of our NEP objectives, Malay and other Bumiputera businessmen were given special attention. During business forums, I would explain that the Government was not being altruistic when helping the private sector. Apart from acknowledging that the private sector plays a role in enlarging the economy and developing the country, the Government, I frankly admitted, was interested in their profits because 28 per cent would be collected as corporate tax. But, unlike some, our Government was not lazily collecting unearned rent from the business sector. It was working hard with business for its share of the profits—together with various other taxes it collects when business is active.

The labour unions were also brought into the Malaysia Incorporated concept. During the financial crisis of 1997–1998, a special consultative body called the National Economic Action Council
[2]
 was established. It included representatives of the private sector and the workers’ unions. A smaller executive committee was also set up, again with private sector members. As I will describe later, it sat daily to monitor the economic situation caused by the devaluation of the Malaysian ringgit and to propose remedies. Working together and by conscious effort, the crisis was overcome. Cooperation between the public and the private sectors in Malaysia was unsurpassed by any other country.
 

But cooperation between the Government and private sector under the Malaysia Incorporated concept came under heavy fire from detractors, especially foreign journalists. They accused the Government of cronyism. But there can be no doubt that the Malaysia Incorporated concept resulted in rapid growth of the economy and contributed greatly to the development of the country. Europeans believe in competition, in tests of strength or skills for solving all conflicts. Theirs is what some have called an “agonistic” culture—one that loves and thrives on contests of strength and will. They believe that in any competition whoever emerges as winner is right and is entitled to the spoils. I, too, subscribe to this “fight-to-death” mentality if I am made to do so, but bankrupting businesses does not help anyone. Moreover, it creates social problems. If at all possible, one must find a way to achieve a win-win result, which is the opposite of the European “winner takes all and woe be to the loser” approach. Malaysia Incorporated was designed and adopted to pursue this kind of win-win situation. Our Government has always preferred to help companies overcome their problems if the fault was not due to them, rather than leave them to wither and die, such as when international currency traders undermined Malaysia’s economy. Both the Government and private sector gained from the cooperation, and workers and national development benefited.

Of course, the Look East Policy was not a one-way exchange. The Japanese also benefited as they became familiar with Malaysians, with our officials and politicians. The practical truth is that you do not do business with those you do not know. When British Prime Minister Baroness Margaret Thatcher decided to charge full fees for our university students in the UK, we stopped sending our students there because of the expense. I told Baroness Thatcher that she was making a mistake—when our students returned from England as engineers or other professionals, they would naturally recommend British goods and services in the course of their work. If we sent our students to Japan, they would of course recommend Japanese products instead. So by raising the fees, the UK would save a few million pounds but it stood to lose a great deal of business for decades to come. Inevitably, the Look East Policy gave Japanese companies an advantage in Malaysia.

Some people were unhappy that many Japanese companies won big construction contracts during this time, but it was simply because they were very aggressive and impressive. We did not favour them especially, but they convinced us that they could do the job. They had the capacity to do the work, their bids were low, and execution was excellent. Besides, there were at the beginning very few capable construction companies owned by Malaysians. When I had just taken over as Prime Minister, the retaining wall on which the wharf was built at Kuantan Port collapsed because it had been built into very fine sand. Ironically, it was built by a Dutch company. Since the Dutch had amassed such enormous experience over the centuries building and maintaining their system of dykes and sea-retaining walls, behind which a large part of their country shelters, one might have expected them to do a first-rate job. But our trust was misplaced. When we sought remedies for their neglect after the wall collapsed, we discovered the company had been dissolved and had disappeared. We could not be left with a half-completed project, and the Japanese were the only bidders who undertook to bring in expert university professors to study the situation and who would give the Government a guarantee. Others dared not take on the project. The guarantee was for seven years but the retaining wall has now lasted more than 20.

Without the Japanese, we also would not have learnt how to build a car. They were initially reluctant to be involved, but eventually we managed to persuade Mitsubishi Motors to help us. At first, most components of the Malaysian car were Japanese, but we eventually mastered all aspects of the automotive industry: design, production, marketing, and technical innovation and development.

Still, no one should ever expect a 100 per cent transfer of technology. We ourselves do not transfer all of our palm oil and rubber technology to others. When foreigners come to Malaysia looking for the best rubber clone, we do not give it to them. A great deal of research and money had been poured into this area and we cannot be expected to give it away gratis. Intellectual property belongs to those who found and developed it. By the same token, we cannot get the formulations for medicinal drugs developed by foreign companies so as to produce our own brand without paying a high price for the rights.

It was the same with the Japanese. They gave us access to some things, but not everything. Perhaps they will never be willing to sell the intellectual property, no matter how high the price offered. They have their own interests and their advantaged position, which they have earned for themselves by their own efforts, to protect. That is business, and that is the way of the world.

I am realistic, not resentful. I do not expect others to help me get the better of them. To expect otherwise is unrealistic and irrational. In doing what it did for us, Mitsubishi was not acting altruistically as there also had to be something in it for them. But through our arrangement, we learnt a lot. A similar principle is applied with regard to foreign investment. Investors are attracted by such factors as our low-cost labour and on our end, we like having them here because of what they bring: technology, investment, job creation and generally, the strengthening of our economy.

In the case of Proton, when we could not get all the technology that we wanted from
Mitsubishi, we bought British sports carmaker Group Lotus Ltd
[3]
 and later we bought the Italian motorcycle company MV Agusta.
[4]
 Lotus helped us to develop our own engine and we had great plans with Agusta. In recent times this last venture has taken a bad turn, reducing our access to technological innovations relevant to automotive production.
 

We would have sent more of our young people to Japan but unfortunately, the number of places was limited. There also should have been a substantial trickle-down effect from those who went after their return to Malaysia, but that did not happen to the extent that I had hoped it would. Whether that was because our people who returned were unable or unwilling to pass on what they had learnt in Japan, or whether their numbers were insufficient to create the critical mass capable of engendering widespread attitudinal and cultural change within the industries where they worked, I do not know.

Most Malays are inclined to take the easy way. If they can get somebody else to work for them, they will, rather than get their own hands dirty by doing it themselves. Unfortunately, that is not the way to learn. There was a government-run carpentry school in Alor Star in the immediate postwar years. At 4pm sharp, the students, most of them Malays, would down tools and leave. They expected someone else to deal with the rubbish they left behind. If no one was detailed to do this, their attitude was that it was just too bad; after all, they were not paid to clean up. Relations with fellow students or workers were usually poor. There was no teamwork, no pride in their workplace, no dedication to good work standards, practices or products. The Japanese, by contrast, valued teamwork and cleanliness. In their factories, each shift of workers would stay behind for a few minutes after working hours and clean the premises so that the new shift could begin work in a tidy environment. The Japanese are taught that the next shift is their customer, and as customers they must be well treated.

People ask if I was disappointed that Japanese discipline did not catch on here. Yes, of course I was. Failure can often be traced to a lack of discipline, which in turn leads to poor dedication to work and low productivity. And low productivity affects cost and profitability. Once when I was in the Ministry of International Trade and Industry, I looked out the window at 3.30pm and saw many of the staff leaving. When I asked why, I was told they were leaving early because they wanted to avoid the traffic jam. But you are paid to work—the difficulties encountered are something that should be expected. They come with the territory, they are part of the job, of working life itself. I was not inclined to indulge such unprofessional attitudes, which was why I introduced clocking-in and clocking-out as a standard practice for all our civil servants.

Our workers are also not loyal in the sense of staying with one company throughout their lives. They hop restlessly from one employer to another in order to improve their earnings. They do not try to improve the quality of their work and increase productivity in order to be promoted to higher positions and earn higher income. Being loyal to one employer was until recently a Japanese trait. It ensured that one always tried to do one’s best for the company. The employee’s interests and fate were so closely tied with the company that this was the rational way for the worker to improve his position and income. It was a kind of “selfless selfishness”: the worker served his own interest through the company making profits, not through withholding work to get better pay, as often happened elsewhere under other industrial systems. This attitude contributed greatly towards Japan’s recovery. How gratifying it would have been to see Malaysian workers develop this same sense of loyalty as a result of the Look East Policy. We would today be much more developed than we are.

The attitude of European workers towards work is quite different. They are not company-oriented but individualistic and display little loyalty to their employers. They do not give of their best to help their company to succeed. Even when the company is in dire straits, they make demands which only create greater difficulties for the company and impose added costs on it when it can least bear them. That is why today, so many products are no longer made in Europe. We did not look to Europe for our industrial model. Their work ethic had undermined their industrial strength and would not be beneficial for an industrialising Malaysia.

Under the free trade system, business has to accept the challenges of competition and, to win, the product or the service offered must be of high quality and the price must be reasonable. Very high wages and other benefits for workers unaccompanied by improvements in quality and productivity affect production costs. Any test of strength between unions and employers will be disruptive and must carry a cost, even though it may result in the workers demands being met. But unless the increased cost is accompanied by higher productivity, the business may fail. Any such victory is pyrrhic, as the workers may end up not winning better pay but losing their jobs and livelihoods.

By and large our Malaysian union leaders are quite reasonable, but when they go to International Labour Organisation conferences, they interact with European union leaders who usually urge Malaysian trade unionists to demand more pay and better working conditions. They imply that Malaysian workers are victims of capitalist exploitation. On some occasions, I was able to argue that the European unionists were probably not concerned about the wellbeing of our Malaysian workers. Behind the offers of support, they were probably concerned with protecting their own jobs. If Malaysian workers were less demanding, if there was greater industrial peace and factory-floor goodwill, investments would flow more rapidly towards Malaysia. We might then attract more European investments and, in time, some of their markets as well. The European workers and trade unions would then lose their jobs. But if Malaysians workers are too demanding there would be less foreign investments and the jobs would stay in Europe.

Outsourcing is an important means of lowering the cost of production. Its popularity has grown enormously simply because outsourcing components from lower-wage countries greatly reduces costs. To stay attractive to investors, Malaysia must maintain both a comparatively lower wage level and industrial peace. Disputes should be settled through negotiation or arbitration, not strikes.

The standard of living can be kept reasonably high and can steadily improve by controlling inflation. This was the route taken by Malaysia. We have never abandoned price controls for essential goods, not even long after the war was over. One Malaysian ringgit can buy in Malaysia what one US dollar can buy in the US. Lower wages need not necessarily lead to lower standards of living.