A Doctor in The House: A Memoir of Tun Dr Mahathir Mohamad (79 page)

The Government had to bear the NEP in mind throughout the complex privatisation process. Privatisation could provide Bumiputera businessmen with the opportunity to leapfrog quickly into big business. While at times they leapt over some non
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Bumiputera companies, many non-Bumiputera themselves also enjoyed opportunities from the privatisation programme. To achieve NEP targets, more of the Bumiputera had to benefit from privatisation but this too attracted criticism. But still we had no choice—we had to balance the business successes between the two groups and also between economic imperatives and equitable distribution, all integral and essential parts of our national development. The Bumiputera with the ability to do the work were awarded privatisation projects and since there were not many of them, the NEP appeared to be benefiting only a few Bumiputera, even though there were far more non-Bumiputera in big business. To increase and consolidate the Bumiputera foothold in big business, we had to build upon those few—upon the strong, the capable and proven achievers. The criticisms were not convincing as they were political and not grounded in any reasoned analysis of our national development strategy.

Close analysis shows that even when large projects were awarded to a Bumiputera, the non-Bumiputera benefited as they received much of the sub-contracts. Yet when the projects were awarded to the non-Bumiputera, the Bumiputera got almost nothing, save for a handful of small supply contracts. We cannot blame the non-Bumiputera for not sharing their projects because most of the Bumiputera have simply not made any serious effort to become good sub-contractors.

My argument here is not motivated by any intention to support the Malay side. Rather, the facts show that, in addition to getting privatisation projects of their own, the non
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Bumiputera also benefited greatly from the contracts that were awarded to Bumiputera contractors. Critics who assert that the NEP shut off opportunities for the non-Bumiputera refuse to acknowledge the fact that non-Bumiputera enjoyed much of the spin-offs.

Accusations of political cronyism were sometimes aimed at the personal level—against the Prime Minister and other Ministers—and sometimes generally, against UMNO. Charges were often made that the companies awarded privatisation projects were linked to UMNO, the core party of the coalition government. In its early days UMNO needed funds for its operations and created several companies under nominees that were supposed to represent the party in investments and contracts. The returns on these investments were not very good. Frequently, due to carelessness, the party could not prove that the shares or the companies or even the land involved belonged to UMNO. When the nominees died, their children often refused to acknowledge UMNO’s claims. That was all long ago. Companies that were awarded privatisation projects often donated money to UMNO for elections, but they were not the only ones. Many companies donated to the party at election time. Often, so they tell us, they also donated to Opposition parties. To be prudent, the business world must hedge its bets, covering all bases and winning goodwill from all sides in the political arena.

But what those businesses gave had nothing to do with their being linked to UMNO. Many felt grateful that the UMNO-led Government had created a good business atmosphere and provided opportunities for them to make money. They gave because they were grateful, and because they hoped that the party would win again and continue to lead a business-friendly government. This is not uniquely Malaysian. Donating to political parties happens everywhere. I believe that in the United States, Britain and in other developed countries, political parties are all supported with funds from big business. Subscriptions from members or supporters would never be sufficient.

Political parties cost money, elections even more, and funds have to be raised somehow. We hear of peerages being sold in Britain by the New Labour Government, and perhaps the Conservatives did the same. In the United States donors may be appointed as ambassadors. Defence contractors know that their only customer is the government and their lobby is very powerful. What, one wonders, are all the “K Street” and Capitol Hill lobbyists in Washington, DC doing if they are not lobbying for the interests they represent? One presumes that the vast lobbying industry there earns its keep, whether or not the nation’s political leaders preach democracy and clean and transparent governance to the rest of the world.

To blame Malaysia’s Government for favouring party-linked companies is discriminatory, another instance of double standards. We believe in being business-friendly. This is not a sin, especially when doing so ensures the delivery of needed services and better standards of living to its people. That is why we adopted the Malaysia Incorporated concept. We did so because we always have a stake in the success of the nation’s companies: 28 per cent of company profits come to the Government as corporate tax, which means we cannot be indifferent to how business is faring. Business success stimulates the economy as a whole, promoting its growth and generating further tax revenue.

Privatisation led to competition among companies and while this was good in principle, excessive competition could lead to failure. Charges for services can be lowered to attract clients and market share, but if the charges are too low then the company cannot earn sufficient profits. We did not like companies to fail as it then became our problem in several ways. The Government collects no taxes from failed companies. Often it must also pick up the pieces, work out an alternative way for the delivery of essential services, deal with the human fallout of company failure, and, if the company is a recently-privatised one, suffer political consequences as well.

When a company is bankrupted it also tends to drag others down. Workers lose their jobs and sub-contractors also incur losses. Loans may turn bad and the banks too may be affected. It is difficult to appreciate the effect of one company being bankrupted on the community and overall economy. If a large number of companies are bankrupted, the devastating effects are soon felt by everyone and by the nation. If that can be avoided, or if corrections can be made, there is no reason why even one functioning or remediable company should be allowed to go under. We are now seeing the effect of companies going bankrupt in the economy of the United States.

Malaysia has been accused of bailing out companies, but a revived company can contribute towards the well-being of the owners and employees and will pay taxes to the Government. The idea that inefficient or struggling companies must immediately be closed down is short-sighted as the implications are bad for other companies and the economy as a whole. Once it goes, the surviving companies face reduced competition and may be able to make more profits. What they do not do is to help overcome the social and economic problems resulting from the failed company’s closure.

That burden is carried by abandoned employees, their families, society in general and the Government. Governments have to choose the best course of action in such situations and bailing out a failed company may be the best option economically. It can certainly serve the interest of social justice and hence the sustaining of social cohesion—a consideration that can never be far from the mind and priorities of a Malaysian government, given the special character and vulnerabilities of Malaysian society.

The critics of Malaysia’s bailouts, however, would not hesitate to support that same strategy if their own companies failed. In 1998, the Long-Term Capital Management Company (LTCM) in the US, for example, was unable to repay the huge loans it had raised for its hedge funds operations. The rich bankers who had themselves invested in LTCM got their banks to bail out the company. Even the US Government applied pressure on the banks to bail out LTCM.

As recently as September 2008, George W. Bush’s administration asked Congress to approve a USD700 billion financial package to rescue US companies such as mortgage firms Fannie Mae and Freddie Mac. Again, double standards. Some operators are simply too big to be allowed to fail and those who gamble through them must be protected. Malaysia and its Government, by contrast, are not that big. We have to concern ourselves only with the fate of our 22 million people, plus a couple of million more who flock to our shores and our industrial work sites in search of employment and sustenance that their own countries cannot provide for them. We, it seems, are not that big not to be allowed to fail. Unlike LTCM and its investors, our country is expendable.

Privatisation has not been an unqualified success, though in public life, few things ever are. In some cases the Government had to re-acquire privatised companies but by and large privatisation has contributed enormously to GDP growth and saved funds for budget allocation to other important development initiatives. It has actually increased government revenue from taxes and dividends.

For the private sector, on the other hand, privatisation has stimulated the start-up and growth of big companies. Their management skills have improved, enabling many of these companies to undertake major projects abroad. This is a great achievement and it is also a decisive argument against critics of our privatisation policy. The situation that these companies face in foreign countries is totally different from the social and political environment they are used to in Malaysia. There they cannot rely on friendly government Ministers or cosy, long-standing, personal relations with key bureaucrats; nor can they expect to deal with the same laws and practices which they are familiar with at home. They must prove themselves and earn their success on alien ground.

These corporations have turned Malaysia into a showcase of what a developing country can be and can achieve if it has a good private sector. Many developing countries have taken heart from what we have accomplished, have seen our approach as a model to follow, and have shown a decided preference for Malaysia when looking for models for their own development efforts.

ENDNOTE

[
1
] On 3 August 1996 the entire Peninsular Malaysia suffered a blackout. It took almost 14 hours to restore power to all affected areas.
 

While privatisation helped us to speed up the process of development, I decided it was time to pursue another, related dream. I did not just want to see more Malaysians driving cars—I wanted them to be driving cars that we had built ourselves, as accomplishing that would be a great step in our development and industrialisation. Since the 1960s, Malaysian companies had been assembling foreign passenger cars. I thought we could do more, going from assembling completely knocked down cars (CKD packs) to producing our own car.

Before we look at the rationale for producing a national car, it’s worth noting certain features of our culture and character. Malays and most Asians are traditionalists—they like to do what their forebears had been doing in the past. Generally they don’t like change. This is true both of their preferred lifestyles and of what they produce. If their forefathers used a wooden plough of a certain design, then they would produce and use similar ploughs without making any attempt to improve on the design or production methods.

I noticed very early on that Europeans were the exact opposite. They like to improve on everything. In Malaysia, the 
orang asli
 or aborigines build their houses on stilts. To enter the house they crudely hack steps into a straight tree trunk. The Malays improved on that and made better steps from planks with the ends inserted into slots cut in two planks, but then went no further. The Europeans, on the other hand, invented lifts and escalators to better the already good staircases they had.

The Europeans have integrated this search for improvement into their culture. To them, there is always a better product to be made and a better way of making it. Today they have research facilities devoted to improving all their products and production methods. Some Asians have now adopted this European attitude and are doing even better, but Asian traditionalists generally dislike change. In the contest between the traditionalists and the progressives, it is clear that the progressives have won. Their ideas have prevailed and have contributed greatly to their progress.

When we decided to build the national car, we did not aim only to learn about automotive engineering but also hoped to adopt the progressive attitude of continuously wanting to improve our products. We wanted to build and improve not just motor vehicles but attitudes, work practices, and the whole culture. Once we started producing the national car, we focused immediately on improving its design, capacity and power, and overall quality with each new model. By doing all this, we were able to keep up with progressive societies.

The seeds of this dream were planted in 1964, when I went to New York City for the first time as a member of a delegation from the Malaysian Youth Council to the World Assembly of Youth. I remember looking down from the airplane as we came in to land and seeing endless streams of cars moving to and fro on the roads around the airport. I had never seen anything like it, not even in Japan or Europe. It seemed as if a third of the population of the United States must be sitting in a car at any given time. To me all those cars represented wealth and development, and I thought it would be marvellous if we in Malaysia could have the same thing. Today we do, though I never thought we would.

Before we could build our national car, we had to look carefully at procedures. When I was running FIMA, I got to know many Japanese businessmen and I had to travel to Japan to negotiate the purchase of tin plate for can-making. They took me to visit the Kawasaki steel mill, in the Chiba Prefecture near Tokyo, where steel plates, each one about a quarter of a kilometre in length, were made and rolled into coils—almost without workers. It was impressive. This was clearly a good example of modern technology. Later I visited automotive plants. I remember thinking that if we could master assembly techniques of cars, producing them would not be beyond us. I knew it would be difficult but I did not really appreciate the level of complexity it would involve. Besides, my persistent belief that we could achieve anything if we really wanted to gave me the impetus to go ahead with this venture.