Speech (5)
- Royal Address '98
by Lim Kit Siang 

Malaysia should play a leading world role to seek a more equitable international financial architecture for all nations but Malaysian leaders can only do so with "clean hands"

(Dewan Rakyat, Wednesday): Parliament should consider the larger issues arising from the economic crisis. Firstly, is Malaysia the victim of the process of globalisation and whether we should therefore turn our back on globalisation.

Globalisation is a fact of international life. A new age is emerging based on globalisation of the world economy. This has positive aspects such as increased economic efficiency, a new impetus to world trade and output, more and better products and services to consumers at lower prices as well as new market opportunites.

Globalisation has however its negative effects such as financial turbulence, uneven development, increasing inequality, high levels of unemployment, social exclusion and social unrest. Globalisation has increased the power of multinational corporations, manipulators of foreign exchange markets and international organisations at the expense of governments, electors and the democratic process.

What the world needs is a new system of collective responsibility to offset these negative effects and promote the potential of the sustainable development of society.

When he returned from his trip to Germany on Sunday, Mahathir said although he had tried to explain the reasons for the current economic problems in countries that he had visited, they continued to blame the Governments.

He said: "Wherever I explain the problems, their response is that we should build confidence and that we should have a Government which is disciplined and transparent. In short, they are blaming the Governments of Southeast Asian countries. Why is this happening?"

One reason for this is the globalisation of the world economy which has strongly reduced the effectiveness of national economic policies. This is why there is a need for a new international financial architecture which can stabilise and control international financial flows, render the functioning of international markets more transparent and avoid the destabilisation of the economic policies of nation-states.

Serious consideration should be given to a turnover tax on purely speculative foreign exchange. Such a tax, proposed by Nobel prize winner James Tobin, should include all major financial markets.

Globalisation has limited the role of the nation state, and the world community has to build an effective international system of collective responsibility to safeguard the market economy and the environment as well as promote the active participation of people with their own structures of representation and organisation, contributing to a global civil society at local, regional and national levels. Without the social and environmental dimension, the end result will be the globalisation of poverty rather than the globalisation of progress - what someone has described as the concept of "20 to 80" and "titittytainment".

Under this concept, in the next century, 20 per cent of the population will suffice to keep the world economy going, while the bottom 80 per cent will have nothing to do and who have to be kept in their place with ‘tittytainment" - a mixture of deadening entertainment and adequate nourishment.

Mahathir said the Asia-Europe meeting in London next month would enable Asian countries affected by the "economic problems" to explain their situation to their European counterparts but he is not optimistic that the meeting would come up with a concrete action plan.

He said this was mainly because "as far as the current economic problems were concerned, the opinions of the Europeans differed from those of their partners in Asia."

Mahathir is no more his former confident self. He even complains that he has lost his right to free speech.

The recent Asian economic turmoils should be the occasion for a new international initiative for the creation of a new international economic system to ensure that markets must serve people and not the other way around, and as one of countries which had suffered grievously from the economic crisis, Malaysia should be well-poised to play a leading world role to seek a more equitable international financial architecture for all nations.

However, instead of rising up to this new challenge to seek equity and justice for the world’s oppressed in creating a new international economic order, which should have been the crowning challenge of his public life, Mahathir seems to have conceded defeat that there is very little that could be done.

The international financial system is unjust and a powerful and eloquent case can be made for a new international financial architecture which controls capital flows, but why is nobody listening to Mahathir or Malaysia? There is a saying that those who seek equity must come with clean hands and there is undoubtedly a perception that Malaysia does not have cleans hands when Mahathir blamed foreign currency speculators for the economic turmoils, for at least three reasons: First, many of the speculators were Asian in nationality; Second, Bank Negara had acquired a reputation of trying to profit from speculative activities, including betting on the pound sterling and the US dollar. Third, for not addressing the real issue, which is described as:

It has been said that an economic crisis is in the final analysis a political crisis. Let Malaysians show that we have the political will to carry out wide-ranging political, economic and financial reforms to rectify the policy and structural weaknesses and defects in our country so that we have cleans hand to go to international forums to demand equity in an international financial system which would not lead to the globalisation of poverty as a result of unregulated capital flows.

Malaysia should be in the forefront to demand the review of the functioning of Bretton Woods institutions so that international financial institutions created more than 50 years ago in a macro-economic context that has drastically changed could be better equipped to deal with the challenges facing developing countries, such as:

However, for Malaysia to speak with moral authority in international fora for democracy and equity the international system, the government must be prepared to be more democratic and equitable in national policies in the country.

The other question I had posed is whether the economic crisis marks the ravelling of a model of development based on high-speed growth fuelled by huge infusions of foreign capital.

The second wave of East Asian economic growth which occurred in Malaysia, Thailand and Indonesia was because of the massive influx of foreign capital, particularly from Japan, as a result of the Plaza Accord of 1985. The Plaza Accord forced Japanese yen to drastically appreciate relative to the dollar. With production costs in Japan rendered prohibitive by the yen revaluation, South East Asia saw one of the largest and swiftest movements of capital to the developing world in recent history.

According to one estimate, a total of $US40 billion left Japan and swirled through the region looking for cheap labour sites for which they could export to the US and Japan. But unlike Taiwan and Korea, growth in South East Asia was extremely unequal.

The World Bank expects a reduction in private capital flows this year while the Institute of International Finance (IIF) in its latest report entitled Capital Flows to Emerging Markets, grouping Malaysia with Indonesia, Philippines, South Korea and Thailand as "the five economies most affected by the Asian crisis", said that net private capital flows into these five economies fell from US$93 billion in 1996 to an outflow of US$12 billion in 1997. The IIF forecast that for 1998, there would be a continued private capital outflow from these five countries to the tune of US$9.4 billion.

This strategic retreat of private capital flow raises the question about the continued viability of the model of foreign capital-fuelled fast track growth and the need for alternative paths to development more based on ecological sustainability.

Malaysia should take the lead to put social issues in the heart of the APEC agenda at the APEC Leaders Summit in November

It is in this context why Malaysia should take the lead to bring about a major orientation of the Asia Pacific Economic Community (APEC) and put social issues in the heart of the APEC agenda at the APEC Leaders Summit in November.

APEC, both in name and substance, is limited to examining economic issues which, on the whole, are totally separated from social issues. Thus issues of sustainable development do not make onto the APEC agenda. This is a serious regressive step. In an era of globalisation, the idea that one can separate economic from social issues is at best to ignore the reality around.

APEC has made a concerted effort to court the international business community. The only organisation to have full consultative status is the APEC Business Advisory Council.

Despite the international recognition of the role of civil society and commitments made by APEC countries in international fora, APEC refuses to recognise the NGO community.

Malaysia should set the international example to give full recognition to the NGO community and to give support to the proposed People’s Summit being planned in conjunction with the APEC Leaders’ Meeting in Kuala Lumpur in November this year.

(25/3/98)


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong