PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | SPEECHES & EDITORIALS | 2002 | POVERTY AND GLOBALISATION

Poverty and Globalisation The Hon. Dato' Seri Abdullah Ahmad Badawi Deputy Prime Minister of Malaysia APEC CEO Summit 2002 Los Cabos, Mexico OCTOBER 25, 2002 PBEC leaders had the opportunity to meet privately with Minister Badawi following PBEC's Mid-term Meeting in Los Cabos Mexico. Minister Badawi later delivered the following address during the APEC CEO Summit. The waves of globalisation are highly selective. They are not lifting all boats. Some boats are fully buoyant and speeding ahead. Some are still launching on the shores, untouched by these waves. Some who braved these waves are unfortunately marooned on some unseen reefs. Globalisation is leaving too many countries and too many peoples behind. Indeed, we are generally agreed, I believe, that there is much hypocrisy and double standards in the way globalisation is managed. The examples by now are only too well known. Tariffs and subsidies in developing economies are alleged to breed inefficiency, protect uncompetitive sectors, raise costs and contribute to unfair competition. Developing countries are asked - sometimes compelled - to dismantle these barriers. Yet tariffs and subsidies are alive and well in many key sectors in developed countries, and forcefully defended. Unfortunately for the poor of the world in developing economies, many of these sectors, such as agriculture and manufacturing, are also sectors that are in direct competition to their export commodities. Of even more direct relevance to poverty is the revelation by a recent study that a cow in the European union receives an average subsidy of us $2.2 a day, which is more than the weighted average income of half the earth's population. There is therefore a gathering recognition that globalisation is not the universal and unmitigated good that it was once portrayed to be. It has many positive elements, but it also has a severe downside, which impacts more heavily upon the poor, the deprived and the disenfranchised. If there is growing consensus that globalisation does have an enormous downside, there is still much controversy about what can be done to remedy it, and how one should go about doing it. I think the starting point for a strategy to fight poverty in the context of globalisation should be a healthy dose of pragmatism. Dogma and ideology should not warp our thinking and close our minds. Alternative approaches should not be dismissed as heresies. A one-size-fits-all strategy of the kind dogmatically adopted by the I.M.F in particular should be avoided, for it has proven particularly damaging. In the regard, I would like to share with you Malaysia's own experience with poverty eradication in the context of globalisation. Malaysia's successes, as well as the problems it encountered, would be interesting for several reasons. it is a developing country that at independence in 1957 had a per capita income of only u.s.$227. The large majority of its people were living in absolute poverty. My country was then written off by many as a basket case, not only because it was poor, but also because its political make-up and condition was all wrong. It was a fledgling democracy with no experience in democracy; it was in the midst of an emergency declared to combat communist terrorism; and it had a multiethnic, multi-religious population that was vulnerable to racial tension and conflict. Malaysia's economy was totally dependent on two primary commodities, tin and rubber. I believe that quite a few of the L.D.C's in the world today will fit this economic and political profile. Today Malaysia is an upper middle income economy. Its per capita G.D.P. in the year 2000 had reached u.s.$9,068 in purchasing power parity terms. it has moved away from primary commodities to become an industrialised country. Incidence of poverty in 1999 had been reduced to 8.1 percent, and Malaysia's target is to whittle it down to 0.5 percent by 2005. Few economies have matched Malaysia's performance in this field. The country has also embarked upon programmes to develop into a knowledge-driven economy. There is peace, stability and a working democracy. Most important of all, Malaysia is a highly globalised economy, much more globalised than any of the O.E.C.D. Countries. Malaysia has also been a victim of the excesses of globalisation. It has been exposed to cyclical volatility in the international markets. More serious was the financial crisis that swept through our region in 1997 and 1998, which wiped out much wealth in the stock market, reduced Malaysia's currency value, and bankrupted companies. Malaysia's experience of effectively eradicating poverty while participating fully in the globalisation process, could therefore be of some interest, if not instructive. Let me then summarise my country's strategies and policies, first in the domestic domain, and then in the external context. There have been ten key principles that have driven Malaysia's approach to combating poverty in the domestic context. they are: First, maintenance of peach and stability in the domestic as well as external environment as a pre-condition for economy growth. Second, ferocious and sustained political attention to poverty eradication and narrowing of imbalances. Third, self-reliance and national effort, with minimal international assistance. This was especially important after the 1997 financial crisis, because Malaysia did not believe in the prevailing orthodoxy of the Washington consensus and the I.M.F. I believe events have since vindicated Prime Minister Dr. Mahathir Mohamad and our policies. Forth, active state participation and selective intervention to achieve the public good objective of poverty eradication. Six, heavy investment in education and human resource development as a key instrument to provide social mobility for the poor, and to raise productivity and fuel growth. Seventh, heavy investment in strongly subsidised healthcare services. Eighth, affirmative policies in favor of the poor and in pursuit of distributive goals. These ranged from providing quality opportunities in education, employment and business, to offering incentives for investment, savings and capital ownership. These affirmative action measures are gradually being eased out now, as the disadvantaged sectors of the population build capacity and become more self-reliant. Ninth, specific programmes for the hard-core poor, those earning less than one-half of the official line income. Tenth and not least, addressing the digital divide within the country even as we endeavour to close the digital cap with the more advanced economies. Meanwhile, our external initiatives have essentially been aimed at achieving three important objectives. First, to fully exploit the opportunities provided by globalisation for economic growth, and thereby, for poverty alleviation; second, to protect ourselves as best we can from some of the excesses of globalisation; and third, to make globalisation more equitable and responsive to the interests and needs of developing countries. Malaysia succeeded because our economy had performed well. But economic success and prosperity cannot be achieved without peach and political stability, and the leadership of the government that is committed to improvement of administration and support for democratic institutions. It must continue to fight and eradicate corruption and continually improve service delivery. The corporate sector must conduct business with transparency and good governance. These businesses should enhance their efficiency and competitive edge through creativity and innovation. meanwhile, international institutions should foster an environment that is conducive to capacity building and growth for all countries, particularly the developing countries. Another financial crisis can wreak havoc on countries. There is no guarantee that such turmoil will not recur in the aftermath of the Asian financial crisis, Malaysia called for the reform of the international financial architecture, but this has fallen on deaf ears. The call for the reform of the Bretton Woods institutions was made even earlier, about a decade ago. we asked for greater transparency and a more democratic governance structure in those institutions, but little has been done. Now we have deal with the scourge of terrorism. Its spectre raises costs and makes doing business more risky and cumbersome. Terrorism and armed conflict have grave economic implications, particularly for the poor of the world. Therefore, any solution offered to address poverty and globalisation, or any other problem, should be holistic and include social and political aspects in the equation. Economic problems cannot be solved by economics alone, as the damage caused by IMF remedies has proven. We should not use ailing institutions to heal sick economies. Malaysia advocates a policy of "prosper thy neighbour". Such an approach benefits all in the long run. After all, when a country becomes poor, it cannot be a good market for its trading partners. Globalisation has turned the world into one large, interconnected village. In a village, when a house burns, no one in safe. In a community, no rich family can live happily if the rest of the community lives in poverty and deprivation. Let us give globalisation a human face.