Malaysia  has gone through three great crises  since  the  Second World War.  We have bounced back  twice.   We  will bounce back again, God willing.

2.    The  first  was  a war against Communist  guerillas bent on setting up a Communist Republic in Malaysia.   We defeated them.
 
3.    Malaysia's  second great post-War  crisis  occurred    with race riots in Kuala Lumpur in May 1969.
 
4.    Parliamentary democracy had to be  suspended.   But within 18 months everything was back to normal.
 
5.    To  ensure  there  would be no recurrence  of  such riots  we implemented a  New Economic Policy  (NEP) aimed at   eradicating  poverty  regardless  of  race  and  the elimination of  the identification of race with  economic functions.
 
6.    As with all Southeast Asian countries Malaysia  has citizens  of  Chinese  origin who dominated  the  economy almost  entirely.The NEP helped the indigenous people  to catch  up  with  the Chinese. It was  not  a  Robin  Hood operation.   Redistribution was to  be  from  new  wealth created through well-planned economic growth policies  of the  Government. As for poverty, it was reduced  from  50 percent to seven percent in 30 years of the NEP.
 
7.    You  may note that we did not choose the  Socialist or  the  Communist approach.  We could have  nationalised by   expropriating  from  the  rich  Chinese.    But   we preferred  the  free  market   and  affirmative   action; something that is not easy to implement.
 
8.    The  NEP  has  benefited  every  single  indigenous people  of  Malaysia,  each of course  according  to  his capacity.   Naturally  some seem  to  benefit  more  than others.   But  there  is no society in  the  world  where   there  is  absolute equality -- not even in the Communist world.
 
9.    The  non-indigenous  people including  the  Chinese also benefitted.
 
10.  Let me now turn to our third great crisis, which  we are  still experiencing now.  Two weeks before the crisis  started  Malaysia was described by Mr. Camdessus  of  the IMF   as,   and  I  quote  "a  good  example  where   the authorities are well aware of the challenges of  managing the  pressures  that  result  from  high  growth  and  of maintaining  a sound financial system amid capital  flows and  a booming property market" unquote.  Yet the country went  into  financial turmoil together  with  other  East Asian  countries as its currency was rapidly valued  by the currency traders.

11.   Instead  of blaming the currency manipulators,  the Government was blamed.  The Governments of East Asia  are all  said  to be corrupt, practised cronyism and nepotism and  are  not  transparent.  There is no  doubt  that  to varying  degrees  they  were.  But  despite  this,  these Governments were able to develop their countries so  fast that  they were described as miracle economies.  If their weaknesses   were  the  cause  they  could   never   have performed  these  miracles.  They  would  have  collapsed long  ago.   But  they collapsed only in July  1997  when their  currencies were deliberately devalued by  currency traders bent on making money for themselves.
 
12.  We are not taken in by the claim that the market  is disciplining  Governments.  If there is no  money  to  be  made  they  wouldn't care less if these  Governments  are run  by  bandits.  The market is made up of  very  greedy people  who  just  want  to  make  money  for  themselves without regard for the misery they cause the poor  people in developing countries.
 
13.   Devaluing currencies can give huge profits for  the currency  traders  but  it is a sure  way  to  impoverish people  and countries and destroy economies.If deliberate currency  devaluation is accompanied by  attacks  on  the stock  market  the result is even worse. Even  the  great United States of America would go under if the dollar  is devalued  by  50  percent and Dow Jones  plummet  to  two thousand   points.   Someone  should  do  a   sensitivity analysis  of some of the giant corporations  of  the  USA under these conditions.
 
14.   In Malaysia the currency was devalued by 80 percent at  times and the stock market index went down from  1200 to  260,  wiping  out  almost US$300  billion  in  market capitalisation.
 
15.   On  top of this the IMF used its Malaysian  cronies to  force interest rates to be raised, to squeeze  credit and  shorten  the  period for loans to  be  declared  non performing.
 
16.   It  was  suggested that high interest  rates  would keep  our money out of the hands of the currency traders.    Instead  it  flowed  massively to Singapore,  where  even higher   interest  rates  were  offered.   The   currency traders  needed  to  borrow  the  money  only  for  short periods  and did not mind the high interests.  They  kept on  devaluing  the currency while Malaysia ran  short  of credit.
 
17.   The  economy  went into a tailspin.   Malaysia  was going  bankrupt.  The foreign observers happily predicted that Malaysia must soon ask for IMF loans and accept  IMF control.   That  means Malaysia must allow foreigners  to take  over  Malaysian  banks,  privatised  utilities  and businesses.   The longer Malaysia balked the  lower  will the   shares  fall  and  the  cheaper  will  it  be   for foreigners   to   pick   up  the   distressed   Malaysian corporations.
 
18.   We  appealed to the IMF and the World Bank to  curb the   activities  of  the  currency  traders.    But   Mr   Camdessus  merely wrote to say that currency  trading  is so  huge  and involved the great banks of the  West  that nothing could be done to regulate currency trading.

19.   We  could not understand it.  To us it was  obvious that  currency trading is at the root of practically  all financial turmoils.  With hundreds of billions  in  terms of  purchasing  power of the East lost, world  trade  and  the  world's  economy  must suffer.   But  it  seems  the rights  of  the currency traders are more important  than  the  economy  of the world.  They must not be  frustrated in any way.
 
20.   It  would  seem  that the system  has  become  more important than the result.  It has become a religion  and must  be  upheld  even  if it destroys  everything.   The world's  economy is not as important as the free  markets and the rights of the currency traders.
 
21.  Malaysia is small.  Its economy is not important  to the  world.   Whether we are destroyed or  not  does  not matter.   Whether our people are hungry or they riot  and self-destruct is of no concern to the world.
 
22.   Since  this is the attitude of the world,  Malaysia would  be wasting its time hoping for the world community to  restructure the international financial system merely to  help  us out.  We Malaysians have to take independent action in order to protect our interests.
 
23.   Since we believe that the currency traders and  the stock  market  speculators  were  responsible  for   what happened  to our economy, the logical thing to do  is  to put  a  stop  to  their activities as they  affected  our country.   And  so  we  put in place  selective  exchange control  designed  specifically to prevent  the  currency traders  from getting hold of our Ringgit.   The  Ringgit was  therefore made worthless outside of Malaysia and may not  be  brought  back  into  Malaysia  one  month  after controls were imposed.
 
24.   Trade  is  to  be conducted in foreign  currencies. Exports  must  exceed imports if there is  to  be  enough foreign  currencies  to  pay  for  imports.   Within  the country  the foreign currency can be converted to Ringgit at  3.8  Ringgit to US$1.00 or equivalent and vice versa.  Conversion  is  only  for payments for  imports.   Within four  months of controls reserves rose by 35  percent  to US$27  billion.  As all export earnings are sold  to  the Central   Bank,  the  money  in  circulation   has   also increased.
 
25.   The  Malaysian stock market was  peculiar  in  that much  of  the  trading was done in Singapore  through  an over  the counter market operated by the Singapore  Stock Exchange.   Although  shares traded  there  were  illegal according to Malaysian law and were not recorded  in  the Kuala  Lumpur  Stock  Exchange (KLSE)  they  nevertheless affected the Kuala Lumpur Composite Index.
 

26.   Short-selling in Singapore rapidly pushed down  the Composite   Index.    All   the   Malaysian   banks   and corporations  went  into a state of distress,  unable  to repay   loans  or  to  borrow  money  to  finance   their businesses.  Unless the trading in Singapore is  stopped, Malaysian  banks and companies would go bankrupt  and  we would  be  forced  to let foreigners take  over  all  our businesses.   We  Malaysians would  be  mere  workers  in foreign-owned companies.
 
27.   To  stop this we required all share trading  to  be made  through the KLSE.  In addition capital invested  in the  stock market must stay in the country for  at  least one  year.  This effectively stopped share manipulations. At  the time when the controls were imposed the Composite Index  had gone down from 1200 to 260.  It has now  risen to  about  600.  Companies are now able to service  loans and borrow again and businesses have largely revived.
 
28.   Free from the threat of devaluation by the currency traders,  interest rates have been lowered.   The  return of  the  Ringgit  from abroad helped increase  liquidity. An   asset   management  company  has  bought  the   non- performing loans while a special purpose vehicle was  set up to recapitalise the banks.
 
29.   When  Malaysia introduced these selective  controls there  was  almost universal condemnation.  We were  told we  would  fail or at best the relief would be temporary. The  international media as usual accused  the  Malaysian Government  of imposing controls to save the cronies  and the  family  members  of the Prime Minister.   They  even hinted  that  the  people would rise and  overthrow   the Government.
 
30.   I  would  like to invite all of you to Malaysia  to see  whether controls have harmed Malaysia. Talk  to  the average  Malaysians, not just to the few  who  are  anti- Government.   Find  out if the people are  interested  in rioting  and  overthrowing  the  Government.   Meet   the managers of 100 percent foreign-owned industries and  ask them how they are doing.
 
31.   I  ask  you  to  come and see for yourself  because apart   from  the  currency  traders  and  stock   market raiders,  we have also to contend with a hostile  Western media.   They  distort all reports on Malaysia.   If  you depend  on them you will never know the truth.  They  are not  above  fabricating stories if they are against  you. And  they  don't like countries which refuse to  "kowtow" to  them.   In  other words they deny others free  speech while  they  preach  the  sanctity  of  free  speech  for themselves.   We  know of cancellations  by  hundreds  of tourists because Malaysia is described by them as  a  war zone.    Power   it  seems  has  corrupted   the   press. Ironically  in the Information Age the only  way  to  get real information is to go see for yourself.
 
32.   However  if you care to believe, I  would  like  to point  out  that since controls were imposed in September 1998,  the results have been very gratifying.  Businesses have  been  revived and are doing fairly  well.   As  the share  prices  have  gone up, the  Non  Performing  Loans (NPLs)   have  reduced  and  companies are healthy again.
 
33.   The  repatriation  of  the  Malaysian  Ringgit  has enabled  us  to recapitalise the banks and  purchase  the NPLs without foreign loans.  Retrenchment is minimal.  In fact statistically we still have zero unemployment.
 
34.   Inflation  is  only 1.5 percent above  the  average yearly  inflation rate.  There is no shortage of food  or medicine  or  fuel.   The supermarkets  are  well-stocked with  everything including imported foods.  There are  no riots and you can travel anywhere in safety.
 
35.   Whereas  for  almost  a decade  there  had  been  a deficit  in the balance of payment, now there is  a  huge surplus.   Reserves have gone up from  US$20  billion  to US$27 billion, sufficient to sustain over five months  of retained imports.
 
36.   Property and motor vehicle sales have shot up.  And all   other   indicators  show  an   economy   which   is recovering.
 
37.   There  may be other reasons for recovery but  there can  be no doubt that currency and capital controls  play a  very major role.  It cannot be a coincidence that  the healthy   economic  indicators  began  to   show   almost immediately  after  controls were  imposed  in  September 1998.
 
38.   Those who do not condemn the controls outright  ask us  when we would lift it.  They admit that controls have helped to stabilise and revive the Malaysian economy  but they  insist that they are retrogressive steps.  Now that stability  has  been  achieved  the  controls  should  be removed.
 
39.   We  see  no reason to remove currency control  now.  The  experience of Latin countries show that as  soon  as their  economies recover from the effects of  attacks  on their  currencies,  the  currency  traders  would  launch another  attack with equally disastrous results.  Clearly as  long as the international financial regime allows the currency  traders  to  devalue currencies,  there  is  no guarantee that they will cease and desist simply  because financial  reforms  have been carried out  faithfully  by Governments.  The currency traders are not interested  in the   good  behaviour  of  Governments.   They  are  only interested  in  there  being sufficient  wealth  to  rob. Countries  with  worse  Governments  are  left  free   of attacks  if  they  are  too poor  to  be  robbed  through currency devaluation.
 
40.   The  controls will therefore remain in place  until the  International  Community  devises  a  new  financial regime which curbs the activities of currency traders.
 
41.   Currency trading has served no good purpose as  far as  the  world's economy is concerned.  It may  enrich  a few  rich capitalists in developed countries but it  does so  at the expense of relatively poor countries and their poor  people.   Today millions in East Asia are  starving or  have  only  one  meal a day,  are  unable  to  afford medical  treatment or milk for their children.   You  may want  to  blame the Governments for this catastrophe  but before  the  currency devaluation these  things  did  not happen.
 
42.   The IMF, the media and the rating agencies are  all culpable  but not initially.  It is the currency  traders who are the true culprits who caused  the destruction  of the  economies of East Asia, of Latin America, of  Russia and  of  the  world.  Trillions of dollars  in  terms  of purchasing power and in real terms have been  lost.   The currency  traders  have destroyed  huge  amounts  of  the wealth  of the world in order to make a relatively small  profit for themselves.
 
43.   In Hong Kong in 1997 I blamed the currency traders.  I  have  no reason to change my mind.  The world  can  do without  their  destructive  cattle-like  behaviour.   If they  cannot  be done away with they should at  least  be regulated.   Governments  which harbour  them  and  claim that  they  cannot  control  them  should  resign  or  be overthrown.
 
44.   The  21st  Century should be a better century  than the  20th.   In the 20th Century we saw the invention  of ever  more destructive weapons of war.  We are now seeing newer  weapons  of  war,  namely financial  and  economic weapons.   And  they  are no less  destructive,  no  less lethal than the rockets and the bombs.
 
45.    If   the  world  really  believes  in  peace,   in democracy,  in justic for all, destroy or curb  currency trading.   Then and then only will we see  a  revival  of the  world's  economy  and an equitable  distribution  of wealth.
 
46.   Malaysia  is bouncing back from the brink.   But  I must  admit that as a small trading nation the extent  it bounces  back  depends on the world's economy.   We  will not recover fully if the world does not recover,  and  it will not recover if it regards capitalism as a religion.