8:36 AM Jan 12, 1996

MALAYSIAN PM OPPOSES WTO INVESTMENT TREATY

Kuala Lumpur, 12 Jan (TWN/Martin Khor) -- The Malaysian Prime Minister, Dr Mahathir Mohamad, has criticised the move by some Northern countries to introduce the 'foreign investment' issue on the agenda of the World Trade Organization and negotiate a full-fledged foreign investment agreement in the WTO.

Such a move, Mahathir said, would be unfair to developing nations.

"We are aware of such moves and we will take steps to ensure that such an unfair trade treaty will not be pushed through," he added.

Dr Mahathir was speaking at a National Forum on "Reducing the Balance of Payments Deficit", held here on 11 January. During a dialogue session, he was asked about the government's position on a proposal by the European Union to set up a multilateral treaty on foreign investments within the WTO.

The proposed treaty would give foreign corporations the right to invest and enter and establish themselves in any country, and in all sectors.

The host country would have to extend 'most-favoured-nation' treatment to corporations and investors belonging to any country, meaning that any favourable terms or conditions agreed bilaterally by a country for investors from another would apply automatically to all countries. The investing corporations would be allowed full equity ownership rights and be entitled to "national treatment", that is be treated no differently than local companies.

The Prime Minister said the Malaysian government was conscious of attempts made through trade arrangements such as APEC (Asia Pacific Economic Cooperation forum) and the WTO to open up the markets of countries of the South.

"We are aware of the moves by some Northern countries to draw up a new investment agreement in the WTO," he added. "They are pushing this forward on the pretext that this would attract foreign investments to developing countries.

"But actually the result may be total domination of developing countries with loss of control over their own economies to the developed countries." Dr Mahathir criticised the concept of the need for a "level playing field" in international trade and services which the industrialised countries were now also using as a rationale for their investment proposal.

He likened the present disparity in the world economy to a match in which the contestants were giants on one side and midgets on the other.

"In such a situation, having a level playing field will mean nothing for the midgets," he said.

"In world trade, the developing countries are midgets and they are going to lose if there is a level playing field. They need to be given a handicap just as in golf, where handicaps are given to the weaker players so that there will be a fair game."

Giving examples of how the proposed investment treaty would adversely affect developing countries, the Prime Minister said that the opening up of the service sectors to foreign companies on a national treatment basis "would result in our local service companies disappearing."

"Imagine huge foreign banks opening up branches freely in various parts of the country. They can afford to make losses here whilst making profits elsewhere and thus continue their business. But if our local banks make losses here in their own country, they cannot continue operating and will close down.

"Therefore we need to protect our local businesses until they grow as big or as strong as their foreign competitors, and then they can go abroad and compete, just as the foreign companies come here and compete with our local firms."

Dr Mahathir added that if big American banks were allowed to operate freely locally, then with their resources they would be able to overwhelm the local banks. But if even the biggest Malaysian bank were to open in the United States, its presence would hardly be noticed as it was so tiny compared to the US banks.

"We are aware of the moves in the WTO on setting up an investment treaty and we will make sure such an unfair treaty will not be pushed through," he said. "We think it is not fair for them to push through this treaty."