1. I am delighted to deliver the keynote address at the second World Capital Markets symposium. The WCMS, as it is known, has developed into a premier annual gathering for opinion leaders and policy-makers to provide thought leadership on key global policy challenges. For those who made a long journey to join us at this symposium, let me take this opportunity to bid you Selamat Datang, or Welcome to Malaysia.
Ladies and Gentlemen,
2. Let me start by taking you back to our global mood at the beginning of this new millennium. At a particularly high point in the Internet era we began the millennium with high hopes for the prospects offered to society by rapid advancements in technology. The 21st century held out the promise of a New Economy powered by productivity gains unleashed by scientific discoveries and electronic networks that connected developed and emerging markets to expand consumer opportunities.
3. We quickly saw the power of the Internet and of the rapid rise in technology as a force for good that would break down trade and cultural barriers, encourage awareness and civil activism and promote transparency. For the most part, all of this has happened; globalization is here to stay and the world will only continue to be even more inter-connected.
4. The past two years have brought us down to Earth, however, and we now know that our growth potential is not limitless. Our hopes and enthusiasm have been dampened by the global financial crisis and we have all adjusted to a “new normal” that reflects greater caution and risk aversion than before.
5. Over the past two years, governments have demonstrated their commitment to provide stability even as private sector markets and enterprises went into a tailspin. Governments are still currently pre-occupied with addressing immediate vulnerabilities and fragilities. But we cannot continue to operate in this mode reacting with only short-term remedial measures and actions. We risk allowing the world economy to drift listlessly and without direction.
Ladies and gentlemen,
Broadening reform agenda to promote long-term confidence and social inclusiveness
6. First, the obvious question must be asked. What lessons have we learnt from the crisis to ensure that past mistakes do not recur in the future? There is little doubt that modern financial tools have advanced the cause of civilization by broadening the ownership of assets and, in the process, recycled global savings to accelerate capital formation. But market efficiency has been sacrificed as self-serving financial and corporate players exploited loopholes and lax regulations to make profits at the expense of society. They have diverted markets from their objective of efficient intermediation for productive investment and unleashed systemic risks in a relentless pursuit of profits.
7. As a result, the relationship of financial markets with society is now in disarray. The consequences of this financial crisis are far greater than the ones in the past because there is now extensive public participation in and dependence on markets. Many individuals entrust their life savings to organized financial intermediation to accumulate savings for their old age. Yet, too many in the financial industry remain callous to their responsibilities and continue to rely on the principle of caveat emptor, or “buyer beware”, as a pretext to undertake complex transactions and sell opaque products that pose financial risks to the public.
8. Worldwide, there are sweeping reforms to address financial system weaknesses at the root of over-leveraging funds, opaqueness of risks and fiduciary duties of financial intermediaries. But it will not be enough to address existing weaknesses to safeguard mechanisms to overcome the current predicament that ails the global economy. I propose for your consideration a broadening of the scope of reform, which is critical to catalysing a sustained global economic recovery, and would like to spend my time with you discussing some of components necessary to achieving such sustainability
9. First, there is a need to focus on increasing private sector commitments to investing over long-term horizons. Investors are now increasingly risk-averse, preferring safety and short-term liquidity. But the willingness to commit funds over long periods of time is necessary to fuel an entrepreneurial environment.
10. Governments can only fill the vacuum in investments for a limited time. If eventually a sustained global economic recovery is to take root, it is necessary to galvanise the “animal spirits” in the private sector to make new and substantial investments for the long term. Restoring confidence in long-term investing requires reforms that address public trust through an agenda based on governance and coordinated among nations.
11. Second, there is a need to achieve a better balance in the social compact between finance and business on one side and the interests of society on the other. Profits cannot be the sole motivation of enterprise; for while they satisfy the individual shareholder, they may not meet the requirements of society. It is only when there is equitable sharing of the fruits of enterprise through ensuring social inclusion that prosperity can be sustained.
Ladies and Gentlemen,
Shaping a global agenda based on governance for the 21st century
12. In the 21st century, there is a great urgency for us to lift ourselves out of the current economic morass so that businesses can resume their quest to utilize technology and financial innovations that create sustainable economic improvements for the majority of our global society, not just the privileged few.
13. If we are to truly begin laying the foundations for sustained and shared prosperity for the New Millennium, we should aspire to a new ethos of governance. This requires us to work together to shape a global agenda for governance, based on a set of shared values that provides a moral underpinning for fair and sensible conduct within and among nations.
14. In this regard, economic and social goals are inevitably intertwined; they cannot be pursued in isolation of each other. The current pre-eminence of profits or returns in the allocation of capital merely reflects a predisposition for self-enrichment. From the recent crisis, we have all seen that such wealth can be transient. When business objectives are achieved at the expense of other citizens and other nations, it results in an eventual breakdown in trust and confidence. Business cannot flourish without the confidence, support and participation of the public at large.
15. In my view, the first priority of a global agenda for governance must be to shift the emphasis from nations competing to promoting global cooperation and collaboration. Many countries naturally strive to strengthen their competitiveness. But for trading and investments across borders to be sustained, there must be mutual benefits for both countries – a win-win situation.
16. Competition must be managed so that it does not turn into a free-for-all; otherwise this will inevitably lead us down the road of “beggar-thy-neighbour”. The building of bridges of trust and confidence across borders is a task that in my view requires greater attention than previously provided for. Indeed, it is incumbent upon us, whether we are trading within our borders or beyond, that we are all bound by an agenda of greater good.
17. Second, international governance arrangements must be reviewed as they play a key role in shaping the compact between organized business and finance and how they use resources and impact on livelihoods and the environment. Institutional arrangements need strengthening to promote fairer distribution of economic wealth and widespread social well-being. Similarly, we must show greater restraint in how we use our natural resources. We are depleting these resources without consideration for environmental sustainability: it is a practice we cannot continue..
18. Good governance must also translate into adequate checks and balances to avoid domination by influential interests in the global decision-making process. It must provide equal access and consideration to the views of a diverse range of stakeholders and countries. Ultimately, the quality of governance arrangements must be judged by the extent of grassroots participation and how it translates into sensitivity to and benefits for citizens all over the world.
19. Last but not least, there must be greater emphasis on social justice. In Islam, social justice is about fairness, mutual respect and integrity that are based on rights, relationships and responsibilities. Within the universe of social justice, it is considered that intent fuels actions and must take into consideration the effects on people, society and the environment. Therefore, there must be ideals to guide day-to-day behavior and promote the principles of fairness, moderation, compromise and sustainability. Distributive, compassionate and sustainable requirements should be embedded into economic systems to temper the Darwinian characteristics inherent in “survival-of-the-fittest” or “winner-take-all” market philosophies.
Ladies and gentlemen,
Leadership in a transparent and diverse society
20. In recent years, technology has altered the speed of communications, resulting in our actions and words being quickly transmitted and quickly disseminated throughout the world. While actions can be seen and words can be heard instantaneously and repetitively, intent can also more easily be misunderstood. The implications are that misunderstandings are now easily telegraphed from one part of the globe to another at astonishing speed.
21. In addition, citizens today are also more greatly empowered by knowledge. With knowledge, diverse groups become more assertive of their rights and public expectations are higher. The speed and weight of public opinion requires responsible moderation to achieve compromise and to make progress so that all can benefit.
22. The leadership skills required to shape consensus within society need to match the changes in time and in circumstance. In a transparent and diverse society, the accountability of a leader is far higher, the need to explain and convince, far greater. In this regard, the continued advancement of society requires citizens to trust the judgment of stewards who possess a sense of purpose and whose adherence to a code of ethical conduct allows them to lead their communities beyond the narrow pursuit of self-interest.
23. Leaders must strive to serve the needs of society so that they are trusted to achieve the compromise and collaboration in which harmony is achieved and prosperity can blossom. Even though opinions may diverge, leaders must increasingly act as arbiters, seeking consensus on the walkable paths to bring everyone along to a common destination.
Ladies and gentlemen,
22. I started my address by stating that although the world has made significant strides in technological discoveries, we are reminded by recent events that the basis for the future well-being of the global economy and society will not be determined by how machines interact with machines, but ultimately by how human beings interact with human beings.
23. We must face our current economic adversity with renewed faith and optimism. We must learn from our mistakes, resolve conflicts through cooperation, foster greater understanding of each other, deepen our compassion for humanity and undertake the duties we have been entrusted with.
24. We must always remain motivated to build a better world for our children – One where they live in peace and harmony and share in the prosperity that comes from working together. After all, history teaches us that humanity has sustained progress through learning, that it weathers crises through resoluteness and always emerges triumphant and stronger than before. We have the opportunity to continue this positive trend if we take the right steps today.
With that, I thank you for your attention and wish you a fruitful symposium.