Developing Countries Must Prioritize Savings to Cushion Economy from Global Shocks

Former Malaysian Prime Minister Dr. Mahathir Mohamad has emphasized the importance of developing countries maintaining a healthy savings regime to protect their economies from global shocks. Dr. Mahathir noted that a high savings rate enables countries to finance their economic development and recovery without relying on external forces, which can exert control over the domestic economy. He also warned that excessive foreign borrowings and capital inflows can lead to the dominance of foreign capitalists, which can be detrimental if they suddenly withdraw their investments.

Key Takeaways:

• Dr. Mahathir suggested that developing countries prioritize savings to cushion their economies from global shocks, citing the 1997-98 regional financial crisis as an example.
• He emphasized the need for emerging economies to prepare for various eventualities, including currency devaluations and foreign capital withdrawals.
• Dr. Mahathir warned that excessive foreign borrowings and capital inflows can lead to the dominance of foreign capitalists, which can be damaging if they withdraw their investments.
• He stressed the importance of robust governance and domestic economic management in mitigating the effects of global economic changes.
• The former Prime Minister cautioned that the offer of help from international institutions can sometimes be detrimental to a country's economy, citing the 1997-98 crisis as an example.
• Dr. Mahathir emphasized the need for countries to build protective barriers and reduce foreign borrowings to minimize their exposure to international economic volatility.
• The Asian Insurers and Reinsurers Conference, organized by Malaysian Reinsurance Bhd, provided a platform for Dr. Mahathir to share his insights on economic governance and resilience.

Statistics:

• The 1997-98 regional financial crisis resulted in significant economic damage to East Asian countries, including Malaysia.
• Excessive foreign borrowings can lead to a country's economy being dominated by foreign capitalists, which can be detrimental.
• The offer of help from international institutions can be destructive to a country's economy, as seen during the 1997-98 crisis.
• Developing countries must maintain a high savings rate to finance their economic development and recovery.
• The Asian Insurers and Reinsurers Conference, where Dr. Mahathir delivered his speech, was organized by Malaysian Reinsurance Bhd.

Sources:

• Asia Pulse, Oct 23
• BERNAMA-OANA bl 23-10 2035