WORLD ECONOMIC ISSUES

(1) Speech begins:

Introduction

Mr President, etc. …

Public administration is the essence of government. Most governments try to act in the interest of the public they represent. If politics is the art of the possible, public administration is the art of the desirable. But often the effect is perverse. Traffic lights don't always make the traffic flow more smoothly. If government was a commodity like tin or rubber, I'm not sure there'd be much demand for it.

So you have invited to address you a Prime Minister who believes that the public interest is often served by rather less administration. I am honoured and delighted to accept the opportunity.

You have asked me to speak about world economic issues. I do so in a country on the opposite side of the world to mine, and whose economy bears scarcely any resemblance to it. But we do have a shared [end p1] experience; and we do have a common interest.

That probably started about 2,000 years ago. If the evidence of the beads found at Kota Tinggi is to be believed, we were both colonised by the Romans at about the same time. Your forebears seem to have resisted their cultural impact rather better than ours. We were still using their coinage until fifteen years ago.

And for two hundred years British commerce and enterprise flourished on the Malay peninsular. Even a little bit of British public administration may have taken root here too.

Recent developments have been more startling. Industrialised Malaysia is the product of your own energies and your own enterprise. If Raffles drove from K. L. to Port Kelang today, he wouldn't believe his eyes.

Success of Post-War Recovery

And all this in such a short time. At the end of the second world war, the industrialised nations, both victors and vanquished, were all but ruined. The resources which should have gone to investment and [end p2] growth were consumed by armaments or destroyed by their use. The third world had not embarked upon industrialisation, and few people expected it to.

Thirty years later the industrialised West was basking in the sunlight of sustained growth and record living standards. It was the era of life, liberty, and two cars in which to pursue happiness. The third world too had made great strides, and here in South East Asia you were poised on the brink of major industrialisation.

By the early 1970s, there were few in London whose grandparents would not have been astonished at the variety, the comfort, and the opportunities of life; there can have been even fewer in Kuala Lumpur.

This enormous progress had its roots in policies which, by the 1970s, were threatened from a number of quarters. The policies were those of financial discipline, fixed exchange rates, the dismantling of wartime controls, and the encouragement of private enterprise. But as time went on, warning signs appeared. There was more inflation; less growth. More support for public enterprises; less for private. More consumption; less investment. [end p3]

The Problems of the 1970s

It's easy to put it all down to the price of oil. Easy, but wrong. The oil price rises certainly illuminated our economic weaknesses, but they didn't cause all of them.

Frankly, there were misconceptions and errors in policies being followed by governments. These were undermining our economic strength and making us less able to to resist the oil shocks. Let me just list five of them.

First: Governments thought they could underwrite growth and jobs. Of course, they only succeeded in underwriting inflation. In Britain between 1970 and 1980 a huge increase in public spending produced an even larger increase in inflation, very little growth, and a large increase in unemployment. The planned economy became synonymous with planned extravagance.

Second, we tried to resist changes which we now know were inevitable. The administration of incentives and open trading was replaced by the administration of subsidy and protection. All the public resources put into steel and shipbuilding could not insulate them from competition for ever. And meanwhile, Governments were doing precious little to help the [end p4] New industries. Despite that, more people are now employed in Scotland in the electronics industry than in shipbuilding.

Third, attitudes changed—for the worse. The growth of public expenditure was matched by growth in public expectations. In a remarkably short time we turned a self-reliant society into a claimant society. The new entrants to the labour market claimed jobs that couldn't exist at the wages they demanded; and claimed welfare benefits that couldn't be afforded out of the taxes they paid. Governments let it happen, and taxes rose. Well, if you're led by the nose, you'll end up paying through it.

Fourth, Government regulation of the economy began to expand again—often in an effort to make good a failure of policy. Look at exchange control. The pound was kept so high people had to be prevented from investing it abroad.

And Fifth, we were living off borrowed time and borrowed money. Government borrowed too much and banks lent too much.

The consequences of these policies were acute problems of economic management for us in Britain; [end p5] and they were common to most of the industrial world. OECD growth averaged [figure missing] %; between 1950 and 1970; but only [figure missing] %; in the 1970s.

The Changed Aproach

Economic historians will look back at the first half of this decade as the period when we changed the consensus. Before it began, Governments were widely regarded as the prime movers of the economy, with powers to match. Now, not just so-called Conservative administrations, but socialists as well, recognise that individual and corporate private enterprise is the foundation of economic growth, and that it flourishes best where the Government's role is least.

This change in the consensus is clearly shown in the outcome of the annual economic summits. Communiqué after communiqué has rammed home the message. Inflation is a threat to growth. Protection is a threat to to competition. Debt is a threat to jobs.

And it isn't just words. It's action. We've acted on the whole range of policies which were holding us back. Some of our actions have meant painful adjustments to economic reality. We've had to live with far higher unemployment for far longer than we [end p6] should have, because we had far too many people working in uncompetitive industries. New jobs are being created now, but there's a very long way to go. We've put the economy into forward gear again: but we're still driving uphill.

Nothing illustrates this better than our miners' strike. Most people in Britain knew they couldn't afford to go on paying huge subsidies to the coal industry for ever. The closure of many uneconomic pits was long overdue. It has indeed been an uphill struggle to have that accepted by all the miners, and a struggle in which the miners themselves have suffered most. But we have not been afraid to travel that road, and we would not hesitate to travel it again, for the sake of a more competitive and less subsidised Britain.

Malaysia

I do not pretend, Mr President, that it is for you to learn from this experience. In many of the areas I have mentioned you are setting the world an example.

Malaysian growth rates testify to the effectiveness of restructuring through growth. Real growth of around seven per cent a year since 1971 is a tremendous achievement. It rests firmly on the foundation of a free market economy in which labour monopolies [end p7] are unknown, new technologies are adopted as fast as they are available, and everybody recognises the need to produce what people actually want to buy. That is why you have virtually doubled the share of your exports to us that is in manufactured products.

And that is why you have also been able to weather the international recession better than many others. You have diversified your exports into a wide range of competitively priced commodities, manufactured goods and services, and you are poised for further export led growth as world demand picks up. In this too, the UK has nothing to teach Malaysia.

Challenges Ahead

But I do suggest, Mr President, that there are lessons for the future that we can both learn from the past. For among the challenges facing the world today are a number that need to be approached as we approached the problems of the past. And we have common interest in seeing them met.

Take poverty. The famine in Africa is a disaster of terrible proportions. We and other donor countries have of course responded, and generously. But in the longer term the solution lies not in food aid, but in food production—and above all in following policies which provide the right framework of [end p8] incentives for farmers. Ten years ago the South Asian countries faced regular famines at times of drought or flood. Today most of Asia is self-sufficient in food production, even in bad years. The combination of carefully targetted assistance from donors, and sensible policies on the part of recipients, can completely transform a developing country's prospects.

Or take protectionism. The temptation of barriers to free trade is strongest when economic growth falters. But while the relief which protectionism gives is also superficial, the after effects are painful. Consumers have to pay higher prices. Modernisation is held back. So the boundaries of the open trading system must be pressed forward.

There are two particular areas in which further progress can be made. One is agriculture. The disciplines that apply to trade in industrialised goods should also apply to trade in agricultural goods. The other is services, where again the arguments of efficiency and consumer choice apply.

In Europe, we already provide freer access to other countries' exports than any other industrialised country or group of countries. We have undertaken to eliminate, as far as possible, all quotas on imports from developing countries. We shall [end p9] continue to press within the European Community for a more open world trading system.

There are also challenges ahead in international finance. The strength of the dollar, the level of world interest rates and the size of the debt burden in some big countries are interrelated problems with no easy solutions.

The world needs lower interest rates in order to sustain the economic recovery. Governments will have to stop pushing the rates up by excessive borrowing. It's no use mortgaging future export earnings to pay for a spending spree now. Here in South East Asia there are examples of countries that have borrowed carefully, invested wisely, and are now reaping the the benefits. It's an example that needs to be followed by a number of countries in other parts of the world.

Peroration

Mr President, the histories and economies of our two nations are interwoven. Our common interests and common experience did not vanish on 31 August 1957. Merdeka meant independence, but not divorce.

British soldiers have fought on Malaysian soil in the [end p10] cause of Malaysian freedom. British contractors are now working on Malaysian soil in the cause of Malaysian development.

Malaysian exports find a ready market in the United Kingdom. Malaysian students find a ready welcome in British universities. It is not such a long step from the Malaysian Kampong to the English village.

Both our countries are committed to meeting the challenges ahead, and we make that commitment with confidence.

Confidence that in the right climate, enterprise and innovation will flourish.

Confidence that with the right policies, we shall ride on the crest of the wave as the world's economy expands.

And confidence that with the right friends, we shall do so with the strength of a partnership in the cause of a better world for all. [end p11]

[(2) Transcript of speech as delivered plus question and Answer session begins:]

SPEECH BY THE PRIME MINISTER, MRS. THATCHER, TO THE INSTITUTE OF PUBLIC ADMINISTRATION ON SATURDAY, 6 APRIL 1985 - KUALA LUMPUR, MALAYSIA

Mr. Chairman, Your Excellencies, Director, Members of the Institute, Distinguished Guests:

May I follow your excellent example, Mr. Chairman, and come straight to the subject of the Address.

I was very honoured to receive your invitation to address the Institute of Public Administration, which enjoys such a deservedly high reputation, and I look forward after my speech to dealing with your questions. May I stress this. I love the question session. I am schooled to it - two days a week in Parliament - and I like the questions. Please do not be shy in asking what you wish.

I must immediately declare the political ground on which I stand. You have invited to address you a prime minister who believes that the public interest is served by less, rather than more, administration. There are many aspects of life which manage very well without government help, but governments do not always know what is best for people. The people themselves decide their needs and business provides the readiest response. But my views on the quantity of administration do nothing to diminish my interest in the quality of it.

The purpose of your Institute is to ensure that the highest standards are met in the public service, and I applaud that.

A great but somewhat cynical British poet, Alexander Pope, once wrote: “For forms of government let fools contest what 'ere is best administered best.”

Of course, when he wrote that some 300 years ago, there were relatively few forms of government to choose from. Today, we know that no choice is more fundamental than the form of government. Malaysia and Britain have both chosen democracy, but democracy where there is genuine choice. Our public servants are trained to work for democratically-elected governments and to render them the best and most loyal service possible. Not for us the public servant who is the slavish interpreter of the obscure jargon of that 19th century theorist, Karl Marx, who knew more about the inside of the British Museum's Reading Room than the real world, and who would never have experienced the freedom to be different had he lived in the kind of society of which he wrote.

As an interesting sidelight, I will tell you that in a letter to Engels in 1868, Marx recalled that his mother had expressed a rueful wish: “If only Karl had made capital, instead of just writing about it!” She foresaw that communism would turn out to bring wealth only to the ruling politicians while capitalism brings prosperity to the mass of the people.

But to come back to Alexander Pope, he had something when he asserted that whatever is best administered is best.

[(Note: Sound level of questions is extremely poor!)]

Question

(inaudible)

Prime Minister

On your three points, the first on open policy and open trade. Yes, I am sure it is the best policy. It is the policy which stimulates industries to be competitive and that they must do if in the end they are to be successful.

I think it was quite right that the GATT provided a certain amount of protection for newly-industrialised countries to develop. They had to have protection during that period, but when they have developed, then we do move on to a much greater basis of equality.

There is a tendency in world recession and with a very high dollar for industries to demand protection. It is happening even in the United States, which is very much an open society. You saw the vote in the Senate the other day demanding more protectionism. It will be fatal if that happens. There was a tendency for it to happen in the 1930's, and if it happens world trade goes down. We cannot all [end p12] flourish, unless world trade expands, and therefore we must keep the open policies open.

Now, some countries are resisting a new round in GATT, because some countries are, in fact, practising by one means or another a form of protectionism, and the rest of us have got to overcome that and see that a new round in GATT develops.

Now, secondly, with regard to Malaysian students, we have at the moment some 14,000 Malaysian students in Britain. I recognise that the policy we had towards overseas student fees was particularly damaging for some countries, which is why we modified it.

I must tell you why we brought it in. Our university system, which is highly selective, that is to say, you have to get there by a test of ability and therefore show that you can profit from a university education, is a very very good one. We do not lose many people by the wayside during the course of their instruction, because there is a test of ability on entrance.

The demand, therefore, actually, for our universities was going up and up. When I was Secretary of State for Education, we had 21%; of our students from overseas countries and it was still rising, and we just had to put a brake on it and eventually, as you know, we changed the arrangements for overseas students' fees and, unfortunately, that stopped some coming from the countries with which we had previously had a very close relationship.

We therefore started a fund to enable a certain number of people to come from those countries, including from Malaysia. [end p13] That is now running into its third year and we have decided to extend that fund a four further years, which will help another 700 students in any one year to come.

I agree with you about English. It is a universal language and, of course, I believe that the British Council are very active here in helping those who wish to learn it, and the British Council is a very very good organisation, in demand the world over. The only thing that I get is demands for more public expenditure on the British Council and it is a demand which I would love to help them with.

The United Kingdom on the industrialisation policy here: I think that we are, apart from Japan, a comparatively large investor in Malaysia. I think that because of the slight matrimonial difficulties which we might have had for a short time, which are now over, that investment policy may have faltered. I hope that it will now resume, because I do believe that there is a natural propensity to work together. We know one another's administrative ways and customs and we believe in the same fundamental economic principles, and I hope therefore that investment will resume its former upward path. Thank you. (applause)

Question

I was very encouraged by the Rt. Hon. Speaker's opening words that we should ask her whatever we feel this morning. My question is: Maybe you like to enlighten us with some of the reasons as to why you decided to visit us now, whereas [end p14] there have been many of your predecessors before you, distinguished ones, since our independence. You mentioned that 31.8.57 was the date of our independence, but you found it proper to visit us now. But do not mistake me please; you are most welcome to Malaysia. Thank you.

Prime Minister

Well now, I thought, judged by your few preparatory remarks, that an interesting question was going to come and I was not disappointed.

Well first, because I thought that it was really about time. I was absolutely horrified when I learned that no British prime minister had visited Malaysia since independence. This seemed to me a great lack and that it should be remedied.

There is also something else. It is not only trade. Trade is important, but there is also something else. We all, as prime ministers, read a great deal of paper, read a great deal about other countries' problems, read a great deal about our relationships between our industries and theirs and our countries and theirs, and we all belong to similar international organisations.

I can only tell you—and it comes from cumulative experience—that you get a quite different impression from when you go to a country, because feel matters. Mahathir bin MohamadThe Prime Minister and I had a slight difference of view about this last night. The Prime Minister did not approve of sentiment; as a woman I do approve of sentiment. I think it is rather apt to make the world go round and when you have finished with all [end p15] the statistics and the graphs and the pie-charts etc., then you have to make a judgment, and in making a judgment, feel and experience comes in. The only way to get that is actually to go—two ways: both to go, and to receive people from that country, and I think this quite strongly, and therefore, I like to go myself to visit countries and my only apology is that I am sorry I did not come before, but the good point is that I think that psychologically, being a woman, I may have chosen just the right time to come! (applause)

Question

My name is Pan Chu Sin (phon.) I am connected with Samdarbi (phon.) which is probably the largest multi-national in South-East Asia.

I entirely agree with you, Prime Minister, with what you said in your Address, but I could probably relate experiences of Samdarbi in Europe.

We have practically shut down our operations in Western Europe and even in Britain, where we once had a major presence, and the reason is quite simple: because we were losing money there.

You quoted from John Stuart Mill. I personally think one of the reasons why Western Europe is not doing so well is because there are two things: firstly, your trade unions are far too powerful; secondly, I think this unfettered democracy can sometimes be a handicap and I will tell you why: in your speech, you quoted from John Stuart Mill. [end p16] He once said: “There is an overflowing current of human affairs towards the worst, consisting of all the follies, all the vices, all the …   ., indolences and weaknesses of mankind, which is only controlled and kept from sweeping all before it by the exertions which some persons constantly—and others by fits and starts—put forth in the direction of good and worthy objects. In short, mankind is prevented from being swept to perdition by the efforts of a few, in spite of the follies of many.” Under those circumstances, undiluted democracy can sometimes be—well—a bit of a handicap, if I may say so!

I agree this is probably very revolutionary.

Secondly, you also quoted from John Maynard Keynes. May I quote from him too? In his famous book called “Economic Consequences of Peace” , which he wrote in 1919, when he resigned in disgust after the Versailles Peace Conference, the main theme of the book was that when he disagreed with Lloyd George and Clemenceau over the treatment given to Germany, he said that you allied leaders made the fatal mistake in equating wealth with coal and coal with wealth. Wealth is not coal and coal is not wealth. Wealth is braininess, hard work, initiative, enterprise. And I think in Western Europe today, they do not give enough what I call “weightage” to qualities like that. Again, I think it is due to the unfair weightage given to what I call the “Welfare State Mentality” and I think that Western Europe, unless Western Europe gets rid of the mentality, you will never progress. [end p17]

I am referring to Samdarbi because we are losing money in Western Europe and as a result we have closed down operations in Western Europe. I have actual experience. We operate in twenty-two countries. We have two hundred companies, and as a result of what I did, I doubled our profit in four years.

When I took over in 1976 as Chairman, our profit was $131 million pre-tax. In 1980—4 years later—it was $245 million, more than double. (applause)

Prime Minister

Well now, I think that will form the subject of a whole speech in itself, but may I briefly comment on some of the most interesting points you have put.

I gather that you are losing money in Europe, not because of the design of the product, which of course is the first thing. So many people make things efficiently that will not sell because the design is faulty—but your designs are good. You were really losing money on the basis of costs, and perhaps one of the greatest factors in costs is unit labour costs and you find that unit labour costs in Europe are higher than the price of the product will bear.

I think you are right. It is one of the problems which is facing us in Britain, and certainly it is one of the problems that faces certain countries in Europe. Unit labour costs, which are wages and the overheads put on by the State and local authorities, are sometimes too high and therefore industry is moving out to the newly-industrialised countries. That, of course, depends upon the proportion of labour costs to the total cost of the product; but where they are high, it [end p18] is one of our weaknesses.

One of my tasks, as a politician, is to try to get this message across to our people, because you are quite right: the trade unions have frequently been interested, not in the amount left in profits for investment for the future—although they will pay lip service to investment—but please, they want their higher standard of living; they want it now. And we certainly, for a time in Britain, had a redistribution between the profits of companies and the wages of the people, and so investment went down.

Now, we are constantly having to try to say to people: “If you want jobs, your unit labour costs must not be higher than the price the product will bear!” It is difficult to get it across. In some places in Europe, we have very wise trade union leaders; in others, if they are merely activated by political adversarial approaches, it is difficult.

But let me say this: we are not getting very much union trouble in the private sector in Britain, very very little indeed. Our union trouble is coming in the public sector—the sector where things were originally nationalised so that they might serve the country!

Let us look at the strikes that I have had to face.

The first one I faced out was in 1980, a strike in steel. Steel is nationalised. We are trying to get some of it into the private sector. We faced that strike for thirteen weeks.

The second strike I had was a strike of the Civil Service We faced that one.

We had a strike of Health Service workers; we faced that one. [end p19]

Then came the big one, the strike of coal-miners. That is in the public sector. But the great achievement of that was not only that some miners stayed working, not only that we saw it off after a year, but the steel workers were not going to come out in support, nor were the railway workers going to come out in support, and the docks—of which most are private—were brought out on a false pretence for about a fortnight, and they got back into work.

So may I cheer you up a bit! We resisted that year-long strike and the two outstanding achievements were that among trade unionists in Britain not one trade union gave support, because they were learning the facts of life. And the second thing was this—and it has to do with your second point: yes, it is about leadership. Democracy will fail if it is regarded as majorities only and the negation of leadership. That is not democracy. Democracy is a system under which you appoint representatives to govern. You cannot extend it to appointments that should be made by merit, by professional standards.

Democracy, more than any other system, needs leadership at all levels of society, and indeed, it cannot flourish without it. And the point I wanted to make about it was this: out of our trade union difficulties, we got new leaders of moderate trade unionists. Leadership comes easy to extremists and fanatics, but moderates tend, you know, to go and look after their families and leave these things to other people. We got new leadership from moderate trade unionists, and that augurs well for the future. [end p20]

Now, you did have a crack about democracy. Do not! Yes, it will have weaknesses if it just becomes an “I want” society; if elections were just to become a public auction about how much each party could give or promise the people from the people's own earnings. But you know, in the end, the people are cannier than that. “Canny” is a Scotch word. People are more acute, more astute, than that. Otherwise, I would never be in government! (applause) People are more astute than that. They know. Common sense tells them that you have got to have effort. Common sense tells them that if you get too much out in wages, yes, businesses will go down.

For a time, they got more by various processes of redistribution. The redistribution is over. It has to be the creation of wealth which gives the rising prosperity. But please do not be depressed! I think we are through some of that period and I am really now quite confident as we face the future, and please do renew your faith in democracy. You would hate the other system! (applause)

Question

Mr. Chairman, my name is Khai du La (phon.) Madam President, you have been to Washington recently and in your discussion with President Ronald Reagan I understand the strong American dollar was one of the important topics. Can we know from you the beneficial result it has produced or likely to produce in the recent future? What we read in the newspaper was not sufficient. If there are some secret factors, please confide in us! [end p21]

Prime Minister

Could you repeat the last part of your question please?

Question

If there are some extra information which you like to confide with us.

Prime Minister

I have got the general gist of the question now.

Yes, of course, when I was in the States, we did discuss the strength of the dollar. It is causing trouble, as I indicated, in interest rates the world over and there is a feeling that it cannot go on rising indefinitely, but the question is when will it turn, and we believe that it might have turned recently. But what we are all afraid of is a sudden plunge, because sudden changes can be as devastating as sudden increases.

If you are dealing with currencies, variations of currencies, even acting in groups, with the sums of money that are moving around the world now, you cannot use up precious reserves for any more than sudden daily intervention to stop the speculators and make them burn their fingers. The only other thing you can do is use interest rates, which we in Britain had to do.

Now, the real thing that can be done in the United States to help the rest of the world and to have an effect on the strength of the dollar, is to reduce the deficit. Now, the point about the deficit there is not that it is high as a proportion of GDP … you take it … you bear in mind that their [end p22] separate States are in surplus, and then take the deficit of the Federal Government and set off the surplus of the States against the deficit of the Federal Government, you find that their present deficit is only of the order of 4.1/4%; of GDP, but their savings ratio is very low, and if there is to be money to go into private investment—and it does go into private investment in abundance—then with a low savings ratio, there is precious little left to finance the United States Government deficit, and that succeeds in drawing in money from the rest of the world and they have to use comparatively high interest rates to do that. If they reduced their deficit, then the interest rates should in fact go down. That helps the rest of the world to recover and the interest rates falling would attract less money across the exchanges and, of course, have an effect on the strength of the dollar.

One of the other things about the strength of the dollar is this: United States lent a great deal of money—really, rather too much—to some of the underdeveloped countries. The banks were ready to lend too much and some of the underdeveloped countries were prepared to borrow too much and, as you know, have got into international debt difficulties. As a result, United States banks are not now lending out fresh money, so you have got the phenomenon that money is being drawn into the United States across the exchanges and not counteracted by money going out, and so you have a very strong dollar.

Now, the other factor which President Reagan gives great weight to is this: the United States is undoubtedly a very strong enterprise economy. They have an enterprise [end p23] culture, the kind of which our last questioner was talking about, a very strong enterprise culture. They do not look to government to find them jobs—they look to themselves to create businesses that find them jobs. It is not a question of brains or research. We have brains and some of the best research in Britain. It is this other thing of entrepreneurship and the business attitude and the business spirit. Undoubtedly, that is strong in the United States. Its limiting factor at the moment is with the height of the dollar, some of those businesses just cannot compete. They cannot compete in exports, because of the exchange rate.

Their own goods are being substituted by imports from overseas. Therefore, they are complaining. Therefore, they are wanting protectionism.

Now, all this stems, really, in part, from the high deficit and you know, not even Keynes had a high deficit at the top of a boom.

I noticed what our last speaker said about Keynes. I often quote Keynes, because Keynes is the most misquoted man. Keynes was against inflation and he did not say half the things that are attributed to him.

So I think that the key to it at the moment does lie in the extent to which Congress can deal with the high deficit. The Ronald ReaganPresident has put a large number of proposals to them. They know the need to deal with it. Not all of those proposals will get through—they never do—but I hope that there will be a significant reduction in the deficit, which will not only be the amount of the reduction, but I hope done in such a way [end p24] that it illustrates a determination to deal with it, because it cannot go on, because otherwise the amount of debt financing puts a bigger and bigger increase on public expenditure in the United States, which it is President Reagan's objective to get down. There are lots of other technical things, but perhaps that will keep you going for the moment.

Question

My name is Mooneer Magit (phon.) Prime Minister, may I put two suggestions to you for your comment and perhaps amplification.

First, with respect to the Fifth Landing Right for MAS which was agreed upon yesterday, to be effective in one or two years, may I ask whether this agreement is based on an agreement on the figures put forward by MAS to justify the increased landing right in London. If so, I wonder why then its effect cannot be immediate and why it should be put off for one or two years, given that in one or two years many things may happen and certain interceding circumstances may crop up and what would happen then if there was an unresolved problem two years later.

On the same point, I wonder whether you believe, as in the case of MAS/BA negotiations over extra landing rights, you believe when there was a dispute over the figures on the passenger load factor, do you believe that in such an economic issue there should not be some kind of arbitration to determine who is accurate and who is right?

The second suggestion I would like your comment on, Prime Minister, has to do with sentiment, which you mentioned [end p25] earlier on. You, generally in the UK, are not associated with much sentiment, being called the Iron Lady and so on and so forth, and it is interesting that in Malaysia you have expressed a more sentimental approach to issues than our Prime Minister. But on that point, on sentiment, I think in an interview you had with Bunama (phon.), the national news agency, when you were asked whether or not there was going to be some account taken of Malaysian students in terms of entry into the UK, as a result of the education fund that was created for Third World countries, you did say—I cannot quote you directly but you did say—I am paraphrasing—you did say “Well, what would other countries think if we gave special attention or treatment to Malaysia?” But then, when you came here, you were talking about a special relationship with Malaysia. How does this square off? Thank you very much. (applause)

Prime Minister

Now, first, on the agreement which we announced yesterday, I hope you will be pleased with the agreement. If you are suddenly going to do a fifth frequency or a sixth one with British Airways the other way, first there are very extensive arrangements to be made. I need hardly tell you. You might actually, and indeed I believe you do, need further aircraft. But secondly, there is no point ever in having arbitration.

If you are going to get a satisfactory solution to this—and I believe we have—the details must be worked out between individuals and you really must be able to agree the [end p26] figures.

Yes, there was a dispute between figures. You may have all the experience in the world between calculating figures on transport matters. It is not easy, because you have got feeders coming in from one place to another and going from one place to another. It is not very easy to say precisely what will happen; if you change the pattern of air services, then people may well change their pattern of travel and you have things which you have not foreseen happening before. Arbitration, no. You have got to proceed on the basis of negotiation and agreement.

The position eventually came to me and I took the view that this application was justified. I believe in equal opportunities, so if British Airways want one the other way, that also would have to come about. I know full well that prime ministers can never work out the details and should not try; that that has to be negotiated between the two airlines; and as we are not pulling any punches, may I say that I hope in spite of your question, you are quite pleased!

Now, secondly, you had various things to say about the Iron Lady and sentiment.

Let me put this to you: if you are a parent, which I am as well, which do you think succeeds better, giving in to almost every demand of a child or from the basis of kindness, love and firmness, don't you do better that way? Don't you do better that way? So actually, you have got to get the right combination of the sentiment, which is the background, and the [end p27] firmness—here you see the right combination! (applause)

And the third point—because I do not duck any questions—it will not have escaped you that Britain does naturally have a special relationship with quite a number of countries. We have also to be fair, try to be fair to each.

You will have a special relationship with several countries, because no country can deny its geography as well as its history. Now, I do not complain that you have special friends. If I have friends who have friends, I think I am enriched by their friends and not diminished by them. So yes, we do have to parcel-out the amounts which we give and we do it on basis of looking at them and seeing what their needs are. I cannot give you more each year, but yesterday we did announce that we have continued that particular arrangement for a little longer, which I hope will help you.

Now, are you satisfied with those answers? Or would you like to ask any supplementaries, just like the House of Commons? (applause)