Prime Minister Dr Mahathir Mohamad today lashed out at the free-market system and warned that it would lead to a global monopoly by giant corporations.

According to him, the most important factor which determined the success of the free market is free competition. However, free competition will only yield the best result if there is a level-playing field, he said.

But is this really true? If a level-playing field is all that is needed, then why is there a rush to become the biggest and the most powerful competitor in the field? Why do we see mergers and acquisition, and more mergers and acquisition, until the players become enormous and dominating the field?

Obviously it is because in a level-playing field, the size of the contestants counts....counts so much that competition will actually be prevented, said Mahathir in his keynote address at the Asia Economic Summit in Kuala Lumpur today.

According to the premier, the mergers and acquisition today are leading to monopoly and oligopoly.

The weak is eliminated and no new player can come in. It would be suicidal for any new player to enter the automotive industry for example, Mahathir said, adding it is doubtful that companies will be influenced to do better when they monopolise the market.

He noted that free-market policies also demand for the loosening up of governments regulations on industries.

However, he pointed out that the airline industry was doing quite well and giving satisfactory service to the public until it was deregulated.

The prime minister said it was believed that services could be improved as a result of strong competition. Instead what had happened was a lowering of standards in the services provided by the airlines, even in the maintenance of aircrafts.

Several crashes were attributed to low maintenance standard and many good airlines went bankrupt, losing huge sums of money and creating social problems, Mahathir added.

EAEC idea defended

Mahathir also told the 500-odd international crowd that an East Asian solution could overcome the weaknesses present in the free-market system and defended his long-time East Asia Economic Caucus (EAEC) proposal.

The idea was to critically study common problems and the new ideas coming out of the West, he said, stressing that no one has a monopoly of wisdom.

He however maintains that the EAEC is not a regional economic bloc but a consultative group involving East Asian nations.

The EAEC, which was initially known as the East Asia Economic Group, was initiated by Mahathir in 1990.

The Malaysian government argued that the regional grouping seeks to enhance economic cooperation, promote and protect free trade, accelerate economic growth, promote open regionalism and contribute to the multilateral trading system.

However, since the proposal was made public more than 10 years ago, Japan is reluctant to join the EAEC unless the United States  which was not invited to join the group and has been lukewarm toward the idea  offers its support to the proposal.

The membership of Japan, Asias economic powerhouse, is crucial for the success of EAEC. Since then, Malaysia has been looking for ways to implement the idea.

Two years ago, Foreign Minister Syed Hamid Albar had argued that EAEC was informally formed when the Asean Plus 3 meetings were held between Asean, Japan, China and South Korea.