(Petaling Jaya, Wednesday): Is the Malaysian Government addressing the symptoms and not the causes of the twin currency and stock market crisis?
This is one of the questions which must be thrashed out by National Economic Action Council (NEAC) which is being formed to deal with the economic crisis and put the Malaysian economy back on track in the wake of the fall in the value of the ringgit and the stock exchange.
It is most disappointing that the International Monetary Fund (IMF) is not ready with its preliminary report on its study on the activities of currency traders and other market players in precipitating the financial turmoils of South East and East Asia, as it had been previously reported that the IMF’s preliminary report would be presented at the just-concluded meeting of ASEAN Finance Ministers Plus Six (Australia, Canada, the United States, Hong Kong, Japan and China) in Kuala Lumpur for discussion.
IMF managing director Michel Camdessus said yesterday that the IMF expected its study on hedge funds and Southeast Asian currency problems by the first week of next year, the conclusions of which would be shared with ASEAN whose members were some of the hardest hit.
He said: "We have some preliminary findings. One of them is that it will be a mistake to attribute the misfortune of Asean countries to hedge funds and speculation."
He added that market situation was "no more than a symptom of the crisis of deeply-rooted problems that have to be addressed."
He said the imposition of controls on market activities and the threat of future controls not only made investments riskier, but tended to reinforce the view that Governments were addressing the symptoms and not the causes.
"This sent investors fleeing and set back efforts to restore confidence".
The question whether the government is addressing the symptoms and not the causes of the economic crisis is vital to any strategy for national economic recovery, as it will affect all economic projections for the future.
The Malaysian Institute of Economic Research has predicted that Malaysia should emerge from its present financial crisis and return to its 7%-8% GDP growth rate in two years in 2,000, although it had lowered by a full percentage point its forecast for next year’s real GDP rate, from 6.8% to 5.8%. The 1999 rate is expected to be 6.1%.
Moody’s Investor Service has a more sombre forecast, warning of a depression reminiscent of the 1930s if Asia and the world fail to accept the painful realities resulting from collapsing currency and equity markets.
Vicent Truglia, managing director responsible for the international rating agency’s sovereign risk unit, said the world economy is "at the crossroads" following the major geopolitical and economic changes of the past few years.
He noted that bitter comments by Asian political leaders, blaming foreign traders rather than domestic political errors for the current regional turbulence, were by no means limited to politicians in developing countries.
He said the reality is that "there is no individual or group which can bear responsibility for what markets do. In the end, government officials are almost in the same position as direct market participants in the markets".
Both inside and outside Parliament, DAP had questioned whether it was the right and proper course for the government to blame the economic crisis solely on external causes and factors, like the currency traders, without being prepared to admit to our own wrong policies and measures.
Unless the NEAC can be more frank about admitting our own policy mistakes and failings which had contributed to the national economic crisis, then it is unlikely that any council established by the government could deal with the deep-rooted causes of the national economic crisis rather than the symptoms or guide the country towards national economic recovery.