With the economic crisis, the Malaysian economy will get worse in the next two to three years before it can get better


Speech
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Forum on National Economic Crisis
by Lim Kit Siang

(Ipoh, Saturday): With the economic crisis, starting with the twin currency and stock market crisis, the Malaysian economy will get worse in the next two to three years before it can get better.

Since the start of the economic crisis, the value of the Malaysian stock market has fallen by 55 per cent while the Malaysian ringgit has depreciated by more than 50 per cent when the Malaysian currency reached its all-time low of 3.8650 to a US dollar on Friday.

This means that RM100,000 in the stock market before the economic crisis would now be worth only RM45,000, and if this sum has to be converted into foreign currency, whether US dollar or British pound, it would be worth only RM22,500 as compared to its value before the economic crisis!

Before the economic crisis, a Malaysian parent can support two children studying overseas with RM100,000 a month. But now, this sum, hit by both the stock market and ringgit crisis, cannot even support one person studying overseas for half a month as it has shrivelled to 22.5 % of its previous value and would be worth only RM22,500 when converted into US dollar or British pound. This illustrates the gravity of the financial crisis faced by all Malaysians with children studying overseas!

This, however, is not the only adverse consequence of the national economic crisis. After the Gongxi Raya next month, the prices of essential commodities like sugar and flour would increase, threatening a new inflationary spiral.

Yesterday, the Deputy Prime Minister, Datuk Seri Anwar Ibrahim, when announcing an emergency financial package, warned that there could be unemployment of 200,000 people. The people have not felt the real bite of the economic crisis yet and the question is how long such an economic crisis would last before there could be an economic revival.

Anwar’s media conference yesterday announcing the emergency financial package yesterday, which checked the free-fall of the Malaysian ringgit all the way to the record-low of 3.8650 was the first time in the past five months that the government had admitted that the country was facing an economic crisis and that the people would suffer a lot of pain before the economic crisis could be resolved.

Malaysians will remember that when Anwar presented the 1998 Budget in Parliament on October 17, Barisan Nasional leaders like the MCA President Datuk Seri Dr. Ling Liong Sik and the Gerakan President, Datuk Seri Dr. Lim Keng Yaik were competing with each other as to who could give the biggest praise for Anwar’s budget as the "painless way" to resolve the economic crisis.

In actual fact, the 1998 budget was a failure as it failed in its paramount task of restoring confidence in the economy. Immediately after the budget presentation, both the stock market and the ringgit continued in their downward slide, with the KLSE Composite Index falling from some 800 points to a low of 512 and the Malaysian ringgit falling from 2.72 to 3.8650 against the US dollar.

It is time that the government be open, frank and honest with Malaysians, tell the people that the country is in the thick of a grave economic crisis and that there is no way Malaysia can come out of the crisis without suffering a lot of pain, hardships and sacrifices.

When Dr. Tan Seng Giaw and I met the Prime Minister, Datuk Seri Dr. Mahathir Mohamad in Langkawi this morning and exchanged views on the national economic crisis, we stressed that the austerity must not only be evenly spread among all Malaysians, regardless of rank or status, government leaders must be seen to be setting the example in belt-tightening.

Call on government to announce the cancellation of the RM60 billion Fund to prop up share prices as well as the postponed mega-projects to further restore confidence

Yesterday, Anwar presented an emergency financial package after the 1998 Budget presented on Oct. 17 had failed to restore confidence and check the downward slide of the stock market and the ringgit.

I had proposed at the end of October that Anwar should present a second 1998 budget in Parliament in early November to come to grips with the economic crisis, and although the emergency financial package announced yesterday was akin to a second 1998 budget, it is most unfortunate that it had not been done in early November as the downward slide of the ringgit and the stock market might not have reached such low positions if action had been taken five weeks ago.

Although the emergency financial package had received favourable market response as seen in the strengthening of the ringgit and upward rise of the KLSE Composite index – as compared to negative market reactions to the 1998 Budget – it is rather improper for Anwar to announce the second 1998 Budget outside Parliament when MPs are still debating the 1998 Budget, which would only be passed next week.

Furthermore, the various measures proposed in the emergency financial package are not comprehensive enough to fully restore confidence and to show the world that Malaysia is capable of prescribing the bitter medicine which IMF would have ordered if Malaysia had sought IMF bail-out, i.e. taking the IMF bitter medicine without seeking IMF help, which would have forfeited Malaysia’s economic sovereignty.

Anwar should present a second budget in Parliament next week, which should include not only the emergency financial package yesterday, but other far-reaching measures to show that the government is capable of the economic, financial and political reforms which are urgently needed to fully restore investor confidence.

Anwar, for instance, should announce the cancellation of the RM60 billion Fund announced in September to prop up share prices as well as the postponed mega-projects, like the Northern Regional International Airport, the Malaysia-Sumatra bridge, the Kuala Lumpur Linear City and the Camerons-Gentings-Fraster Hill Highlands Highway, which together cost over RM50 billion.

Such cancellations would give a great boost to investor confidence and signal a new commitment that the government does not have a closed mind but is prepared to be investor-friendly and to take all necessary measures to restore confidence.

(6/12/97)


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong