Calls for greater transparency by Bank Negara as well as in the banking and finance sector to restore confidence in the banking and finance sector, as announcing the identity of institutions engaged in merger negotiations

Speech (1)
- Bills of Exchange
(Amendment) Bill 1997
by Lim Kit Siang

(Dewan Rakyat, Wednesday): The Bills of Exchange (Amendment) Bill will, among other things, allow a cheque to be presented for payment through a document image processing system.

Other amendments include:

The most pressing problem facing banking industry in the country today is not so much the imaging system for cheques, as the image crisis of Malaysian banks as financial institutions of integrity, reliability and solidity.

There is no doubt that Malaysian banks are facing one of the worst crisis in the nation's history, with all sorts of rumour swirling about banks and finance companies.

From 6th Nov. to yesterday (9th Dec.), KLSE Finance Index fell 30.74% from 5250.40 to 3636.46 points which , together with the KLSE Construction Index (down 33% from 260.70 to 175.67) and KLSE Properties Index (down 33% from 1348.47 to 904.36), were the worst sectors, as compared to KLSE Industrial Product Index (down 21% from 101.13 to 79.63) and KLSE Trading/Services Index (down 9% from 114.58 to 103.86). Yesterday, Bank Negara governor Tan Sri Ahmad Mohd Don sought to allay public fears and concerns with a public assurance that the central bank would protect the interests of depositors at all times.

He said the public should not listen to rumours on the strength of banking institutions as all banking institutions were supervised by the central bank and their financial health closely monitored.

He said: "While the banking system remains intact and is strong, we do not discount the fact that with further developments, some may face difficulties.

"Bank Negara is closely monitoring the financial health of the banking institutions. We are also in regular consultation with the managements to ensure that appropriate pre-emptive steps are taken to address any potential risk and this could include arranging for banks to merge into stronger units.

"Bank Negara nevertheless has a wide range of powers under the Banking and Financial Institutions Act 1989 to act promptly to deal with banks in financial difficulty and which are insolvent. Bank Negara will not hesitate to close down any bank operating in a manner which is detrimental to the interest of the depositors or is insolvent, as what we had done in the 80s."

The market reaction this morning should be a matter of concern for Bank Negara about its credibility for despite its assurance yesterday, the KLSE Finance Index fell by 35.61 points at the end of trading although the KLSE Composite Index rose by 1.41 points.

This is because the statement by Ahmad Don raises several questions. For instance, when he said that "we do not discount the fact that with further developments, some (banks) may face difficulties", what are these "further developments" and "difficulties" he was talking about.

Furthermore, when he referred to Bank Negara's record in the 1980s, it is not something which is very reassuring either, particularly for the 600,000 victims of the RM1.5 billion Co-operative Finance Calamity after the 1986 general elections, as the authorities concerned had closed their eyes to the hanky-panky in the deposit-taking co-operatives although public warnings had been given as far back as in 1982.

The government is still suffering from the "denial syndrome" as far as the national economic crisis is concerned.

Two days ago, Information Minister, Datuk Mohamed Rahmat called on Malaysians from all walks of life to "seriously do their bit in helping the Government revive the economy".

He said: "Whether they are politicians, government officials or members of the public, they need to sacrifice and tighten their belt especially in spending money.

"We are facing a national issue which is not our own doing but caused by outside forces. There is no other way to face this but sacrifice to help the Government." Mohamad Rahmat is doing the national economic recovery programme a great disservice as the symbol of the "denial syndrome" in government by trying to pin all the blame for the national economic crisis on external factors. In continuing such a stance, Mohamed Rahmat would be undermining all efforts at uniting and mobilising Malaysians to act in unison to face up to the economic crisis, as the government would lack credibility to rally the people together because of his continued personification of the "denial factor".

Mohamed Rahmatís former boss and former Deputy Prime Minister, Tan Sri Musa Hitam, struck the nail on the head last month when he identified the "denial factor" as a major obstacle to restoring confidence and enabling troubled economies in the region from embarking on the road to economic recovery.

He said that the "denial factor", reflected by a continual denial that something was wrong within the countries themselves, was too high in the region and expressed the hope that the formation of the National Economic Action Council was a sign that the government was reducing the "denial factor" in addressing the country's economic problems.

Instead of demonstrating to Malaysians that the government has abandoned the "denial syndrome", Mohamed Rahmat is telling the whole world that the "denial factor" is still dominating the thinking of Cabinet Ministers and major policy-makers.

The British weekly, The Economist, recently likened government reactions to the economic turmoil to phases of reaction to death: shock, anger, denial and acceptance.

All the other countries in Asia which have been hard hit by the economic turmoil have passed through the first three phases of shock, anger and denial and are in the final phase of acceptance, to enable them to chart a rational strategy to plot the recovery of their economies.

Malaysia is the sole exception as we stand out as the only country where the leaders are still in the "denial" stage after five months of the economic crisis. I had hoped that the emergency financial package by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim last Friday signified the end of the "denial" phase of the Cabinet but I seem to be wrong.

It would appear that the first problem to be addressed if Malaysia is to get on the road to national economic recovery is to educate Cabinet Ministers to abandon the "denial syndrome".

Government Ministers should stop claiming that there were nothing wrong with government policies or to take the easy way out by just blaming George Soros for every deterioration of our economic crisis, whether it be the bloodbath in the Kuala Lumpur stock exchange after the UEM-Renong deal last month which proved to be a national catastrophe or the free fall of the Malaysian ringgit last week after Mahathir's land-bridge announcement.

There is ample evidence of such "denial syndrome" in Parliament. Only yesterday, the Deputy Finance Minister, Datuk Dr. Affifudin Omar tried to downplay the gravity of the national economic crisis, by claiming that the real economy has not been hurt yet.

If, so why then, is the Prime Minister going to all the international conferences telling the world the ravages which foreigners had caused to the Malaysian economy?

Furthermore, why then are all the publicity about the 10% cut of salaries of Ministers, Deputy Ministers, Mentri-Mentri Besar, Chief Ministers and 3% cut of allowance of MPs and State Assemblymen?

In the past two days, the Malaysian mass media, both printed and electronic, have been giving top headline coverage for news about the 10 per cent salary cut for Ministers, Deputy Ministers, Chief Ministers and Mentri-Mentri Besar and 3 per cent cut for MPs and Assemblymen in response to the national economic crisis.

Such mass media publicity and coverage had been overdone, completely out of proportion and perspective, giving the mistaken impression that such salary cuts by Ministers, Deputy Ministers, Chief Ministers, Mentri-Mentri Besar, MPs and Assemblymen would be a major step to resolve the national economic crisis, when it actual fact, the savings would be a mere "drop in the ocean".

While such voluntary cuts of their salaries and allowances by political leaders are welcome in their psychological impact on the people that the economic crisis would get worse before it could get better, they must be seen in the right perspective. There are in fact people who believe Cabinet Ministers should bear a greater cut of their salaries to accept responsibility for allowing the national economic crisis to reach such a magnitude.

It has been calculated that the savings from the salary and allowance cuts by Ministers, Deputy Ministers, Chief Ministers, Mentri-Mentri Besar, MPs and Assemblymen would work out to some RM2 million a year, which is a totally insignificant figure as compared to the colossal losses which had been suffered by the country and people as a result of the twin currency and stock market crisis. In fact, this figure of RM2 million is not even enough for the renovation of the Selangor Mentri Besar's residence, which required RM5 million!

This morning, the value of the ringgit fell as low as US$1=RM3.6800, which is a drop of over 47 per cent in the ringgit's value. The Prime Minister, Datuk Seri Dr. Mahathir Mohamed has used a formula in various international conferences to compute the actual losses suffered by Malaysians as a result of the ringgit depreciation. On the basis of a per capita income of US$5,000 in Malaysia, a 47% depreciation would mean a loss of US2,350. Multiplied by the country's 20 million population, the loss to the country due to the depreciation of the ringgit would be US$47 billion or RM172.96 billion.

The Kuala Lumpur stock exchange has suffered even greater losses in the stock market crisis, as the KLSE Composite Index had fallen by 60 per cent. In his Ministerial statement in Parliament on Monday, Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim said that the market capitalisation of the Kuala Lumpur stock exchange had been reduced by RM414 billion, i.e. from RM806.8 billion at the end of 1996 to RM392.8 billion as at Dec. 4, 1997.

In the context of RM172.96 billion loss as a result of the currency crisis and the RM414 billion loss as a result of the stock market crisis, totalling RM586.96 billion, the RM2 million savings from the salary and allowance cuts of Ministers, Deputy Ministers, Mentri-Mentri Besar, Chief Ministers, MPs and Assemblymen are quite insignificant.

Ministers, Deputy Ministers, Chief Ministers and Mentri-Mentri Besar should set a good example to the public about the belt-tightening and austerity campaign which the whole country must undergo to face the national economic crisis.

When I met the Prime Minister, Datuk Seri Dr. Mahathir Mohamed in Langkawi last Saturday to exchange views on the national economic crisis, I had raised the issue of holidays overseas and I was assured by Mahathir that the ban on Ministers, Deputy Ministers and Parliamentary Secretaries from taking government-paid holidays abroad also cover private holiday plans as well.

Anwar Ibrahim has been calling on Malaysians not to send their children overseas for first-degree university education. Let Ministers, Deputy Ministers, Parliamentary Secretaries, Chief Ministers, Mentri-Mentri Besar and State Exco members set a good example by announcing that with immediate effect, none of their children would be sent overseas for first-degree university education.

However, there could be no better example by Ministers, Deputy Ministers, Chief Ministers and Mentri-Mentri Besar to show their seriousness to provide leadership to the people in the face of the national economic crisis than to publicly declare their assets and those of their spouse and children to send a clear signal of the government's commitment to bring about political, financial and economic reforms to overcome the national economic crisis.

Such a public declaration of assets would definitely be a morale booster for all Malaysians, giving the people greater confidence in the government, even if what happened in Thailand is repeated here.

In Thailand, where its new constitution requires Cabinet members to declare their assets and those of their immediate families within 30 days of assuming or leaving power, the National Anti-Corrrruption Council (NAC) had just revealed these asset declarations.

Eyebrows were raised in Thailand when it was revealed that wives of Thailand's top politicians were a lot richer than their breadwinner husbands, with wives dominating the 30 billion baht (RM2.8 billion) in cash and assets of the 49-member Cabinet of the former government.

Former Prime Minister Chavalit Yongchaiyudh had 16.8 million baht (RM1.58 million) in assets while his wife Phankrua had 141 million baht (RM13.3 million). Thaksin Shinawatra, a business tycoon and former deputy prime minister in Chavalit's government, was the richest, with assets of about 5.93 billion baht (RM559 million), while his wife declared 14.06 billion baht (RM1.32 billion).

The question is whether the government and Bank Negara also suffer from such a "denial syndrome" when it comes to accountability to the public about the banking and financial sector.

Therer is a need for greater transparency by Bank Negara and the banking and finance sector to restore confidence in the banking and finance sector, as announcing the identity of institutions engaged in merger negotiations


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