Agendas for ASEAN Informal Summit and ASEAN-Plus-Three Dialogue with China, Japan and South Korea should be revised to make the economic and financial crisis the foremost issue

Media Statement
by Lim Kit Siang

(Petaling Jaya, Friday): The ASEAN Informal Summit will begin in Kuala Lumpur on Monday to commemorate ASEAN's 30th anniversary and will be followed by a ASEAN-Plus-Three Dialogue with China, Japan and South Korea.

Great and tumultous events, particularly on the financial and economic front, had happened in the past few weeks and it is important that the ASEAN Informal Summit and ASEAN-Plus-Three Dialogue should address these events.

The agendas for the ASEAN Informal Summit and ASEAN-Plus-Three Dialogue with China, Japan and South Korea should be revised to make the economic and financial crisis the foremost issue.

Since July, economies in East and Southeast Asia have been shaken to their roots by a cascade of currency crisis and plunging stock markets, starting with Thailand, and then spreading swiftly to Malaysia and Indonesia, and now afflicting South Korea and Japan.

Neither the APEC Summit in Vancouver on November 24-25 nor the meeting of ASEAN Finance Ministers in Kuala Lumpur on December 1 and the their meeting with Finance Ministers from Australia, China, Japan, South Korea and the United States on Dec. 2 to resolve the Asian economic crisis could stop the continued implosion of East and Southeast Asian currencies.

The intervention of the International Monetary Fund in Thailand, Indonesia and South Korea has also failed to check these currencies from crumbling or their stock markets from plunging.

Yesterday was the fourth straight day the South Korean won fell within minutes to its permissible 10 per cent limit of 1,719.80 to the US dollar, from 1,5664.90 on Wednesday.

This morning the Korean won fell a further 7 per cent to 1,840 a dollar, which is a 33 per cent decline for this week.

A year ago, the Korean won was 830 against the US dollar, which means it has depreciated by 120 per cent. In the week before South Korea decided to bite the bullet and seek IMF bail-out, the won was around 990 against the dollar - a plunge of 86 per cent since the announcement of the IMF bail-out three weeks ago!

In the past few days, Asian currencies have also continued on the downward slide. This morning, the Indonesian rupiah, Thai baht and Philippine peso plunged to all-time lows and the Malaysian ringgit also reached its lowest in 24 years, with the exception of last Friday, when it reached US$1 = RM3.8650.

This morning, the Philippine peso plunged 4.2 percent to 36.641 a dollar, from 35.105 yesterday and the lowest in more than 25 years. The baht dived 2.7 percent to 43.95 a dollar, from 42.75 yesterday; it's at its lowest since it was loosely pegged to the dollar in 1983. The rupiah tumbled 2.4 percent to 4,617.5 a dollar from 4,505 yesterday, and is at its lowest since Indonesia's capital account was liberalized in 1971. The ringgit fell 0.96 percent to 3.794 a dollar, close to the lowest since the ringgit was floated in 1973. The Singapore dollar is near a four-year low, falling 0.6 percent to 1.643 a U.S. dollar from 1.6328 yesterday.

In view of the continued implosion of the Asian currencies and plunging stock markets, questions have been raised as to whether the IMF, which was established to deal with 20th century financial crisis, is capable of dealing with 21st century financial crisis compounded by globalisation and the information technology revolution.

Nobel-Prize winning economist, Jeffrey Sachs rightly pointed out that three months ago, in its 1997 annual report, the IMF "welcomed Korea's continued impressive macroeconomic performance (and) praised the authorities for their enviable record". Sach said three months ago, IMF gave "not hint of alarm" and "only a call for further financial sector reform - incidentally without mentioning the chaebol (conglomerates), or the issue of foreign ownership of banks or banking supervision that now figure so prominently in the IMF's Korea programme".

The leaders of ASEAN, China, Japan and South Korea should initiate a serious global study of the IMF as to whether it has been invested with too much power to choose make-or-break financial policies in more than six dozen developing countries, especially as IMF policies had not always been successful in all countries, as evidenced by its mishandling of the Russian reforms and its failure to foresee the Mexico crisis in 1994 and the Asian crises in 1997.

Finance Ministers of ASEAN, China, Japan and South Korea should attend the Kuala Lumpur meeting for an emergency ASEAN+3 Finance Ministers' meeting in view of the worsening of the Asian economic crisis

In view of the worsening Asian economic and financial crisis, the finance ministers of ASEAN, China, Japan and South Korea should also attend the Kuala Lumpur ASEAN 30th Anniversary Summit to have a concurrent emergency meeting.

One lesson from the five-month Asian economic crisis is that delay can be very costly, resulting in actions which might have been effective if taken earlier becoming ineffective because of procrastinations and prevarications.

Malaysians should not feel smug that they have not resorted to IMF for help, for it would be wrong to demonize IMF just as it was wrong to demonize George Soros as if he is the cause of the Malaysian economic and financial crisis.

I am very disappointed that the "denial factor" is still dominating the thinking of the government and political leaders, including Barisan Nasional Members of Parliament.

Yesterday, during the Parliamentary debate on the Labuan Offshore Securities Industry Bill, I referred to the recent report of the United States-based risk consultancy which was unfavourable to Malaysia.

The Business Risk Service (Beri), which ranks profit opportunities for 50 major countries for next year and the next five years, tracked developments from July to mid-November to come up with its "profit opportunity" recommendations.

According to the November report of Beri, Singapore retained its position as the world’s second most profitable place to invest in for the next one to five years, despite the currency turmoil that has hit the region.

Beri gave Malaysia a score of 57, down from 59 in its previous report in July. The rating slipped one notch to 19th.

In its analysis of Malaysia, Beri noted that the Malaysian government had been slow to react to the crisis and that the Prime Minister, Datuk Seri Dr. Mahthir Mohamad’s "intemperate remarks" attacking foreign currency speculators and the "ill-judged measures to strengthen the collapsing stock market also undermined confidence abroad".

Barisan Nasional MPs hated to hear these reports, protesting loudly and some even staged a walk-out from the chamber. So long as the government and the political leadership continues to suffer from the "denial syndrome", wanting to pin all the blame for the economic crisis on external factors and refusing to acknowledge weaknesses and mistakes in government policies, measures and even pronouncements, the "denial syndrome" would be the biggest obstacle to the success of any national economic recovery programme to ride out the current economic crisis.


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