(Petaling Jaya, Saturday): DAP welcomes the proposed formation of the National Economic Action Council (NEAC) as an important measure to help overcome the economic crisis as the 1998 Budget has failed to arrest the continued plummeting of the ringgit and the stock market.
When Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, presented the 1998 Budget in Parliament last month, he realised that the acid test for the new budget would be its ability to restore investor confidence to address the twin ringgit and stock market crisis.
Although Anwarís 1998 Budget was immediately given great commendation by Barisan Nasional leaders, with MCA President Datuk Seri Dr. Ling Liong Sik and the Gerakan President, Datuk Seri Dr. Lim Keng Yaik competing with each other to praise it as "another good and caring budget" and "painless way to overcome current economic problems", the past month has shown that the medicine prescribed in the 1998 budget had not worked to restore confidence in both the ringgit and stock markets. In fact, the condition in the health of the Malaysian economy has worsened.
In his budget speech, Anwar took comfort from the fact that there had been improvement in the ringgit depreciation, which had plummeted from the US-dollar value of RM2.50 from the start of the currency crisis. As he told Parliament on Oct. 17, on Oct. 1, the exchange rate was RM3.40 to the dollar, its lowest in 27 years, but the Malaysian currency had gradually strengthened, reaching RM3.16 to the dollar on Oct. 15. Anwar then declared that he expected the ringgit to regain its strength "to reflect our strong economic fundamentals".
Nobody expected the ringgit to immediately regain its strength to the exchange rate of RM2.50 to a dollar. However, the ringgit has not been able to defend it value and started a slide immediately after the budget. Yesterday, the ringgit was traded as low as RM3.54 to a US dollar - a shocking fall of 41.6 per cent in the traditional value of the ringgit at the RM2.50-to-a-dollar level!
The Kuala Lumpur Stock Exchange Composite Index also began a downward slide after the 1998 Budget, falling from 802.02 points before the budget to 560.09 points at the close of trading yesterday - a drop of over 30 per cent since the budget presentation.
Although Anwar had said that the 1998 Budget would restore confidence in the Malaysian economy as the necessary measures to deal with specific problems had been taken, the events of the past month have shown that the skeptics and critics of the 1998 budget as adequate to address the economic crisis have been proven right.
The scope, functions and powers of the NEAC are unclear, but the NEAC should regard as its first challenge to help formulate a second 1998 mini-budget to be presented by the Finance Minister to Parliament next month with the specific objective of restoring investor confidence - so as immediately to rectify the failure of the 1998 budget presented on Oct. 17 to achieve this objective by checking the downslide slide of both the ringgit and the stock market.
The NEAC must be a forum where all views as to how investor confidence could be restored could be heard and thrashed out, including those which are regarded as highly objectionable and offensive by the powers-that-be - as for instance, the view prevalently held that the severity of the economic crisis had been compounded by avoidable self-inflicted wounds, like the UEM-Renong deal and the ill-considered government decision to take over the Bakun project as it is seen as a bail-out for Ekran Bhd.
It has been said that in nearly every economic crisis, the root cause is political, not economic. Will the NEAC be able to grapple with this root cause of the economic crisis facing Malaysia?
The Cabinet, the government and the NEAC must be prepared at least to listen and consider the views of investors and analysts, whether local or foreign, and not regard all criticisms or unfavourable comments as part of an international conspiracy directed against Malaysia to destroy our economy. In Sydney yesterday, for instance, the ANZ Investment Bank (ANZIB) said it believed only Indonesia has produced a credible response to the South-East Asian economic crisis, and argued that banking reform is the key to sorting out the regionís problems.
It also expected property markets in many Asian countries to fall by 50 to 60 per cent rather than the 20 to 30 per cent seen so far.
What is also worth serious consideration by the Cabinet, Government and NEAC is the latest "Country Risk Report" on Malaysia by the Hong Kong-based Political and Economic Risk Consultancy Ltd., dated November 4, 1997 and its four-point "Executive Summary", namely: