The biggest issue in the twin currency and stock market crisis faced by Malaysia is the intangible property of "confidence", and it is essential that any stock purchase plan to prop up the stock market must be open and transparent or it would be a new element to undermine public and investor confidence, which would ultimately defeat the object of the entire exercise.
The buy-back scheme from locals at a premium will raise questions about accountability, transparency and integrity, especially as Malaysians who sell the shares at a premium under the buy-back scheme would be able to purchase these shares in the market.
What arrangements and monitoring mechanism have been put in place to ensure that public funds and the people’s savings in various funds like the EPF are not misused or abused in the name of shoring up the stock market?
All Malaysians are concerned about the twin currency and stock exchange crisis plaguing Malaysia, and would want to see the country come out of the woods. It is a matter of grave concern, however, that an atmosphere has been created whereby dissenting views as to the best ways to tide the country through the twin economic crisis are being regarded as "anti-national" and "traitorous", even with threats about the use of Internal Security Act with its provisions of detention without trial.
There should be room for a healthy national discussion whether the RM60 billion buy-back scheme is the best and right solution to the economic crisis, when its announcement could not prevent a fall of six per cent in the Kuala Lumpur Composite Index, i.e. a loss of 45 points to 750.76 points while other regional markets such as Indonesia, Singapore and the Philippines registered gains.
From various announcements, apart from RM30 billion from Khazanah Nasional Bhd., the EPF would be the main vehicle whose funds would be deployed to shore up the stock market. This raises the question as to whether workers’ representatives should not have a greater say in the deployment of the workers’ provident funds, whether in total amount of funds or in particular share puchases – rather than leaving the government to make all the decisions about the investment of EPF monies.
As the workers’ life-savings meant to look after their old age are being mobilised to perform a national service to shore up the Kuala Lumpur stock exchange, the workers’ are entitled to the assurance about the chances of success and correctness of such an operation – especially as the KLSE had fallen from 1277 points on 7th March 1997 to 695 points at 12.30 p.m. today – a drop of 45%.
Mahathir had announced several measures to prop up the stock market, like the curbs on the 100 component stocks of the KLSE Composite Index to prevent short-selling, but these have yet to show positive effects.
A research report by NatWest Markets, the investment banking arm of Britain’s National Westminster Bank, said that the regional currency turmoil could come to an end only in 1999, with the Malaysian ringgit stabilising in the second half of next year – and the key factors would be an export recovery and ability to stem overheating by regional economies.
Many questions need to be debated – whether Malaysia has anything to learn from Indonesia, which yesterday announced economic austerity measures, including unprecedent measures like curbing imports, slashing government spending, postponing infrastructure projects and allowing insolvent banks to either merge or cease operations. Isn’t it time that Malaysia take a hard look at our mega-projects and our huge current accounts deficit.
Another question is what collective action could be taken by ASEAN countries to defend and shore up the regional economies. Although the ASEAN Foreign Ministers’ Conference in Kuala Lumpur at the end of July decided to "put their heads together to fight well-planned efforts by foreign speculators which have destabilised their currencies", nothing seemed to have resulted from it.
However, what should be the greatest concern is whether Malaysia is alienating and driving away foreign investors from Malaysia, which will not only affect the Kuala Lumpur stock exchange for the short and medium term, but Malaysia’s information technology plans like the Multimedia Super Corridor for the long term.
The government should make a careful distinction between "rogue speculators" and foreign investors to ensure that in declaring war against the former, we are not creating conditions which also drive away foreign investors by undermining investor confidence, both foreign and local.