DAP proposes World Bank offer a US$1 billion loan to assist SMIs in Malaysia as well as to establish social safety nets to help Malaysia tide through the economic crisis

(Penang, Sunday): Tomorrow, World Bank President James Wolfensohn will arrive in Malaysia as part of his nine-day regional tour of Thailand, Singapore, Malaysia, Indonesia, Philippines and South Korea to assess the social impact of the economic firestorm which has swept across the once-booming continent and how the World Bank can help ease the situation, particularly in the area of unemployment as millions of people across the region have lost and many millions more will lose their jobs as a result of the economic crisis.

Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, said on Friday that the World Bank should strengthen its poverty eradication schemes in Asia where economies are reeling because of the financial crisis.

Anwar said Malaysia won't seek specific assistance from the World Bank during Wolfensohn's visit to Malaysia but it was fair to expect the institution to initiate efforts with other multilateral agencies to deal with the problem faced by anti-poverty measures in the present economic crisis.

World Bank has pledged US$16 billion in last year's US$114.2 billion International Monetary Fund-led bailouts of Thailand, Indonesia and South Korea, committing $1.5 billion to Thailand, $4.5 billion to Indonesia and $10 billion to South Korea.

At the press conference in the World Bank in Washington on 27th January 1998 on Wolfensohn's regional tour, the World Bank vice-president for the East Asia and Pacific Region, Jean-Michel Severino, who is accompanying the World Bank President on the trip, said that apart from its pledges in the IMF-led bailouts, the World Bank is also developing specific social programmes in the countries in the region which will directly target the poorest. For instance, in Indonesia, the World Bank is discussing social funds of between US$500 million and US$1 billion over the next 12 months for social programmes from the World Bank investment money, not structural adjustment funds.

Although Malaysia has not asked for any IMF bail-out, and rightly so, there is no reason why the World Bank should not provide assistance to Malaysia to cushion the social impact of the economic crisis.

During his visit to Malaysia, Wolfensohn should seriously consider offering a US$1 billion World Bank loan to assist small and medium-scale industries (SMIs) in Malaysia which are facing serious liquidity problems as well as to establish social safety nets to help Malaysia tide through the economic crisis.

It would be better for the World Bank to provide assistance which could prevent Malaysia from having to seek an international bail-out from the IMF, instead of waiting for Malaysia to have to be rescued by IMF and be part of the international bail-out.

The World Bank recently issued a paper outlining its view of the causes and remedies for the Asian economic crisis.

It said:

"East Asia's economic crisis risks undermining one of the most remarkable economic and social achievements in history unless the region embraces fundamental social and financial reforms."

The World Bank said the recent financial crisis has brought out existing weaknesses behind the achievements in East Asian economies and reaffirmed its support for the following measures:

• reforms in the financial sector, in corporate governance and competition and in managing external debt.
• need to deal with corruption in government institutions, along with other issues of quality and transparency.
• importance of providing social protection by putting social safety nets in place as "most countries have virtually no unemployment insurance, social safety nets, and little provision for old-age pension insurance" in the face of rising prices and unemployment.

If the World Bank is seriously concerned about wanting to minimise and cushion the social impact of the economic crisis in East Asia including Malaysia, it should give serious consideration to the proposal that it offer a US$1 billion loan to Malaysia in two parts, US$500 million to assist SMIs and US$500 million to help strengthen social safety nets to restore foreign and domestic investor confidence.

Anwar should also take the opportunity of his meeting with Wolfensohn to discuss the possibility of convening a global economic APEC + EU + IMF + World Bank Summit on the financial crisis.

It has been reported that the upheaval in the Asian financial markets will be a major issue of joint concern at the second Asia-Europe Meeting (Asem) in London on April 3-4, 1998.

This is however another two full months away, and there is an urgent need for a global summit to ensure that the Asian economic crisis does not become a full-blown global economic crisis, considering the failure of both the November APEC Summit and December ASEAN PLUS Three Summit to make any dent on the regional crisis.

(1/2/98)