(Petaling Jaya, Wednesday): World Bank President James Wolfensohn’s praise for Malaysia should strengthen and not weaken the political will to carry out wide-ranging political, economic and financial reforms so that Malaysia can effect a strong economic turnaround in the shortest time possible.
Wolfensohn has rightly pointed out one important difference between Malaysia and the other countries most affected by the Asian economic crisis, that "Malaysia’s future does not hinge on its ability to negotiate with foreign creditors at a time when your currency has been whacked in the market and you do not have foreign exchange reserves".
However, Malaysia has still to fully grasp the challenge of confidence-restoration and the centrepiece of such a economic recovery strategy must be greater information flow to resolve the problem of information deficit in the country.
In this connection, it is worth noting the view that the former gold standard of the world financial system under the 1946 Bretton Woods agreement has been replaced by a new global information standard, where foreign exchange rates are now set by tens of thousands of traders at computer terminals around the globe.
James Wolfenson said yesterday he could see the creation of an international mechanism to regulate financial markets but does not expect this to happen anytime soon.
The daily turnover on the foreign currency market is some US$2 trillion, or 40 times the value of world trade in goods and services.
George Soros said at the World Economic Forum in Davos last week that there should be a new international mechanism to regulate financial markets as existing international financial institutions could not cope.
While Malaysia should continue to pursue international initiatives for a new international mechanism to regulate the international financial markets, we should bravely focus on the fundamental weaknesses in our political, economic and financial systems which have aggravated the national economic crisis.