(Petaling Jaya, Thursday): Last night, I received an email, which said:
"Today 25th February 1998 our Kuala Lumpur Stock Exchange (KLSE) is a clear demonstration of : 'WHAT THE MARKET CANNOT TAKE IS UNCERTAINTIES BUT IT CAN TAKE BAD NEWS '
"I think I need not elaborate any further."
My correspondent was clearly referring to the KLSE benchmark Composite Index dropping 17.03 points to 712.81 at close of trading yesterday, as compared to Tuesday’s trading which had risen by 9.38 points despite considerable profit-taking during the day’s trading, tying the stockmarket responses to Tun Daim Zainuddin’s statement on Tuesday that "non-bumiputeras may be allowed to buy bumiputera stakes in companies" and the statement by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad yesterday that "the government’s proposal to allow non-bumiputeras to acquire stakes in bumiputera companies is temporary and in certain cases only."
The Government should tell Malaysians the truth about the economy, even if they are bad news, for the people can take bad news but not uncertainties or sugar-coated statements which have little public credibility.
Recently, there seems to be a concerted attempt to paint a rosy picture around the corner for the Malaysian economy as borne out by statements that there would be economic recovery in six months, even in three months. On Tuesday, economists at the one-day seminar on "Managing in an Economic Slowdown" organised by the Asian Strategy & Leadership Institute in Kuala Lumpur had the predominant theme that local businesses should be prepared for economic recovery towards the latter part of 1998.
However, such upbeat forecasts and scenarios are not supported by regional news and developments, with governments and economists in the region significantly revising downwards their earlier growth forecasts.
Yesterday, the Singapore government chopped its forecast for economic growth this year to between 2.5% and 4.5% from between 5% and 7% previously.
A day earlier, the Thai government and the International Monetary Fund offered similarly bad news, saying they now expect Thailand’s economy to shrink 3% to 3.5% this year. In November, the government had forecast zero to 1% growth.
What should be a cause for concern is that economic forecasts may head still lower, with economists even predicting a 1% GDP growth for Singapore in 1998.
Indonesia and South Korea have also seen drastic forecast revisions by private economists, with predictions of a contraction of 5% in Indonesia compared with a January forecast of zero growth and a contraction of 2.9% in South Korea, revised from a 1.2% growth forecast in January.
On Tuesday, the executive director of the National Economic Action Council (NEAC), Tun Daim Zainuddin defended the 4-5% economic growth forecast for 1998 in the second 1998 budget of the Finance Minister, Datuk Seri Anwar Ibrahim on December 5.
With the general drastic downward revision of economic growth rates in the region, if Malaysia achieves the 4-5% forecast economic growth this year, then Malaysia will be heading to become the country with the fastest rate of growth in the Asia-Pacific region outside China.
It is interesting to note how swiftly global outlook had changed in the past few months of the economic crisis, just by looking at the IMF’s various projections and revisions for output growth for this year, in its May and October 1997 editions of World Economic Outlook and the IMF Interim World Economic Outlook released in Washington on December 19, 1997:
International Monetary Fund
Real GDP Growth Projection year and WEO date
The economic gloom is not lifted by the latest report that some 84% of top executives in Asia anticipate the market crisis to worsen, with 80% expecting it to taper off in two to three years.
About 60% of them attribute the crisis to regional governments and their policies.
The survey was conducted during The Presidents Forum, a three-day meeting of 140 top executives from Asia, held in Bali, Indonesia between Feb. 20 and 22.
It was presented by international business magazine Business Week and held in partnership with management consultants AT Kearney, Oracle Software and Swiss Banking Corp.
Thai Deputy Prime Minister and Minister of Commerce Dr. Supachai Panitchpakdi, one of the speakers at the forum, said governments had failed to take note of early warning sign of the crisis, such as rising inflation, growing current account deficits and flat exports.
They have much to learn from past mistakes, which included a tendency to underestimate problems, and over-optimistic forecasts which are based on unreliable information.
With the generally gloomy and bleak economic landscape in the region, Malaysians should be told the unvarnished truth rather than given sugar-coated statements which could only undermine credibility and delay the restoration of confidence.