(Petaling Jaya, Saturday): Although the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, denied earlier this week that there was a credit squeeze and said that businesses involved in productive projects would still be able to get loans from financial institutions despite the Government's decision to slow down credit growth, this is not the experience of many small and medium businessmen.
There is mounting complaints throughout the country that since the middle of last month, banks have suddenly, without giving notice, withdrawn or reduced overdraft facilities and credit lines to small and medium businesses involved in productive and export-oriented industries, whether manufacturing, tourism and services.
It is understandable for banks to cut down lending to the property sector and non-productive sectors, but it is not only unfair but counter-productive in the the economic crisis as most damaging for an early economic turnaround for banks to slash loans not meant for the property sector, speculation or consumption but for productive and export-oriented businesses and industries.
According to Bank Negara, loans growth surged by 30% in 1996 alone and for the first 11 months of 1997, it rose by a further 28%, with much of the loans going into extravagant or speculative activities.
Between January and November last year, loans growth rose by 28% or RM79bil. Of this amount, nearly half went to property or unproductive sectors, i.e. RM21bil went to the property sector, RM5bil to stockbroking and RM13bil to consumption.
Anwar said that although Bank Negara has issued guidelines to banks to reduce credit growth to 15 per cent by the end of 1998, there would still be an extra RM65bil available over and above the RM417.7bil outstanding in November 1997.
While Bank Negara is to be commended for issuing guidelines to discourage banks and finance companies from giving loans to property (apart from low-and medium-cost houses), stockbroking and consumption, there must be no credit squeeze for manufacturing and exports which are critical to our economic recovery.
Anwar had said the action of banks in October and November to control their credit had given a false impression that there was a credit squeeze.
The Finance Ministry should set up a complaints bureau to resolve the mounting complaints that banks have unfairly withdrawn or reduced credit for productive and export-oriented businesses and industries and ensure that his assurance that credit was still available for productive sectors such as manufacturing, tourism, and services are followed by all banks in the country.
One reason why banks are suddenly, without notice, withdrawing or slashing credit lines for productive and export-oriented industries is probably because of the tight liquidity situation in the local banks, caused by the massive shifting of money from local banks to foreign banks.
This problem is not a recent one, but has been going on for the past three months, and which had been raised in the recent budget meeting of Parliament.
This is not a question of loyalty or patriotism but a question of confidence and it is most regrettable that neither the Bank Negara or the Finance Ministry had addressed this problem at its root.
How much money have been shifted from the local banks to foreign banks in the country in the past three months?
The Singapore Business Times reported yesterday that some foreign banks in Malaysia are starting to turn away new deposit business because a clampdown on new loans does not make it worth their while.
The banks are finding that accepting new deposits without being able to convert them into loans -- following severe constraints placed recently by Bank Negara -- has meant that the banks' ratio of liabilities to assets has become unfavourable.
"We are getting too much money as deposits to be able to lend out profitably," one foreign banking source in Malaysia was quoted as saying.
Bank Negara should come out with a strategy not only to restore confidence but to resolve the liquidity problem in the local banks.