(Petaling Jaya, Monday): 1997 had been a horrible year for Malaysians and 1998 is expected to be worse.
It is tragic but true that Malaysians are not starting the new year with the confidence that the government and country are now on top of the problem, that the people have seen the worst of the national economic crisis, that the economy has reached rock-bottom and cannot go down further and that the only way for the economy to go is up to start the painful process of economic turnaround and recovery.
Malaysia is entering the seventh month of the national economic crisis but confidence among investors, which is a fundamental prerequisite for any economic turnaround, remains as elusive as ever.
This is why the recently-retired Finance Ministry secretary-general Tan Sri Clifford Herbert said in the International Movement for a Just World (JUST) forum on "Understanding the Global Financial Crisis" yesterday that the crucial task facing the Government now was to re-establish confidence among investors through sound macro economic policies and that the speed of their return depended on how fast the government worked towards rebuilding the confidence.
He said: "Investors are like a herd of cattle. They’ll be back if they see that the grass is green again and we must create that kind of environment for them to return."
Unfortunately, after six months, despite the first 1998 Budget of October 17 and the second 1998 Budget of December 5, the government has not been able to convince investors that "the grass is green again" in Malaysia.
Another speaker at the forum, Metrowangsa Sdn. Bhd. chief executive officer, Dr. Ghazali Atan, said sending the right signals to the market could result in a quicker revival.
He reckoned that government policies and actions should be aimed at "what the market wants and not what the Government wishes to do".
The Prime Minister’s New Year Message had been a very despondent one.
His call on Malaysians to be prepared to make sacrifices, including putting their monies in local banks even though their savings would depreciate if the value of the ringgit continued to fall, is not one calculated to enhance confidence.
The central issue is not whether the people are prepared to make sacrifice in the hard times ahead, but whether the government is capable of embarking on the path of confidence-restoration, without any zig-zags, u-turns and detours, with the right hand repeatedly undoing what the left hand is doing to restore confidence.
I feel confident that Malaysians are capable of rising to the challenges and hardships of the economic crisis if the people are told the truth and given all the information and the government sets an example of austerity, transparency and integrity.
What appeared in the local mass media on January 1 together with the Prime Minister’s New Year message is one classic example how confidence could be undermined if the government resorted to foolish and even dishonest efforts purportedly to enhance confidence.
I refer to the Bernama report which was prominently carried by all local newspapers on New Year’s Day on the glowing report on the Malaysian economy by the International Monetary Fund (IMF).
The Star carried the headline IMF report gives Malaysia the thumbs-up, The New Straits Times bannered IMF praises Malaysia's high level of investment while the Sun used the headline M'sia's high investment level augurs well: IMF. The Star's report said:
KUALA LUMPUR: Malaysia's high level of investment and rapid total factor productivity growth will augur well for sustainable growth in the future, the International Monetary Fund (IMF) in its 1997 annual report said.
The IMF executive board observed that growth would depend on Malaysia's ability to sustain the momentum of its liberalisation and structural reform.
In its 286-page annual report, the IMF said it supported measures by the Malaysian authorities to strengthen the services sector, including measures achieved through tax reforms.
It said a continuation of financial reform was also important, such as deregulation to promote development of the bond market and greater reliance on indirect monetary instruments.
The IMF has also urged for further trade and tariff reform and the elimination of controlled and administered prices.
In their discussions with Malaysia in August last year, the IMF directors had commended local authorities for Malaysia's continued impressive economic performance, which had been marked by robust, outward-oriented growth, low inflation, and remarkable social progress in reducing poverty and improving income distribution.
The IMF directors said that sustained prudent macroeconomic and wide-ranging structural reforms underpinned these achievements.
However, the IMF said it viewed pressures in markets and the widening current account deficit as signs of continued strong demand pressures.
Although the national saving rate was high by international standards and the current account largely stemmed from increased investment, the IMF directors considered that the size of the deficit and the increased reliance on debt-creating flows gave rise to risks.
As such, they have called the authorities to take early action to reduce overheating and place the deficit on a clear downward path.
The Malaysian authorities have since taken steps to tackle the country's current account deficit in the 1998 federal budget and through subsequent additional measures.
The IMF said that given the constraints of monetary policy with large capital inflows, fiscal policy would have to play a key role in the needed policy mix.
The IMF directors have urged the Malaysian authorities to limit the deterioration of the overall public sector balance projected last year and restore fiscal surplus this year.
They welcomed the authorities' intention to consider proposals for expenditure-reducing and revenue-enhancing measures, including rescheduling lower-priority public investment projects, further cuts in investment incentives, and an early introduction of a value-added tax.
In view of the continued rapid money and credit growth, the IMF directors noted that the authorities' readiness to allow greater exchange rate flexibility should help increase the effectiveness of monetary policy.
They said the difficulty of significantly reducing the current account deficit through higher private saving, particularly in the short run, underscored the need for greater reliance on fiscal policy to increase public saving.
In an immediate reaction, outgoing finance ministry secretary-general Tan Sri Clifford Herbert said the IMF's favourable report on Malaysia will help bring back investors' confidence to the country.
"Confidence is something to be re-established and the IMF knows us. They've been here every year. They do annual reviews and they know the stance of our economy that our fundamentals are still strong," Herbert told reporters before clocking out for the last time at the Treasury in Kuala Lumpur yesterday.
-- Bernama --
This is a misleading and dishonest report for four reasons:
Firstly, the IMF 1997 Annual Report was not a recent report on Malaysia and I am most shocked that one newspaper even reported that the government has just received a copy of the IMF 1997 Annual Report. In actual fact, the IMF 1997 Annual Report was completed before the Asian economic crisis and was submitted by the IMF Managing Director, Michel Camdessus to all IMF Governors on July 9. Every country has a Governor on the IMF, who is normally the Finance Minister or his representative. This means that the Finance Ministry received the IMF 1997 Annual Report in July, before the Asian economic turmoils. Why then did Bernama run a story six months after the event to give the impression that this is the latest 1997 report of the IMF on the Malaysian economy?
Secondly, the IMF 1997 Annual Report was referring to the Malaysian economy before the economic crisis. Why did Bernama run a story appearing in all the local mass media, both electronic and printed, claiming that the IMF was giving a glowing report on the Malaysian economy six months after the crisis?
Thirdly, the report said the IMF 1997 Annual Report commended the government for the various measures taken in the 1998 Budget and after, which is misleading, wrong and dishonest as the IMF 1997 Annual Report was released in July 1997 before the presentation of the 1998 Budget in the Malaysian Parliament on Oct. 17, 1997.
Fourthly, Bernama had deliberately misled Malaysians for the latest IMF report on the Malaysian economy was as recent as Dec. 19, when it released its Interim World Economic Outlook where it gave its forecast that the economic growth rate for Malaysia this year is 2.5 per cent, a clear statement of lack of confidence in the projection given by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim in his second 1998 Budget that Malaysia’s eocnomic growth rate for this year would be between 4 – 5 per cent, down from the 7 per cent he had forecast in his first 1998 Budget on Oct. 17.
Why didn’t Bernama report the IMF’s latest report on the Malaysian economy, which did not give any glowing account at all. Furthermore, the IMF’s Interim World Economic Outlook, which represents the IMF's preliminary findings into the Asian financial crisis, also rejected the contention by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad about the causes of the Malaysian economic crisis.
As the Malaysian Government had been in the forefront asking that IMF make a study of the role of the speculators in the Asian financial crisis, why did Bernama as the national news agency fail to report on the IMF's preliminary findings that speculators "appear to have played only a minor role in the crisis, and that domestic investor sentiment was the principal driving force"?
Bernama should explain why it had misled the country and people with regard to the two IMF's reports on the Malaysian economy, the IMF 1997 Annual Report to pass it off as a glowing account of the Malaysian economy today when it was about the Malaysian economy before the crisis six months ago, and the IMF Interim World Economic Outlook in failing to report the IMF's sombre view of the Malaysian economy which was released in Washington on Dec. 19, 1997.
If Bernama cannot give a satisfactory explanation for its serious journalistic lapses, I would lodge an official report against Bernama to demand a full inquiry which is provided in the Bernama Act aimed to provide the highest ethics and standards for Bernama as national news agency.
The Information Minister, Datuk Mohamad Rahmat must be held responsible for this deplorable state of information deficit in the country, where Malaysians have ceased to believe in the local mass media, preferring to believe what the foreign press says, even though they may be wrong and superficial.
The information deficit is one important reason why the government has failed to make any significant headway to restore confidence, and this credibility gap must be urgently resolved if investors are to be convinced that the "grass is green again" and the environment for their return has been restored.
In his New Year Message, the Prime Minister called on Malaysians to be willing to face challenges as well as to sacrifice in the face of the economic turmoils in the country.
Malaysians would expect the top leadership to set the example of such willingness to sacrifice for the country to defend the sovereignty, independence and dignity of the country.
There will be no instantaneous injection of confidence than for all Cabinet Ministers to collectively submit their resignations to the Prime Minister to empower him to carry out a major reshuffle to establish a National Economic Crisis Cabinet of calibre and integrity as the important first step in the new year to restore confidence.
After all, if the Cabinet is not prepared to accept full responsibility for the economic crisis of the past six months, and the crisis to come which will cause unprecedented pain, sufferings and hardships to Malaysians, who is to accept such responsibility?
This is the time when Cabinet Ministers must prove their loyalty and patriotism by giving way to a National Economic Crisis Cabinet of calibre and integrity to check the worsening of the economic crisis, chart the economic turnaround of the country and unite and galvanise all Malaysians to respond as one unit to the economic crisis to achieve the twin objective of ensuring that there would be the minimum of avoidable pain, sufferings and hardships in the coming months and that the crisis would pass in the shortest possible time.
Malaysians want a National Economic Crisis Cabinet of calibre and integrity to replace the present Cabinet, with many old tired faces, who are very frightened, not because of what the economic crisis can do to the nation and people but very frightened how their near ones could survive the economic crisis because of their mega-loans.
Many Ministers are going round the country appearing very dazed and lost. One Minister is going round the country to be photographed daily in hawker centres, having a plate of kway-teow while others of his party people sit around having coffee or tea. How can such daily photographic coverage of a senior Cabinet Minister forelornly trying to rediscover hawker food help address the national economic crisis - the worst in the 40-year history of Malaysia?
We have another Minister who precipitated the sugar shortage crisis by announcing more than one month in advance the increase of sugar price on February 1, and now wonders why there is the public psychology of wanting to buy more sugar before its price goes up after the Qongxi Raya holidays!
Then we have another senior economic Minister going round saying that the Malaysian economy is only suffering a "mild case of cough" although the country has lost over RM650 billion in the past six months - which is two-and-a-half times Malaysia’s Gross National Product (GNP) for 1997, which is RM262.2 billion - comprising stockmarket losses of over RM440 billion and the ringgit depreciation losses of over RM210 billion.
I hope all Cabinet Ministers would heed the call of patriotic duty to make sacrifices and would collectively tender their resignation to enable the Prime Minister to form a National Economic Crisis Cabinet of calibre and integrity, tapping the best talents and brains and people of undisputedintegrity from both the private and public sector, as the first step in the painful battle to restore confidence, economic revival and re-positioning Malaysia in the world order by making Malaysians dare to dream again to be among the best in the world.