(Kota Melaka, Monday): On 17th October 1997, Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim presented the 1998 budget in the Dewan Rakyat to restore confidence in the Malaysian economy, and in particular to deal with the twin currency and stockmarket crisis.
The first budget failed to achieve its economic objectives, as both the stockmarket and the Malaysian ringgit kept falling during his budget presentation as well as the following week.
On October 30, I proposed that Anwar Ibrahim should present a second 1998 Budget in Parliament on November 5 during his winding-up of the budget debate, as the 1998 Budget presented by Anwar on Oct. 17 had failed to address the fundamental issue of restoring confidence in the Malaysian economy or to check the twin currency and stock market crisis.
It was only five weeks later, on December 5, that Anwar heeded the DAP advice and presented an emergency financial package, which was akin to a second 1998 Budget.
Although Anwar's emergency financial package or second 1998 Budget was better received than his 1998 Budget on Oct. 17, as Anwar's emergency financial package at 4 p.m. on Friday, 5th December, checked the unprecedented decline of the ringgit to 3.8650 against the US dollar and strengthened it to 3.6950 an hour later as well as causing a rally of the KLSE, these positive market reactions could only be sustained on the following Monday as by Tuesday, 9th December, the KLSE plunged by 47.32 points.
On 18th December 1997, I called on Anwar to present a third 1998 Budget and to learn from the lessons of the Asian economic crisis both in Malaysia and in other countries, where delays could be very costly, resulting in actions which might have been effective if taken earlier becoming weak and ineffective because of procrastinations and prevarications.
Anwar's emergency financial package announced on 5th December last year would definitely have been more efficacious and effective in restoring market confidence if it had been announced four weeks earlier as suggested by the DAP.
If Anwar had adopted the DAP proposal for a third 1998 Budget, Malaysia might have been spared the worst of the economic turmoils of the first ten days of 1998, when the KLSE Composite Index crashed through the 500-point psychological barrier while the Malaysian ringgit crashed through the US$1=RM4 psychological barrier, falling all the way to 4.882 against the US dollar, threatening to crash through a second psychological barrier of US$1=RM5 within 48 hours of the collapse of the RM4 barrier.
I concede that the disastrous performances of the stockmarket and the ringgit in the first week of January were primarily externally-induced, caused by the flight of confidence in Asian economies as a result of the developments in Indonesian and Thailand. While Malaysia cannot fully insulate itself from regional and international developments, our economic resilience or the lack of it would determine how badly we could be affected by external events.
The DAP's call for a third 1998 Budget has been vindicated by the International Monetary Fund managing director, Michel Camdessus, who said in Kuala Lumpur on Friday that while Malaysia, unlike Thailand, Indonesia and South Korea did not need an International Monetary Fund rescue package to help its economy recover, the country still needed measures to strengthen its fiscal and monetary policies, and to address "structural weaknesses."
Camdessus said there was a need for a "better policy mix" and that the IMF team could, "as much as Malaysia wishes, help put a comprehensive economic programme for structural policy and financial sector reforms" for Malaysia.
On the structural reforms needed, he said, the system of control of prices and government intervention in economic areas which has served the country well in the past "need to re-analysed and possibly cancelled."
He added that all countries had some form of structural weakness and was confident that Malaysia could formulate and implement comprehensive measures to check this.
This is precisely why DAP has proposed a third 1998 Budget to ensure that new policy measures are devised to better prepare the Malaysian economy to face the ravages of the economic crisis.
The Cabinet at its meeting on Wednesday should decide on a third 1998 budget and convene an emergency meeting of Parliament by middle of next month for Anwar to present such a third 1998 budget to strengthen budgetary, fiscal and monetary policies to combat the national economic crisis.