Finance Minister Anwar Ibrahim should present a fourth 1998 Budget in Parliament
on July 13 and admit that Malaysia is facing a recession and that there
would be negative GDP growth this year
by Lim Kit Siang
(Petaling Jaya, Tuesday): Although
the Kuala Lumpur Stock Exchange Composite Index (CI) rallied yesterday
closing 5.10 points higher than the previous day to end at
450.77 at the end of trading, the Malaysian ringgit plunged to a new low
of 4.1700/900 to the US dollar since the strengthening of the Malaysian
currency in January after falling to a historic depth of US$1= RM4.88.
Although regional factors like uncertainties over the Japanese yen were
negative market factors, the Malaysian markets should have been upbeat
especially after two weekend developments, namely:
the announcement by Bank Negara of the cut by two percentage
points of the statutory reserve requirement (SRR) of financial institutions
to 8.0 per cent, releasing RM8 billion of funds into the financial system
and bringing the average base lending rate (BLR) for commercial banks down
to 12.09% from, 12.30%; and
the appointment of the economic czar and saviour of Malaysia, Tun Daim
Zainuddin, who is also the executive director of the National Economic
Action Council (NEAC) as a Cabinet member as Minister for Special Functions
in the Prime Minister’s Department on economic affairs.
These two developments should have provided a fantastic fillip
to investor confidence but yesterday’s stock and money markets proved otherwise
and this itself should be serious food for thought for the Prime Minister,
Datuk Seri Dr. Mahathir Mohamad, who seemed to have wrested control over
the economic management policy from his deputy and Finance Minister, Datuk
Seri Anwar Ibrahim after the UMNO General Assemblies the previous week.
Mahathir has been proved right that when he opened his mouth,
market confidence plunged. In his interview with the latest issue
of Far Eastern Economic Review, there was this startlingly
frank admission by Mahathir on the effect of his speeches and statements
on market confidence. When asked whether some of his comments had exacerbated
the economic crisis, Mahathir said:
"What did Suharto say to cause the rupiah to do go down 600%? Drop
from 2,400 rupiah to 1 U.S. dollar to 16,000 rupiah to 1 U.S. dollar. He
was very, very soft spoken. He was very nice. He never commented on anything."
Asked whether his "comments last summer led to a loss of confidence",
"I felt it was a peculiar reaction. A lot of people were
very, very careful about what they say but they have been hit sometimes
harder than me. I am the one who caused this? Its unclear to me"
To the question " You said yourself that you opened your mouth
and it caused the ringgit to drop", Mahathir replied:
"I have been watching. Despite the fact I have not
been talking, the ringgit still goes down. So why should I stop talking?
Even when I stop, it still has this bad effect. So I came back to
Malaysians are very perturbed by Mahathir’s interview with the
Far Eastern Economic Review as it signifies a very unrepentant and truculent
Prime Minister who is prepared to take on the whole world regardless of
the consequences to the Malaysian economy.
With the appointment of Daim as the virtual Finance Minister,
Mahathir seems set on a new phase of economic crisis management which can
only alarm investors, both national and international. The Cabinet
should seriously consider whether it is in the interests of the nation
to embark on such a new phase.
The Singapore Government yesterday slashed its economic forecast
to between 0.5% to 1.5% this year from an earlier downward revision of
its projection of between 2.5% to 4.5%.
I call on the Finance Minister Datuk Seri Anwar Ibrahim to
present a fourth 1998 Budget in Parliament on July 13 and admit that Malaysia
is facing a recession and that there would be negative GDP growth this
Economists are almost unanimously agreed that the government’s forecast
of 2 to 3 per cent GDP growth this year is unrealistic and unachievable.
The Malaysian Institute of Economic Research (MIER) executive director,
Dr. Mohamad Ariff Abdul Kareem said very categorically that Malaysia was
going into a recession. MMS International Standard & Poor’s in
Singapore is looking at a minus 5% growth this year.
*Lim Kit Siang - Malaysian Parliamentary
Opposition Leader, Democratic Action Party Secretary-General & Member
of Parliament for Tanjong