Speech (2)
- Royal Address '98
by Lim Kit Siang 

What caused the crisis

(Dewan Rakyat, Wednesday): The Yang di-Pertuan Agong, in his Royal Address, said:

Let me firstly congratulate the government as this is the first time that the government has officially admitted to an economic crisis, as some time last year, the mass media, both printed and electronic had been warned not to use the words "economic crisis" probably fearing that this would panic Malaysians, with Ministers going round the country talking about "economic problems" instead. This had been the constant subject of my criticism in the past few months as proof that the government has not completely shaken off the "denial syndrome" to come to grips with what the Executive Director of the National Economic Action Council (NEAC) and Government Economic Adviser, Tun Daim Zainuddin has said in an interview with Far Eastern Economic Review as "the worst crisis since the Second World War" - although this was meant for a foreign rather than local consumption.

The government’s reference to the economic crisis in the Royal Address, however, is quite disconcerting because there is no preparedness to admit that although there are external causes to the economic crisis, internal policy and structural weaknesses have seriously aggravated the economic crisis, making it more painful and even longer than would otherwise be necessary.

The lessons we draw from the crisis depend to a large extent on our understanding of the causes of the crisis itself. In the past nine months, however, the government had made no attempt to explain the larger causes of the economic crisis apart from heaping blame on foreign speculators in contrast to what other governments in the region are doing.

The Ministerial statement by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, yesterday - what has been described as the "third 1998 Budget" -had been more forthright and did not flinch from admitting the financial crisis facing the country. Unfortunately, the market had reacted negatively as seen by the weakening of both the currency and the stockmarket at the close of trading yesterday, either because Anwar’s latest package of measures fell short of expectations or his attempt to stimulate the market had been undone by the Prime Minister’s parliamentary performance during question time.

This is one recent explanation by a government in the region on "What Caused the Crisis":

This was the speech by the Singapore Finance Minister when presenting the 1998 Budget in the Singapore Parliament on February 25.

The Malaysian Government can disagree with the analysis of the Singapore Government as to the causes of the Asian economic crisis, but I have quoted the Singapore 1998 Budget statement at some length to emphasise one point: that the first condition in confidence-restoration is for government leaders to stop giving simplistic reasons for the causes of the economic crisis.

In Malaysia, Government leaders are not only putting the blame of the economic crisis on foreign currency speculators for deliberately depreciating the Malaysian ringgit, they are also trying to make these foreign speculators responsible for the Employees Provident Fund declaring the lowest dividend of 6.7 per cent in 22 years and for creating the troubles of Sime Bank, Bank Bumiputra, Abrar Finance and Cempaka Finance!

This is in sharp contrast to what leaders of other Asian economies are saying. For instance, Thai Prime Minister Chuan Leekpai blamed the recent economic crisis in Thailand on complacency, without any talk of George Soros or international conspiracy to sabotage the Thai economy.

In his speech to the Council of Foreign Relations in New York last week , Chuan said:

Singapore’s Senior Minister, Lee Kuan Yew, in an interview on the East Asian economic crisis in a recent issue of Newsweek said:

Speaking at the National Defence College of Thailand, titled "How and when will East Asia recover", Lee Kuan Yew highlighted two key inter-related factors that caused the crisis that has gripped East Asia.

He said:

Lee noted that while private companies were the main borrowers, governments were to blame for failing to check excessive borrowing. Indeed, they abetted the process by adopting policies which created a euphoric environment.

He said:

On what can be done, Lee said:

The question is how long it will take, and whether governments can do anything to speed up the process. While governments have little direct control over market reactions, they can restore confidence by addressing market concerns – in particular, external debt, the soundness of the financial and corporate sectors, and money supply and interest rates.

Warning that pain was unavoidable, he added:

Confidence Restoration

One important reason why Malaysia is still facing the problem of confidence-restoration nine months into the economic crisis is the widespread perception that government leaders are still in denial and are not prepared to face up to the internal weaknesses and causes which have made the economic crisis worse that it should have been. Such unrealistic attitude can only make it very difficult to arrive at a proper diagnosis and remedy of the crisis - dragging out the economic crisis longer than necessary.

This is why the recent pronouncements of the Prime Minister, Datuk Seri Dr. Mahathir Mohamad are very disturbing. In an exclusive interview in the latest issue of Asiaweek, Mahathir said that he had lost his right to free speech.

If Mahathir has lost his voice, could he say these things and get them published? Furthermore, when asked who are these powers which have deprived him of his right to free speech, he said:

On IMF, Mahathir said:

Last Monday, in Kuala Lumpur, he rebutted allegations of "crony capitalism" with this response:

Well-known Utusan Malaysia columnist Rustam Sani in his article entitled "Menyelamat Bank" last Wednesday rightly said, with regard to bail-outs of Sime Bank and Bank Bumiputra: "Pada hemat saya, kenyataan-kenyataan separuh berseloroh atau separuh serious - seperti ‘seluroh negara ini merupakan suku sakat kita’ - tidak akan memadai untuk melepaskan diri kita daripada menghadapi tanggungjawab tersebut."

These are among the reasons why Malaysia has not won the battle of confidence-restoration although we are in the ninth month of the worst economic crisis since the Second World War.

Malaysians can understand if the Malaysian ringgit and the Kuala Lumpur stockmarket nosedive because of external developments, but they have a right to demand an end to the long list of self-inflicted wounds caused by bad government and corporate decisions which had aggravated market sentiments resulting in the plunge of shares and the Malaysian ringgit.

I am surprised that on Sunday, the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim, when opening the UMNO Bukit Bintang division meeting, said since the start of the economic crisis, I had ceaselessly made various proposals which would have landed the Malaysian economy in a greater mess if they had been followed.

I do not know what Anwar was referring to, but I stand by my Open Letter to all Cabinet Ministers on January 6 before their first 1998 Cabinet meeting on the 15 measures they should give priority focus to tide the country through the economic crisis in the shortest time possible and with the minimum of avoidable pain, hardships and sufferings to Malaysians.

If the Cabinet had acted on the 15 proposals in the Open Letter in their first Cabinet meeting this year, the Malaysian economy would definitely be in a healthier and stronger state.

The 15 measures which I had recommended the Cabinet to give priority focus, together with reasons which I had given in the Open Letter to all Cabinet Ministers, were as follows: The 15 areas which I had asked the Cabinet to give priority focus are:

  1. Confidence-restoration.
  2. Elimination of the information deficit through a liberalisation of the mass media.
  3. Drop the proposal of NEAC and have instead a National Economic Crisis Cabinet of technocrats and experts.
  4. Establish a National Economic Crisis Consultative Council (NECCC) comprising representatives from all political parties, both government and opposition, academicians, industry, commerce, trade unions, professional bodies, NGOs, so that it could be a nationally unifying force.
  5. If the Cabinet wants to continue with the NEAC proposal, reconsider the appointment of Tun Daim Zainuddin as NEAC executive director.
  6. Make the Senate an Elective Chamber.
  7. A third 1998 Budget in an emergency meeting of Parliament this month.
  8. Implement the Vision 2020 concept of Bangsa Malaysia during the national economic crisis as a unifying force for all Malaysians.
  9. Good Government which adhere to the highest principles austerity, transparency and integrity.
  10. All-Out War Against Corruption.
  11. Good and Transparent national and corporate governance
  12. Accountability and Transparency by Bank Negara and the banking and financial sector.
  13. Full public debate on IMF option
  14. Mechanism to protect interests of Malaysians as against foreign workers in the loss of million jobs this year
  15. Green-Book Plan - Land For All on First-Come First-Served Basis

It is most unfortunate that the Cabinet had not given all the 15 measures serious attention or the country would have been well on the way towards economic recovery.

At the very least, I am glad that the Prime Minister had taken note of my strong objection to the NEAC being a body which supersedes or is co-equal with the Cabinet in the important areas of economic policy, seriously undermining the principles of Cabinet responsibility and parliamentary democracy, as it would therefore be highly unconstitutional and challengeable in the courts.

Yesterday, when answering my question, the Prime Minister, Datuk Seri Dr. Mahathir Mohamad said for the first time that the NEAC is a consultative council which advises the Cabinet, which is very different from his initial announcement of the NEAC in Nov. 20 last year, when he explained that the NEAC would have emergency powers like those of a National Operations Council without declaration of emergency, or as explained by the Economic Planning Unit after the first meeting of the NEAC on January 22, implying that the NEAC has decision-making and executive powers independent of the Cabinet.

The NEAC has has a five-man executive council, which will "ensure that the current economic problems can be resolved expeditiously and decisions of the NEAC implemented effectively", comprising the Prime Minister, Deputy Prime Minister and Finance Minister, executive director and two members to be appointed by the Prime Minister.

Mahathir announced yesterday that so far only one of the two vacant posts on the NEAC executive council had been filled, i.e. by the Chairman of ISIS, Tan Sri Nordin Sopiee. I would like to know why the government has found it so difficult to fill up the posts in the five-man NEAC Executive Council, if it is serious about the tasks of the NEAC to "restore public and investor confidence, pafticularly that of foreign investors with regard to the economy".

The government does not seem to be very serious about the urgency of counter-measures to deal with the economic crisis, as it taken over two months before the NEAC could be formed and hold its inaugural meeting since its first announcement on Nov. 20. Furthermore, it has taken another two months for its decision at the first NEAC meeting on the establishment of State NEACs to be complied - as some states, like Penang, had only recently announced the formation of State Economic Action Councils and have not yet held their inaugural meetings.

These are all symptoms that the country is still grappling with the problem of confidence restoration as the government has yet to completely shake off the "denial syndrome".

(25/3/98)


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong