Speech (3)
- Royal Address '98
by Lim Kit Siang 

Anwar's Third Budget

(Dewan Rakyat, Wednesday): In his Ministerial statement yesterday, Anwar said the financial markets, as far as the ringgit and share market, have strengthened in recent weeks, with the ringgit stabilised at US$1=RM3.57 while the Kuala Lumpur Stock Exchange Composite Index recovering to 735.69 at midday yesterday.

The market response to Anwar’s ministerial statement was one of disappointment. The KLSE CI, which had stayed positive throughout the day, took a dive when Mr Anwar's speech was released to the media after 3.30 pm and began filtering through the news wires.

The index, which stood at 736.62 at 3.30 pm, fell by 9.29 points or 1.26 per cent to a low of 727.33 points at 4.23 pm. It then consolidated to close at 731.89 points, nearly four points down on the day.

The ringgit also weakened after Anwar’s statement and closed the day at 3.644 against the dollar.

Anwar’s announcement of a reduction in gross domestic product (GDP) growth estimates to 2-3 per cent for 1998, from the 4-5 per cent announced last December and 7 per cent announced in the October budget, should have been made earlier and would have achieved a greater confidence-restoration effect.

For the past three months, I had been asking the government to respond to the International Monetary Fund’s forecast in its Interim World Economic Outlook report released on December 19 of 2.5 per cent GDP growth for Malaysia this year and the three-month delay in the response highlights the need for the Malaysian economic managers to be more nimble and realistic in reacting to fast-changing economic developments, especially in the present crisis.

Last Sunday, Anwar was reported as saying that when the Malaysian ringgit stabilised at RM3.2 to the US dollar, the Malaysian economy would have recovered. I do not know whether Anwar had been correctly reported, but if this is the case, he has undergone a major change of views as he had valiantly maintained since the 1998 Budget on Oct. 17 that "the value of the ringgit will trend to around its previous level" before the crisis, i.e. around RM2.50=US$1.

Anwar said a lot about transparency and corporate governance but what the market and the country wants are not assurances but deeds and it is most disappointing that Anwar failed to meet public expectations that he would be able to present a convincing case that the government is not engaged in five bail-outs of UEM, Sime Bank, KUB Bhd., Bank Bumiputra and Konsortium Perkapalan Bhd.

Another serious omission in Anwar’s statement is his failure to address two adverse shocks for the Malaysian economy, a drop in export prices and the collapse of the speculative bubble in the real estate market.

Export prices have been falling throughout the year and averaged 5.1 per cent lower in 1997 than in 1996 and Malaysia can ill afford a deterioration in export profitability.

Of great concern is the deflation of the speculative bubble in the real estate market, with serious repercussions on financial institutions and the stock market. Anwar said yesterday that non-performing loans stood at 5.7 per cent of total loans as at the end of 1997, but bank analysts have forecast the aggregate non-performing loan ratio to rise to 15% by end-1998 and to between 20% and 25% by end-1999. Will Bank Negara, when it releases its annual report later this week, give its estimates of the aggregate non-performing loan ratio at the end of this year and next year?

Anwar was also expected yesterday to give details of the proposal to allow non-bumiputeras to buy bumiputera stakes in companies and to end the series of contradictory statements by top government leaders as to whether this is temporary.

In the face of the economic crisis, the government must be bolder to mobilise and galvanise all Malaysians to respond as one unit to ensure the quickest possible economic turnaround with the minimum of avoidable pain, hardships and sufferings to the people. The time has come for Malaysia to go beyond the old bumiputera and non-bumiputera distinction and recognise all Malaysians as the new bumiputeras who swim or sink in the same boat

The crisis of confidence facing the country can only be resolved if there is a two-way flow of confidence - the restoration of the people's confidence in the government and the government demonstrating its confidence and trust in the people by removing the information deficit in the country.

For instance, the government should be frank with the people as to when it seriously expects an economic recovery. The Prime Minister, Datuk Seri Dr. Mahathir Mohamad said in his TV3 Malaysia Hari Ini programme on January 9, 1998 that he expected economic recovery in six months to a year’s time, and the MCA President and Transport Minister, Datuk Seri Dr. Ling Liong Sik, bested him in forecasting an economic recovery in three months' time.

In actual fact, the six-month or three-month span have been shortened considerably, as Mahathir first made the economic recovery forecast in his TV3 MHI appearance two-and-a-half months ago, which means that there are only three-and-half-months left if the economic recovery is to be effected in six months and there are only two weeks left as far as Liong Sik's three-month economic recovery forecast is concerned.

If there is to be a two-way confidence flow between the government and the people, all government agencies, in particular the National Economic Action Council and the Cabinet, should act with greater openness, accountability and transparency and take the people into their confidence as to their operations and the rationale of their decisions and actions.

As part of the national economic recovery strategy, the Government has called on Malaysians to sell their properties in countries whose currencies were higher than the ringgit and keep the funds in local banks to increase the country's foreign currency reserves.

How many Ministers, Deputy Ministers and Parliamentary Secretaries have properties overseas and how many of them had been sold and their proceeds brought home and placed in local banks to increase the country's foreign currency reserves and whether Ministers, Deputy Ministers and Parliamentary Secretaries who have not yet disposed of their properties overseas propose to do so and when.

It should be understood that when we are referring to the overseas properties of Ministers, Deputy Ministers and Parliamentary Secretaries, we are also referring to the properties of their spouses, children and next of kin as well.

It is not only Ministers, Deputy Ministers and Parliamentary Secretaries who should declare their foreign properties overseas, all MPs, whether government or opposition, should also do the same.

Let the present meeting of Parliament be a historic session where all political leaders, whether Ministers, Deputy Ministers, Parliamentary Secretaries or MPs set the example of publicly declaring their foreign properties overseas as well as selling them off to bring the proceeds home to put in local banks to strengthen the country's foreign currency reserves.

Early last month , the Prime Minister announced the establishment of a special body to receive donations and contributions from Malaysians to increase the country’s reserves and that contributions could be made in any form, including property, goods, jewellery and cash.

Yesterday, the Deputy Finance Minister, Datuk Wong See Wah said during question time that to date, some RM900,000 had been donated to the National Reserve Fund, which is a far cry from the objective of strengthening the country’s international reserves.

From July last year to January, Malaysia’s foreign reserves fell by some RM14 billion. RM900,000 is less than 0.006 per cent of RM14.1 billion - which is a most puny figure.

The political leadership and the top 300 corporate bosses in Malaysia should take the lead to raise RM14 billion to recoup the losses suffered by the country’s external reserves during the economic crisis, whether through sale of their overseas properties or conversion of their valuable holdings, whether gold, jewellery and other precious stones and metals.

Has the Government acted with accountability and transparency, and taken the people into its confidence, so that its call for public donations and contributions to save the national economy through the strengthening of the country’s external reserves could be more effective and successful?

I had repeatedly raised my concerns about Malaysia’s external reserves on three important grounds but I have not been able to elicit any meaningful response from the government.

My first concern was with regard to the nation’s international reserves, which had fallen by RM11.5 billion from RM70.6 billion on 30th January 1997 to RM59.1 billion as on 31st December 1997; and which fell by another RM2.5 billion ringgit in the first 15 days of January, falling to RM56.6 billion on 15th January 1998 - although it stands at RM56.8 billion as on 14th March 1998.

My second concern was whether it was wise and prudent for Bank Negara to lose RM14.1 billion international reserves to defend the ringgit in the six-and-a-half months from June 1997 to January 1998.

Shouldn't there be more informed national debate as to what the Bank Negara should do when the ringgit comes under attack in such circumstances?

My third concern was whether the international reserves should be strengthened, especially as Malaysia's external debts of US$45.2 billion last year more than doubled the external reserves.

In setting up a special fund for Malaysians to make donations and contributions to increase the country’s reserves, is the Government now admitting that the DAP’s three concerns about the external reserves are valid and justified, and if so, is the government prepared to act with greater transparency and accountability by allowing an informed national debate on these three issues?


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