Malaysia mass media must report both good and bad news about the economy instead of suppressing unfavourable reports like the latest  report about 1.4 per cent contraction of  GDP this year



Media Statement
by Lim Kit Siang  

(Penang, Tuesday): The Malaysian mass media, both printed and electronic,  must report both good and bad news about the economy if they are to help in the restoration of confidence by resolving the crisis of information deficit.

The government and the mass media must realise that in the era of information technology and instant communications, it is not possible to suppress adverse news like the latest report from a United Kingdom research house forecasting that there would be recession this year with the  Malaysian economy contracting  by 1.4 per cent, in sharp contrast to the revised government estimates of 2 to 3  per cent GDP growth for this year.

The smart and intelligent approach is to allow the mass media to publish these adverse reports and for the government to rebut them if they are biased, misguided or baseless.

The forecast of the UK research house about recession in Malaysia this year was carried in the Singapore Business Times  today under the heading: "Politics is hurting Malaysia: report - UK research house sees GDP shrinking by 1.4% this year".

This is the Singapore Business Times report today:

"M ALAYSIA can easily take steps to ride out the Asian  crisis, but the reluctance to admit the problems and address them with market-based solutions has eroded  confidence, depressed the ringgit and pummelled the stock  market, says London-based Independent Strategy.

"In its latest Emerging Markets report, the research house blames  politics for standing in the way of rational economics in Malaysia.

"’Bad news and ambiguous policy statements will continue to hurt  the economy,’ the report says. ‘Worse, asset and debt-deflation  will push the economy into recession. As this unfolds, interest rates will be cut and the ringgit will be allowed to sink towards  RM6/US$1. Falling activity will murder equity earnings and the rising cost of foreign debt will also hit the blue chips.’

" It sees blue chips like Tenaga and Telekom getting caught by  falling domestic demand and rising foreign debt burden.

"The firm is short on the ringgit and Malaysian equities, and expects gross domestic product to shrink by 1.4 per cent this year. In  contrast, the government expects a 2 per cent expansion.

" Independent Strategy notes that the government has chosen the   slow-burn deflation of procrastination and obfuscation instead of  the pain of a fast and furious adjustment (by raising rates).

" But it acknowledges that it would be politically very difficult to  raise rates in Asia's most domestically-geared economy – where  credit outstanding is 168 per cent of GDP and the loan-to-deposit  ratio is around 125 per cent.

"’Easy money, tight fiscal policy (the government has cut spending by 17 per cent) hasn't worked,’ Independent Strategy says. ‘It is the lack of confidence at home, not bogey-men from abroad,  that's now killing the economy with asset-price deflation.’

" It also questions Bank Negara's claim that the financial sector's problems are at an end. ‘Our figures show otherwise,’ it says. ‘Based on peak non-performing loans ratio of 25 per cent, and a recovery rate of 50 per cent, the cost of bailing out the Malaysian  banks will be over 25 per cent of GDP, or RM70 billion (S$30.3  billion).’

" While the Employees' Provident Fund -- with assets of RM226   billion, cash reserves of RM60 billion and annual cashflow of  RM30 billion -- could be used for a bailout, the better solution  would be for foreigners to buy into the financial sector.

" Nevertheless, Independent Strategy is impressed with the  competence of some of Malaysia's leading economic managers. It  praises Deputy Prime Minister and Finance Minister Anwar  Ibrahim as a man of ‘penetrating intelligence, a great listener with a  truly amazing ability to synthesise complicated economic processes’.

"It also ranks Bank Negara deputy director Fong Weng Phak on   par with respected international financial market personalities like  New Zealand's Reserve Bank governor Don Brash."

(26/5/98)


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