Appointment of Salomon Smith Barney to implement government’s financial programme most unprecedented and does it mean that the finance and economic ministers have lost  confidence that they could raise international  funds without foreign help?

Media Conference Statement  (2)
-  second day of the  18-day Marathon ‘Free Guan Eng"  Fast
by Lim Kit Siang  

(Kajang, Friday): The appointment of American securities and brokerage firm, Salomon Smith Barney Holdings Inc. to design and implement the government’s programme to raise foreign funds to meet the nation’s needs over the next two years is most unprecedented.

It raises many disturbing  questions about the economic and financial policy and decision-making in the country.  Firstly, it shows that the government is aware that Malaysia needs foreign funds to resuscitate the Malaysian economy, and yet it had taken many recent measures which had struck at the root of investor confidence, whether local or foreign.

For instance, will the  exchange controls imposed by the government  deter new investments in the country  and cause international investors to refrain from channelling funds into Malaysia because of arbitrary chop and change of rules?

There are analysts who expect foreign direct investments (FDIs)  to plunge in Malaysia, as unlike China and India, which have the attraction of large domestic markets, Malaysia can only offer price competitiveness and efficiency -- but exchange controls undermine precisely these attributes.

When the Prime Minister, Datuk Seri Dr. Mahathir Mohamad announced the new currency controls on Sept. 1, Bank Negara had estimated that there are  RM25 billion in bank accounts outside the country, which would have to be brought back by Sept. 30 when all ringgit outside Malaysia  would become "invalid".

The volume of ringgit deposits in Singapore was estimated  to be about  RM20 billion.  In line with Malaysia's new currency  controls, ringgit-denominated accounts in Singaporean   banks have been closed this week -- but reports from Singapore  say only a fraction of the estimated RM 20 billion in Singapore has been  repatriated back to  Malaysia as  nearly   all their customers who had ringgit deposits opted to  have them converted into U.S. dollars rather than  transferred into banks in Malaysia.

The second question about the appointment of  Salomon Smith Barney is that it jars against the rhetoric of the Prime Minister in denouncing foreign interference in Malaysian economic afffairs, and his assertion of Malaysian independence in economic and financial decision-making.

Thirdly, it raises the very disturbing question whether the Malaysian finance and economic ministers have lost confidence that they could raise international funding without foreign help.

At the end of July, just after the publication of the National Economic Recovery Plan (NERP) by the National Economic Action Council, the then Finance Minister, Datuk Seri Anwar Ibrahim and the Special Functions Minister, Tun Daim Zainuddin had to shelve their plans for an international roadshow to raise US$2 billion from international bonds when Malaysia’s sovereign credit rating were downgraded by three notches by Moody’s Investor Service Inc., Standard and Poor and later by Thomson Bankwatch.

Two days ago, Fitch IBCA downgraded Malaysia's long-term foreign currency rating two notches to "BB", below investment grade, from "BBB" while the short-term foreign currency rating was also cut to junk status of "B" from "F3".

After the sacking of Anwar as DPM and Finance Minister, Mahathir has assumed the post of Finance Minister himself, with the appointment of a Second Finance Minister, Datuk Mustapha Mohamad.

Is the appointment of Salomon Smith Barney an admission that Mahathir, Daim And Mustapha would not be able to raise the international funding needed to resuscitate the Malaysian economy and must now resort to the unprecedented decision of virtually corporatising an important part of the government’s financial programme to a foreign company!  Isn’t there a local banking and securities firm capable of being assigned this task?

Malaysians are entitled to know the full terms of the appointment of Salomon Smith Barney, in particular what fees and earnings the American firm would make from such an appointment.


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