(Kajang, Monday): The Malaysian media should publish both the good and bad news about the government’s management of the worst economic crisis in the nation’s history to allow Malaysians to make up their own minds.
One of the many crises afflicting Malaysia today is the crisis of information, where Malaysians have little faith in what they read in the local newspapers or hear or see on television or radio.
Malaysians have found from experience that the local mass media will give big publicity about good news about Malaysia but either black out or play down bad news about Malaysia.
For instance, there is one piece of good news and two bad news about the government’s management of the worst economic crisis in the nation’s history. Let us see how the local mass media will treat these three items.
The first good news about the government’s management of the economic crisis is the forecast by an economist at a Singapore seminar that Malaysia could be the first crisis-hit Asian country to emerge from recession, thanks to its currency curbs.
A senior economist at Credit Suisse First Boston, P.K. Basu said at the bank's seminar on the global economic outlook said he expected Malaysia to be the first of the four crisis countries to recover because he felt Malaysia's economic downturn was caused by tightening policies and not by external shocks.
Basu said Malaysia's recent currency controls have provided a temporary insurance against currency volatility and prevented further outflow of funds.
"Malaysia's improved credit delivery to the real economy will enable a cyclical recovery long before the other crisis economies," Basu said.
Basu said Malaysia has low external debt and foreign liabilities in the banking system which would limit fund leakages.
"The banks' insignificant reliance on foreign liabilities gives Malaysia a distinct advantage over the rest of East Asia," he said.
Basu said that, assuming a peak non-performing loan rate of 25 percent for the country, the estimated cost for recapitalising Malaysian banks was at 80 billion ringgit.
He felt this would be sufficently met as the country unlocks some of its assets, gets funds from countries like Taiwan and Japan, and issues bonds.
He forecast real gross domestic product to grow 3.1 percent in 1999, after a likely decline of 3.4 percent in 1999, as manufacturing posts a strong recovery.
Inflation was seen peaking around seven percent in the second half of 1998 and 6.1 percent for 1998.
The first piece of bad news, which I expect to be reported although played down, is that rating agency Moody's Investors Service has downgraded the debt, deposit and bank financial strength ratings of five major Malaysian banks,dealing a fresh blow to the country's battered banking sector. Moody's also placed those same ratings under review for possible further downgrades.
The rating agency said the banks downgraded were Malayan Banking Bhd (Maybank), Bank Bumiputra Bhd, Public Bank Bhd, RHB Bank Bhd and Sime Bank Bhd.
Moody's said the downgrades reflected the increasing risk to creditors of Malaysian entities following the economic policy measures announced by the government with regard to the sweeping capital controls in a bid to insulate the recession-hit economy from global instability and shield the ringgit currency from speculators.
The Moody's rating announcement coincided with the lowering of Malaysia's country ceiling for long-term bonds and notes to Baa3 from Baa2, and for long-term bank deposits to Ba1 from Baa3. Moody's also lowered Malaysia's country ceiling for short-term obligations to Not Prime from Prime-3.
The second piece of bad news for the Malaysian economy may be blacked out by the local media altogether. This is the report that a French securities company has advised French investors to be better off putting their money in Pakistan rather than Malaysia following the introduction of sweeping exchange controls.
The AFP reported that Credit Lyonnais Securities Asia, in a recent advisory to clients, said the controls had imposed "unacceptable restrictions on institutional and individual foreign investors" -- such as having to wait a full year before repatriating the local currency proceeds from sales of Malaysian shares.
"This is one country that investors can safely delete from their investable universe," the company said, adding that it would subsequently be scaling back its economic coverage of the Southeast Asian country.
"Malaysia's flirtation with an economic miracle is now just a footnote in history. Prefer Pakistan," it said.
Credit Lyonnais said the rationale behind the one-year rule was clear -- foreign holdings of Malaysian shares are estimated at up to 10 billion dollars and the country's reserves could plunge in the event of an abrupt withdrawal.
"In its efforts to regenerate investment and growth, Malaysia will forego the benefit of foreign capital. However, in the absence of the driving force provided by foreign capital, growth and prospects are bleak," it said.
Credit Lyonnais said it had "little doubt" that Malaysia's policy amounted to "an isolationist stance where the authorities believe the economy can prosper on domestic resources alone."
The surge in Malaysian share prices which followed the announcement of exchange controls on September 1 was "downright disturbing," it said.
"Liquidity is being pumped into the system. In the absence of profitable investment opportunities, asset prices are being driven up without any corresponding increase in the value of the underlying asset.
"In effect, the authorities are creating a mini-bubble. Moreover, all prices apart from asset prices -- as long as they go up -- are controlled," it said, referring to the exchange rate, interest rates, consumer prices and oil prices.
"The last experiment that went this far was an economic philosophy called socialism," the securities company said. "It is a philosophy much better suited to impoverishment than enrichment. Malaysians will eventually find that out."
In a separate report, Credit Lyonnais Securities Asia asserted that Malaysia had been transformed from an "emerging market super-nova to a black hole of capital" in the short space of five years.
"On the way up, it worked with the deadly precision of a Swiss watch. Predictable and beautiful and so easy to understand. Now fashion has changed. Now to foreigners you are like your much misunderstood Durian -- prickly on the outside and stinking in the middle," the report said.
"So farewell then, Malaysian equity market, may we meet again -- when the current generation of global investors has retired or is bullish on Bangladesh," it said.
I do not fully agree with the analysis and report of Credit Loyannais Securities Asia but I would want to uphold the right of Malaysians to have access to them in the local mass media, instead of having them blacked out because of selective publication of good and bad news about the Malaysian economy.
(14/9/98)