(Dewan Rakyat, Thursday): The BN Government’s White Paper on the Status of the Malaysian Economy, issued on 6 April 1999, sums up many of the factors contributing to the ongoing economic crisis as well as most of its policy responses.
Unfortunately, it does it by whitewashing the Mahathir-Daim clique’s responsibility for worsening the crisis and instead implies that Anwar Ibrahim was solely responsible for all domestic policy errors. Such a tendentious account not only contradicts the facts, but is also unlikely to inspire the investor confidence so badly needed to ensure economic recovery.
It is well known, for example, that Mahathir’s KLCI ‘designation’ ruling drastically reduced liquidity in the stock market, precipitating a collapse from late August 1997. Similarly, the UEM reverse takeover to bail-out Renong in mid-November 1997, supported by Mahathir and Daim, resulted in a 20% stock market contraction in three days!
Conversely, Anwar is not credited for establishing the key institutions for financial restructuring and recovery such as Danaharta and Danamodal. Unfortunately, the abuse of such institutions by Mahathir, Daim and their cronies has caused widespread concerns about the integrity and credibility of the recovery strategy.
The whole country is also aware of how Mahathir continued to shoot off his mouth in 1997 even though his rhetoric undermined international confidence and the value of the Malaysian ringgit. Despite his nationalist rhetoric, the White Paper clearly shows how foreign investments are being selectively encouraged to protect and save interests they favour, including those which led to the crisis.
More than half a year after their coup (Black September), our interests rates are higher, while our exchange rate is weaker than our neighbours affected by the crisis except for Indonesia. Money supply and loan growth went down after August 1998, despite threats against bank managers, while industrial output, especially manufacturing, has continued to decline. Meanwhile, signs of economic recovery, more evident elsewhere in the region, remain weaker in Malaysia and Indonesia.
It is clear that genuine economic recovery cannot be achieved by the Mahathir-Daim clique, who are placing their own business interests above those of the nation and the people. Justice for Malaysians can only be achieved by rejecting these policies in favour of an honest, fair and accountable government of the people, which will urgently bring about the necessary policy and institutional reforms.
When I spoke two days ago in the debate on the White Paper tabled by the Deputy Prime Minister, I noted that what started as an economic crisis has turned itself into an overwhelming national crisis. It is no longer an economic crisis, nor is it solely political or social. It is now a full-fledged national crisis that is shaking the very foundations of our nation.
I went on to suggest that the ostrich-like denial of reality by the self-centred Barisan Nasional leadership was neither acceptable nor likely to be tolerated by the long suffering and patient citizens of this country. In my remarks, I elaborated on the genesis of the crisis, a crisis that has been prolonged and deepened by both the actions and inactions of this government.
It is the policies of this government, both economic and non-economic, that have cumulatively subverted and undermined the most important pillars upon which civil society exists. We have seen a destruction of the independence and integrity of the judicial system, the strength of the financial system, the honesty of the civil service, the integrity of the forces of law and order. The list is endless. We have seen the rule of law replaced by the law of the jungle; truth replaced by lies and propaganda; the common good usurped and replaced by the narrow self-interest of the few; divisiveness taking over from unity; and uncertainty giving way to stability The abysmal track record of this Government. has destroyed confidence. The people of this country do not believe any longer in pronouncements and markets no longer accept what passes for policy.
The debate on the White paper was illuminating in that the interventions from the benches opposite focused on projecting a "feel good" image. It is sobering that ministerial speeches did not respond to the many legitimate issues we on this side of the House raised. We have yet again been fed a barrage of half-truths, evasions and outright silence on the critical issues raised. The self-congratulatory statements are devoid of meaning and ring hollow and add to the further destruction of confidence and credibility. The answers provided, are irrelevant and not believed. Allow me to illustrate.
Capital controls have not worked. The government has yet to show that these controls, ostensibly designed to encourage stable long- term capital inflows, have indeed led to increased flows of Foreign Direct Investment. The truth is there have been no substantive flows. The very fact that the government has had to modify the controls and provide exemptions is indicative of failure. Capital controls were further designed to uplift the Stock Market, particularly after the mid-February announcement – but the indices speak loud and clear. The stock markets of our neighbors have performed better without the foolish experimentation. Capital controls are in part the reason why investment flows have not flowed into Malaysia.
The Ringgit Peg . It is most revealing that this most touted remedy espoused by the Prime Minister as a policy instrument for bringing about stability is now being exposed as little more than quackery. I draw the attention of the House to the public request by the National Chambers of Commerce to the government to revalue the Ringgit. This policy was supposedly designed to heal but if the NCC is to be believed, it has hurt. The peg has not brought about the surge in exports but has had the perverse effect of making imports of intermediate goods expensive, thereby eroding any competitive gain that would have accrued from the devaluation effect. The peg has also led to increases in the cost of imported consumer goods. It is also sobering that our neighbors, particularly Thailand, Philippines and Korea, avoided pursuing destructive policies of this nature and are now better placed for a recovery, This ill-conceived policy, like many other policies pursued by the government is inflicting costs that have yet to be calculated.
The Bailouts –Much has been written about this sorry aspect of policy pushed relentlessly by the Prime Minister and the Minister for Finance. The blatant abuse of national resources continues unabated. Full disclosure has not taken place. I ask that the government come clean.
It may be recalled that earlier this week, when I spoke in the debate
on the White Paper, I referred to the size and nature of Non Performing
Loans. I feel I am somewhat vindicated by the fact that Danaharta has admitted
in a statement that these will indeed increase even using the six-month
yardstick. This goes to show that the policy of bailouts is a failure.
The billions doled out appear to be disappearing into a sinkhole and will
not have any real impact on the health of the financial and banking system.
Bailouts are palliatives and do not offer a cure. Returning the system
to health will demand swallowing the bitter pill of allowing corporate
failures, holding to account those who indulged in gross corporate mismanagement,
and, if need be prosecution of those who abused positions of trust and
betrayed fiduciary responsibilities.
Monetary & Fiscal Policies There may well be no alternatives to loose fiscal policies to provide economic stimulus. However it is legitimate to question the composition of that package. Why is the country building a RM 200 million palace for the Prime Minister in the midst of a recession? Why are we spending millions on a private jet for the Prime Minister? Why is the Bakun Dam to be resuscitated? Why is a second East-West highway being built? Why were the funds for low cost housing scaled back? Why were funds cut back for scholarships and the universities? Why was the allocation for drugs and medicines in the stretched medical services cutback in the 1999 budget? Why were resources not made available for relief to laid off workers? And more pointedly why are the resources earmarked for hard-hit pig farmers so dismally low? It is most telling that the public are being asked to aid pig farmers through donations and charity collections. The list of questions is endless but the responses provided are deafening in their silence.
The fiscal priorities and policies being pursued by this government are nothing but callous and border on the obscene. The working people are being asked to shoulder burdens and to sacrifice while the rich and the well connected are engaged in a frenzy to divert public resources for their own ends. Is this the new Barisan vision of a just and fair society.? The people demand answers and if they do not receive these, they, the people will give a resounding and loud answer through the ballot box.
Mr.Speaker, overcoming the national crisis presents Malaysia with its greatest challenge. This crisis, unlike other crises, is unique in that it threatens the integrity of the Malaysian nation. It threatens to tear apart all that we have achieved since we emerged as an independent nation some four decades again. It demands the wholehearted support of every loyal and patriotic Malaysian, irrespective of race creed or political persuasion. Slogans and clichés are no longer sufficient. There is a new spirit, a new awakening – reformasi is just a symbol of that awakening and realization that a renewal will demand change, a questioning of how we conduct ourselves as a nation.
The leadership on the opposite benches must come to terms with the new realities. I believe, as do millions of our countrymen, that we as a nation are capable of meeting the challenge of change. The Deputy Prime Minister in his address to this House acknowledged earlier this week that unconventional methods were required. I urge him to take the further step of translating those sentiments into deeds – deeds that lead to real change in the governance of this country. The first step on that road is the re-establishment of credibility, transparency and an open acknowledgment that there will not be a recovery from our self-inflicted wounds until and unless the governed are treated with respect and their rights not trampled upon by an oligarchy. Without restoration of confidence, there will be no recovery. Confidence will only return if there is credibility. Credibility is therefore the key.
If the Barisan Nasional truly wishes to exercise moral leadership, it
must implement policies that are based on a national consensus. I urge
that in the national interest there should be an All-Party Convention
to hammer out a covenant that meets the people’s aspirations. That covenant
will need to include:
For the immediate, the government must reconsider the crippling and mindless economic policies that it is currently following. Bailouts must stop. Corporate entities in trouble must be afforded the protection of US Chapter 11 laws to work out their financial problems. Public expenditures must be redirected to aid recovery and not be squandered on lavish palaces and grandiose mega projects that got us into the very problems we are in. Unpeg the ringgit and allow our manufacturers and exporters to reap the benefits of an exchange rate that is competitive. Replace capital controls that are a shackle on the movement of long term funds. Put in place a system of taxes on volatile short -term capital movements. Restructure the financial system with the injection of new equity capital – not more debt. Hold corporate managers accountable for their management.
What I have outlined is not based on partisan rhetoric. It represents a genuine attempt to lay out an agenda that the people desire. If there is to be a New Malaysia, a Malaysia that has the respect of the world as progressive, committed to basic values, and a model, then we must first sweep away the debris and clean house. Yes, change will demand sacrifice, and some pain, but that is a small price to pay. Malaysians are willing to pay that price. The question is : Is the Barisan ready ?