Has government financial adviser Salomon Smith Barney failed in its mission to win over the international rating agencies and remove their "misconceptions" about the Malaysian economy?


Media Statement
by Lim Kit Siang  

(Petaling Jaya, Monday): After the Malaysian Government signed the US$1.35 billion (RM5.13 billion) loan extended by a consortium of 12 foreign banks in the country last Tuesday, the second Finance Minister Datuk Mustapha Mohamed said it sent a strong signal of the foreign banks’ confidence in the country’s future as the terms are equivalent of a AA credit rating, debunking the rating of several rating agencies.

In June last year, international rating firms Moody's Investors Service and Standard and Poor's cut Malaysia's rating to just one notch above junk status, derailing the government’s launch of a global bond issue to fund its economic
revival.

Mustapha said the loan reflected that  the ratings made by some of the rating agencies were not accurate and  proved the  point that Malaysia had been grossly underrated, "deliberately perhaps".

``This vote of confidence in Malaysia is very comforting.''

Two days later,  officials of Standard and Poor said it would not immediately revise its poor rating of "BBB minus" on Malaysia despite  the RM5.13 billion loan from 12 foreign banks.

One Standard and Poor official said: ``We have taken into consideration some of the funding needs of Malaysia. Our outlook on Malaysia is negative.

``Our outlook reflects the higher uncertainty about the direction of the economic policy in this challenging environment. We would review the outlook and the rating if there is credible financial sector reforms.''

One question Malaysians want an answer is whether the government financial adviser Salomon Smith Barney has failed in its mission to win over the international rating agencies and remove their "misconceptions" about the Malaysian economy, as the country has been told that this would be one of the assignments of Saloman Smith Barney which was appointed in September.

(4/1/99)


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