The proper place to debate whether there should be a re-pegging of the currency is in Parliament in a specially focussed debate on the RM3 billion economic stimulus package, especially as the Kuala Lumpur Composite Index (KLCI), the stock market’s benchmark index, has broken through immediate support levels to close at 577.44 points at the end of Friday’s trading.
This also constitutes a 91.83-point or 13.7% plunge in the KLCI from 669.27 points in the eleven days since the announcement n of the RM3 billion economic stimulus package by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad on March 27, 2001.
Parliament should consider the option of re-pegging the ringgit as the weakening of the Japanese yen will make Malaysian exports more competitive.
Parliament will be completely irrelevant if it could not focus on the looming economic crisis to specially debate on the RM3 billion economic stimulus package, which had been completely ignored by Parliament in the two recent policy debates on the Royal Address and the Third Outline Perspective Plan 2001-2010.
Parliament and the country must realise that there is no way the country could avoid the new economic crisis.
The question then is: how can its effects be minimized and the damage to the long-term health of the economy lessened?
The Government’s policy options are clearly limited. Business as usual is untenable. The Prime Minister, Datuk Seri Dr. Mahathir Mohamad needs to awaken to the realty that there is no painless way out from the swamp that he has led the economy into. He has to bite the bullet and accept that growth can no longer be the central goal of economic policy.
What is fundamentally important for the near term is that the economy
be restructured and put back on a sound path of sustainable growth. The
economic fundamentals must be restored. In the near term, many of the failed
policies now in place have to be abandoned. These include:
Beyond these key policy reversals, the Government has to take a
number of confidence-building measures which would demand a real effort
to curb corruption, enforcement of the regulatory and supervisory rules
in respect of corporate governance, restoration of confidence in the judiciary;
a more open environment in which policy can be debated and dissent permitted.
These and other confidence building measures would go a long way in creating
an investment climate conducive to the flows of FDI and a reversal in capital
flight.
In addition, it is imperative that the Government follow macro-economic policies that correct the many distortions that have been introduced over the past several years. Monetary policy must be freed to take account of market circumstances. The banking system must be allowed to function without directives as to who and for what purposes it must lend.
To meet the immediate situation of layoffs necessitated by the export slow-down, the Government needs to work with the private sector to establish a safety-net programme for workers that are laid off. At the same time, fiscal relief should be provided to smallholders.
It is also imperative that some part of the resources, freed up by a freeze on mega projects be channeled into up grading rapidly the basic infrastructure in the Kampong Medans - paving of roads, provision of water supplies, cleansing services etc. These are not only desirable socially, but are urgently needed to arrest the further marginalization of the “working poor” and poor.
The need for poverty programmes was never greater. The needs of a million-plus Malaysians subsisting on RM 3.80 a day cannot be ignored. Expenditure on projects of this nature will arrest the rising level of tensions and act as a check against the eruption of violence.
The nation is on the edge of an economic crisis. It cannot drift along. Business as usual is not an option. If unchanged, present policies are likely to lead the nation down a slippery path of unmitigated disaster. The time to take corrective measures is now.
(8/4/2001)