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Posted Monday, November 23, 1998

MALAYSIA: ISOLATED AND BANKRUPT (WELL, ALMOST....)


"Malaysia is on the brink of bankruptcy. Its central bank will be forced to print money to bail out the country’s financial system. When it does, the Ringgit will be debased. And the regime of Mahathir a/l Mohammad Iskandar Kutty will be deposed" - This is what Independent Strategy, an investment advisory service based in London, is saying to their clients in its latest report - "Malaysia - The arithmetic of bankruptcy".

Easy credits and huge overhang of domestic debt would leave our country with a huge resource gap to fill up to the year 2000, as much as RM50bn according to one estimate. And Bank Negara would have no choice but to start the printing presses.

Banks are now caught between the rock and a very hard place: "Mahathir a/l Mohammad Iskandar Kutty’s regime is now demanding a Soviet-style resurgence of bank lending" Independent Strategy said. However, to the dismay of bankers, these new credits are mainly going to bankrupt creditors and not to productive sectors such as manufacturing and utilities. And judging by the eagerness of our judiciary system to protect these bankrupt creditors, it would take years for the banks and even Danaharta to recover the bad debts- if they were lucky!.

It is now high time for us to acknowledge the severity of our banking problems. The amount of bad debt in the system is actually much higher than what Bank Negara is willing to admit, probably as much as 40% of total loans outstanding!. The recently released NPL figure is grossly misleading. So is the conclusion by Bank Negara that it needs only RM15bn to buy up bad loans. The Bank Negara’s announcement is nothing but an act of sugar coating a stale donut - if you eat it, you would still end up with a bad diarrhea. Or in this case, the ordinary citizens will be the ones to end up with the stomach cramps from having to subsidize the banks. How many times do we have to bail out Bank Bumiputera? Enough is enough!

But, lo and behold, it appears that our new Governor is not finished yet. Today (Friday), he reduces the minimum credit card repayment from 15% to just 5% - more money to punt the stock market, right Governor? What else does he have up his sleeves? Well, to be fair to him, perhaps I shouldn’t be asking the puppet and instead go straight to the Tok
Dalang. So, what else do you have in mind, Tun Daim?

"Mahathir a/l Mohammad Iskandar Kutty’s policy of isolationism, for what used to be Asia’s most internationalized manufacturing economy, represents nothing short of disaster" Independent Strategy said. "It will eventually destroy living standards in a country that has no means of financing a current deficit and so must eliminate it by shrinking domestic purchasing power. And inflation will debase the Ringgit. Capital will flee despite the government’s control." Obviously, our "beloved" Trade Minister, Rafidah Aziz, would vehemently disagree with this and pro-Mahathir a/l Mohammad Iskandar Kutty camp would also argue that so far, no big multinational has pulled out of the country (yet). But then again, the capital controls are only 2 months old...

Is there a happy ending to this so far, doom and gloom predicament? Well, yes and no.... "Luckily, unlike in Indonesia, there is an alternative leadership in the wings, or to be more exact, languishing in jail. Malaysia will rejoin the world under a new, more enlightened leadership. But sadly, not before Malaysia’s people and the economy suffer terribly".

As a nation, we have progressed by leaps and bounds since our independence some 40 years ago primarily by opening up our economy and embracing new technology and ideas. For the Malays like myself, we have shed our "katak di bawah tempurung" mentality and adopted the "Malaysia Boleh" attitude with new found pride and confidence. In the age of globalization and the internet, the stupidest thing for us to do now is to isolate ourselves from the rest of the world.

LET’S VOTE PROGRESS,
NOT REGRESS!!


Email: reformasi-terkini@usa.net