I would urge the government to take painful decisions to arrest economic overheating, promote structural changes and most important of all, avoid massive self-inflicted wounds whether on the economy, currency or stock market.
It is no exaggeration to say that the reversal of earlier policies on both the stockmarket and the economy announced by the Prime Minister last night was his first announcement since his return from his two-month leave which had been well-received by both local and international investors.
The explanation by the Deputy Prime Minister, Datuk Seri Anwar Ibrahim that there is no need for the week-long measures to curb trading on the 100 components of the Kuala Lumpur Stock Exchange Composite Index and the ban on scrip borrowing because the government had been successful to curb share manipulation and short selling is not convincing at all.
In fact, these very measures had been among the latest government moves which had deepened and aggravated a serious crisis of investor confidence, which has not been fully recovered despite the U-turn in the government policies on the stockmarket and the economy announced last night.
The Kuala Lumpur stock exchange would have lost some RM550 billion in capitalisation when it fell from 751.4 to 731.1 points yesterday, reaching at one time the all-time low of 675.1 points on the KLSE composite index, despite the announcement of a RM60 billion fund by the Prime Minister to prop up the stock market.
How much of this RM550 billion loss in the value in the KLSE and 14 per cent of the country�s wealth was avoidable and the result of the government�s self-inflicted wounds as a result of ill-advised measures and positions on the stockmarket and the economy, primarily in driving away investor confidence, not only short-term but even more serious, for the long-term?
Malaysia should try to learn from the expensive lessons of the recent economic crisis, in particular in ensuring that there is greater room for public debate about the various alternative policies and options open to the country to address the twin currency and stock market crisis, instead of creating a very intimidating xenophobic atmosphere where dissenting views are equated with being "anti-national", "traitors" and attracting the threat of the use of the Internal Security Act powers of detention without trial.
Many local economists for instance do not see much evidence that the recent financial and monetary crisis in Southeast Asia have been manipulated by Western powers, in particular George Soros, and would have advocated more attention on the problems of the real economy such as prudent fiscal policies as well as greater government accountability by dropping economically indefensible mega-projects. However, the xenophobic climate that was created silenced most of these voices because of the fear of being branded as stooges and pawns of the West in general and George Soros in particular.
This must also be a lesson that in the age of Information Technology where the world is borderless, pre-IT measures like the Internal Security Act is not only not relevant, but could become a hindrance to economic recovery.
Although the new policy changes on the stockmarket and the economy announced yesterday are welcome, the fact that it was announced after the UMNO Supreme Council meeting rather than the Cabinet meeting held one day earlier is not a factor which would contribute to confidence-building � as it highlights the marginalisation of the entire Cabinet process and the Finance Ministry and the danger of sudden policy changes which had been one main cause of crisis of investor confidence in Malaysia.
In his announcement yesterday, Mahathir showed considerable displeasure in having to face up to the real economic issues confronting the country and having to announce the delay of several mega projects, which might be the reason why he shocked everyone in his UMNO Presidential Address this morning by not saying a single word on the economic and stock market crisis, which was the single item topmost in the minds not only of all UMNO delegates, but also all Malaysians who followed his speech through live telecast.
Although Mahathir had announced the delay rather than the scrapping of mega-projects, the government should take the opportunity of the dispute between Ekran Bhd. and ABB-CPBO consortium over the RM13.6 billion Bakun hydroelectric dam project, with Bakun Hydro-Electric Corp. Bhd. (BHECB) announcing yesterday that it had dismissed ABB as its main contractors, to seriously consider the scrapping of the highly controversial Bakun dam project � because of its financial, economic, technical and ecological viability and feasibility. As substitute, the government should build a series of small hydroelectric dam projects in Sarawak which would not create such a great financial burden and pose so serious ecological problems both to the ecosystem as well as the affected indigenous people in the area.
(5/9/97)