(Ipoh, Wednesday): I welcome the statement by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim that the government may revise its gross domestic growth rate forecast for this year.
The refusal of the government to be realistic about the economic growth rate for this year has been seen by investors that the government has not emerged fully from the “denial syndrome”, which does not contribute to efforts at confidence-restoration..
Two weeks ago, the Singapore government chopped its forecast for economic growth this year to between 2.5% and 4.5% from between 5% and 7% previously. In actual fact, economists are even predicting a 1% GDP growth for Singapore for 1998
A day earlier, the Thai government and the International Monetary Fund offered similarly bad news, saying they expect Thailand’s economy to shrink 3% to 3.5% this year. In November, the government had forecast zero to 1% growth.
Indonesia and South Korea have also seen drastic forecast revisions by private economists, with predictions of a contraction of 5% in Indonesia compared with a January forecast of zero growth and a contraction of 2.9% in South Korea, revised from a 1.2% growth forecast in January.
What was surprising was that during that week, the executive director of the National Economic Action Council (NEAC), Tun Daim Zainuddin had defended the 4-5% economic growth forecast for 1998 in the second 1998 budget of the Finance Minister, Datuk Seri Anwar Ibrahim on December 5.
With the general drastic downward revision of economic growth rates in the region, if Malaysia achieves the 4-5% forecast economic growth this year, then Malaysia will be heading to become the country with the fastest rate of growth in the Asia-Pacific region outside China.
Is this the case? The Malaysian government should be aware that two weeks after Anwar had revised downwards the original forecast of 7% GDP growth this year in the first 1998 Budget on Oct. 17 to 4-5% growth in the second 1998 Budget on December 5, the International Monetary Fund had given a much lower forecast of 2.5% GDP growth for Malaysia this year in its Interim World Economic Outlook.
For the past two-and-a-half months, I have been asking the government to respond to the IMF’s lower forecast for GDP growth for Malaysia this year, but it was only yesterday that there is the first response. There are in fact economists who are more pessimistic and forecast that the country’s GDP growth for this year could be as low as one percent or even zero growth, which would still be better than 1985 when it was -1% growth.
We should note how swiftly the global outlook had changed in the past few months of the economic crisis, just by looking at the IMF’s various projections and revisions for output growth for this year, in its May and October 1997 editions of World Economic Outlook and the IMF Interim World Economic Outlook released in Washington on December 19, 1997:
It is because of such forecast that in a recent survey, some 84% of top executives in Asia anticipate the market crisis to worsen, with 80% expecting it to taper off in two to three years. About 60% of them attribute the crisis to regional governments and their policies.
The survey was conducted during The Presidents Forum, a three-day meeting of 140 top executives from Asia, held in Bali, Indonesia between Feb. 20 and 22.
Until Anwar’s statement yesterday, the Malaysian government stands out as the only body in Asia highly optimistic about the country’s economic growth projection to the extent of forecasting that Malaysia would have the fastest economic growth this year in Asia-Pacific outside China, which is unlikely to contribute to confidence-restoration in the Malaysian economy.
I call on the government to give its latest projection of the country’s GDP growth for this year in the Royal Address to be delivered by the Yang di Pertuan Agong when opening Parliament on March 23, to send out a clear message that the government has shed more of its denial syndrome.
The Prime Minister, Datuk Seri Dr. Mahathir Mohamad, the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim and the Economic Adviser to Government as well as Executive Director to the National Economic Action Council (NEAC), Tun Daim Zainuddin, have repeatedly given assurances to the Malaysian people and investors that there would be no bail-out of troubled companies and individuals at public expense, but the five bail-outs underway are clear breaches of such solemn public assurances and undertakings.
These bail-outs are also in clear breach of the announcement by Anwar in December on a freeze on all corporate restructuring, new company listings and rights issue.
It is most disturbing that Employees Provident Fund (EPF) monies would be used in three of these five bail-outs.
For instance, it appears set that EPF would be the saviour of the debt-laden UEM in buying a 20 per cent stake in Projek Lebuhraya Utara-Selatan (PLUS), the toll operator of the North-South Expressway, for not less than 1.5 billion Malaysian ringgit cash from UEM.
UEM’s heavy debt arose following the controversial RM2.34 billion purchase of a 32.6 per cent stake in its parent company Renong Bhd last November, where it borrowed heavily to finance the Renong purchase. At prevailing interest rates of between 12 and 15 per cent, its interest servicing would amount to at least RM324 million annually.
It is reported today that Rashid Hussain Bhd (RHB) would buy Sime Bank for RM852.24 million, covering both the 60.35% stake of Sime Darby and the entire 30.01% stake belonging to KUB Malaysia Bhd.
KUB Bhd is a listed investment-holding company, whose shareholders are largely UMNO members.
It has been reported that EPF would fund RHB in the bailouts of Sime Bank and KUB, with RHB issuing new shares to the Employees Provident Fund in exchange for cash to finance the acquisition of Sime Bank.
Last week, Bank Negara also revealed that Malaysia’s second largest banking group, Bank Bumiputra is again in trouble for the third time in 12 years, and could need as much as RM750 million in fresh capital in a worst-case scenario - despite the RM2.5 billion bailout by Petronas in 1986 and a RM1 billion bail-out at taxpayers’ expense in 1989. Is there to be no end, aswell as no accountability, in the colossal losses of public funds in the three bail-outs of Bank Bumiputra in 12 years?
The latest controversial bail-out is that of the debt-ridden companies of Mirzan Mahathir and the listed company Konsortium Perkapalan Bhd. by Petronas which would buy all of Mirzan’s shipping operations and liquefied-natural gas transportation interests.
Anwar said yesterday that he was prepared to come out with a full explanation on the Konsortium Perkapalan Bhd rescue if clarification was needed.
It is more than needed in order to address the latest blow to confidence arising from the failure of the government to honour its pledge that there would be no bail-outs or corporate restructurings, and I call on Anwar to issue a full explanation of the five bail-outs concerned.
(11/3/98)