(Petaling Jaya, Sunday): The Prime Minister’s hint in Kota Kinabalu yesterday that the government might have to adopt "shocking" measures to overcome the economic problems is most shocking and strengthens the DAP call for an emergency meeting of Parliament in the runaway deterioration of the 14-month economic crisis.
Mahathir told the crowd at the Likas Sports Complex in Kota Kinabalu during his pre-election road-show to Sabah: "We may be taking a number of measures which may shock us. We may feel frightened or doubtful as to whether they will benefit us and whether they will help overcome our economic problems.
"But believe me, every time we act, we think about it deeply and ensure the approach is only for the people’s benefit."
These statements are not assuring at all, as in the words of Mahathir, for the past 14 months, every time the government had acted, it had thought about it deeply to ensure that it was only for the people’s benefit, but the economic crisis have escalated from the original government forecast of 5% to 7% GDP growth for this year, to 4%-5% growth, then 2%-3% growth and last month to a contraction of -1% to -2% for 1998 - while economists and financial analsysts are projecting -5% GDP contraction for this year.
Last Thursday, the Kuala Lumpur Stock Exchange (KLSE) Composite Index (CI) was the biggest loser in Asia when it fell by 4.52% or 15.46 points to 326.73 points as compared to the end of the trading the previous day.
Although on Friday, the KLSE CI ended 1.25 points higher at the end of trading at 327.98, at 10 a.m. in the morning, it plunged to 316.55 points - the lowest in the last 10 years.
As a result of the unprecedented plunge of the KLSE and the faltering Malaysian ringgit, with no sign of a recovery, economic analysts are talking about the KLSe CI falling to between 280 and 300 points in the near to medium term, something which was completely unthinkable three weeks ago when the National Economic Recovery Plan (NERP) was announced with great fanfare by Tun Daim Zainuddin, the Special Functions Minister for Economic Affairs on July 23.
During the last recession in the 80s, the stock market's composition index fell to 170 points in June 1986. Can the KLSE CI fall below the 170-point level in the current economic crisis, which has not seen the worst yet?
There is no doubt that some investors were now getting out of the market in a hurry to protect against an erosion of the Malaysian ringgit, as there are analysts who say that the market has already discounted the Malaysian ringgit falling to 4.50 or 5 to the U.S. dollar.
Stanley Morgan Dean Witter Research, which was quoted favourably by the National Economic Action Council (NEAC) when it defended its NERP proposals, in its exchange rate forecast projections last week anticipated the Malaysian ringgit to weaken to RM4.75 to the US dollar at the end of 1998 and RM5.30 to the US dollar at the end of 1999.
Although the NERP, dubbed as the economic salvation plan, was announced three weeks ago on July 23, it had not only failed to restore the economy, it had failed to prevent the economy from a runaway worsening of the economic crisis, as evidenced by the drop of more than 100 points of the KLSE CI, the continued faltering of the Malaysian ringgit and the forced cancellation of the trips overseas by the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim and Daim Zainuddin to go overseas to raise RM8.4 billion ringgit bonds from international financial institutions as a result of a three-notch downgrading of the sovereign credit rating by Moody's International Investors Inc, Standard and Poor and Thomson Bankwatch.
Apart from the internal factors resulting in the failure in the confidence-restoration efforts of the government, there are also very potent external factors.
I am not talking about Soros and an international Jewish conspiracy, but the increasing concerns that the Japanese economy is in worse shape than earlier feared, as there is very little market confidence in the new Japanese Prime Minister Keizo Obuchi as the right man to tackle Japan's problems, especially its critically-ill financial sector.
If the Japanese yen fall to 160 or even lower against the US dollar, it will cause pressures which might make it impossible for the Chinese renmimbi to resist a devaluation, which would spark off a second round of the Asian economic turmoils, making the recession of the eighties a child-play.
When Mahathir talked about "shocking" measures that have to be taken in the economic crisis, has the government come around to agree with these bleak and gloomy economic prospects for the short and medium-term?
If so, the government should be more frank and truthful by releasing timely economic and financial data to the people, a recommendation made by the NERP but which has not been acted upon - as the government has not yet released data and statistics of the Malaysian economic performance for the Second Quarter when other countries have already done so.
Mahathir rightly said that in any tough measures, the government needs the people’s unwavering support and confidence. But the people can only give the government unwavering support and confidence if the goverment reciprocates by taking the people into its full confidence shares all the pertinent information about the economic crisis with the people, instead of keeping them in the dark about the government’s real plans and intentions.
For instance, when Mahathir talks about "measures which may shock us", who were he referring as the people who will be "shocked" - is it the ordinary people at large or those handful whose squandering ways with mega-loans have landed not only themselves in trouble, but the whole economy and the innocent Malaysian population as well?
This is why the DAP calls for the convening of an emergency meeting of Parliament to fully prepare the country for the very tough times in the coming months and years as Parliament cannot wait for another two months before it meets again.
I hope the Prime Minister, Datuk Seri Dr. Mahathir Mohamad would agree to the establishment of an all-party Parliamentary Committee on the Economic Crisis to monitor the progress of the NERP to effect an economic turnaround and recovery, as well as to provide a regular forum for MPs to communicate to the authorities the views, concerns and aspirations of the people about the economic crisis so that the government could have "unwavering support and confidence" from the people when tough and shocking measures have to be taken to deal with the worst economic crisis in the nation's history.
(16/8/98)