Call on government to start lifting  capital controls to restore international confidence and speed up Malaysia’s economic recovery

(Penang, Saturday): The DAP’s nation-wide "Justice For All" campaign is not just about the injustice suffered by DAP Deputy Secretary-General and MP for Kota Melaka, Lim Guan Eng who has been jailed in the Kajang Prison in the past five months for defending the honour, human rights and women’s rights of an underaged 15-year-old girl and victim of statutory rape or about the "black eye" of former Deputy Prime Minister, Datuk Seri Anwar Ibrahim while under police custody in the innermost sanctum of the police high command at Bukit Aman, Kuala Lumpur.

It is about justice in the widest meaning of the term,  embracing political, economic, educational, social, cultural, religious, human rights for the 22 million Malaysians.

The "Justice For All" campaign, which would be conducted for the next 12 months, is being launched in every state as well as in every Parliamentary and state assembly constituency.

Penang is the first state where the "Justice For All" campaign is being launched at the state constituency, beginning with the Kampong Kolam state constituency today.

There can be no economic justice if the worst economic crisis in the nation’s history persists, together with economic mismanagement, corruption and abuses of power.

After nearly five months of capital controls imposed on Sept. 1, the government should start lifting capital controls to restore international confidence and speed up Malaysia’s economic recovery.

The government has said that as a result of the capital controls imposed on Sept. 1, the economic crisis has bottomed out and the country is on the way towards economic recovery.

But this is something which the Prime Minister and Cabinet Ministers have been saying for more than a year, and Malaysians can never forget the unforgettable forecast made by the MCA President and the Transport Minister, Datuk Seri Dr. Ling Liong Sik early last year of an economic recovery within three months!

But last year is probably going to be the worst economic year in Malaysian history - with the economy shrinking from six to eight per cent.

Officially, the government’s forecast is that Malaysia’s Gross Domestic Product (GDP) will suffer a negative growth of 4.8 per cent for 1998, although the Prime Minister, Datuk Seri Dr. Mahathir Mohamad has gone on public record as saying that Malaysia’s GDP last year will see a negative growth of over six per cent.

The International Monetary Fund (IMF) in its latest Interim Assessment of the World Economic Outlook last month was more pessimistic, forecasting that Malaysia GDP for last year will be a negative growth of -7.5 per cent with Malaysia continuing in recession this year with a -2 per cent negative growth for the GDP for this year.

The Prime Minister claims that the capital controls imposed by the government on Sept. 1 was the main cause for the signs of economic recovery in Malaysia.  This contention is debatable however, as other countries where economic recovery may be faster, like Thailand and South Korea, have not imposed capital controls.

The efficacy of capital controls introduced on Sept.1 remains a matter of controversy as many economists are of the view that  there would have been recovery of growth in the country regardless capital controls had been imposed or not.

One important element of the government’s economic strategy is to blame foreign speculators, foreign media and foreign powers of a conspiracy against Malaysia’s economic recovery.

The Second Finance Minister, Datuk Mustapha Mohamed said in Jeli at his  Hari Raya Aidilfritri open house that one-sided foreign media reports on Malaysia is "the biggest obstacle" for the country to achieve economic recovery.

Mustapha had just returned from the Asia-Europe Finance Ministers’ Meeting in Frankfurt which he said was a success for Malaysia, as he had helped  world financial ministers and corporate leaders to clear some misconceptions about Malaysia in his meeting with them.

What surprises me is why  Mustapha had not  responded in Frankfurt  to very critical comments which the International Monetary Fund had made about Malaysia at the Asia-Europe Finance Ministers Meeting.

A background paper entitled "Economic and Financial Situation in Asia: Latest Developments" presented by the Managing Director of the International Monetary Fund, Michel Camdessus to the Asia-Europe Finance Ministers Meeting, had very unflattering reference to Malaysia, when it said:
 

"In Malaysia, economic activity remains weak, and the prospects for sustained medium-term recovery are more uncertain than the other East Asian countries in crisis. The IMF's forecasts of an 8 percent decline in GDP in 1998 and 2 percent decline in 1999 indicate that the policy stimulus of July 1998 has yet to take effect. Policy is becoming more expansionary, as elsewhere in the crisis countries, through the larger fiscal deficit planned for 1999 and through an easing in monetary policy. At the same time, some steps were taken to strengthen the financial and corporate sectors. However the effect of these measures on medium-term growth prospects was jeopardized by the imposition of capital and exchange controls and by the relaxation of some prudential standards and introduction of directed lending. While capital outflows have been stemmed and external reserves have risen, investor confidence has been damaged by the capital controls, and some official sources of external
finance have dried up. Neither source is likely to recover until the overall stance of policies is modified."

It would appear that Mustapha had failed to defend the honour of Malaysia at the Asia-Europe Finance Ministers Meeting in Frankfurt a week ago when the  management of the Malaysian economy was questioned by the IMF.

Mustapha should explain why he had not responded to the IMF’s unflattering reference to Malaysia at the  Asia-Europe Finance Ministers Meeting in Frankfurt. 


Be that as it may, I call on Mahathir  to start lifting  capital controls to restore international confidence and speed up Malaysia’s economic recovery.

(23/1/99)