[asia-apec 605] Interview with Mahathir about recent currency policy (part 3 of 3)

[PAN Asia Pacific]

Interview (cont'd)

Q: Despite the evidence we see today, the IMF and other international
                    agencies are not very keen to come in and stabilise the economy. Despite
                    the fact that that is is actually their mandate. Can Datuk Seri enlighthen us
                    what is the rationale that they are not helping us through. 

                    Dr M: They see in our trouble a means to force us to accept certain
                    regimes. They want us to have reforms, meaning to say we should open
                    our market wide for foreign companies to come in and do business
                    without any conditions whatsoever. Their help is always based on that...
                    we will give you the money provided you open up the economy. And
                    when we open up our economy, we will of course lose control of our
                    economy, all our companies, all our banks and all our industries will
                    belong to foreigners. 

                    In Malaysia, in particular, we are in the process of restructuring the
                    economy, we can't do that because they will object to any conditions
                    being imposed upon them. So the IMF should in fact be helping
                    developing countries which are in financial trouble but it wants to use the
                    financial trouble in other countries to enable the giant companies from the
                    rich countries to come in and take over the economy. That seems to me
                    to be their objectives rather than helping. Of course they say reforms, but
                    reforms (to) them means something beneficial to the developed countries.

                    In fact among the speculators they actually say openly," we want to see
                    blood. In others words we want to see killings. You know these
                    companies must be killed, that is a measure of how serious you are about
                    reforms. I can't understand that because we have seen blood enough. In
                    some countries, millions of workers are unemployed now and they have
                    no food, no medicine, no milk for their children and all thess people can
                    think of is that this is the price we have to pay for the reforms and
                    reforms are good for you. 

                    Q: Datuk Seri, in this regard do you see that this move taken by us can
                    put a spanner in the works of the speculators? 

                    Dr M: We think so. That is the purpose in fact. We have to take the
                    speculators out of the currency trade involving the ringgit. Because of
                    course currencies need to be changed in order to trade to finance trade.
                    That we can do without the speculators. We can do even without the
                    hedge funds. 

                    Q: Datuk Seri, do you think other developing economies will come
                    forward and do the same thing we have done here? 

                    Dr M: Well there are signs that people are losing faith in the operations
                    of the free market. That's why Hong Kong went in in order to curb the
                    speculators. Now Taiwan has given warning to (financial speculator
                    George Soros) not to come to Taiwan and China has refused to allow its
                    currency to be freely convertable. Now Russia has second thoughts, they
                    may even go back to communism. Of course we have seen what Chile
                    and Slovenia have done. People can realy find that when the system is
                    abused and they suffer,then they are prepared to change. But some
                    countries apparenly benefit from the abuses. 

                    Q: There is talk that following the implementation of these measures,
                    deposits, people's savings in banks will be frozen. Is there any truth in
                    this? 

                    Dr M: There is no reason. There is no reason. The internal economy is
                    not touched in this matter.The domestic economy will become stronger,
                    traders can trade without being disturbed by the fall in the value of the
                    ringgit and share prices. The domestic financial system will become
                    stronger and there is no reason for us to freeze fixed deposits for
                    instance. The money in the bank is safe and will not be touched. 

                    Q: Our people going for the Umrah in Mecca, usually bring along our
                    ringgit and then go and exchange it there but lately our Malaysian money
                    is not popular in Mecca or in Medina so if we want to perform the haj,
                    they get the ringgit and buy US dollars or Riyal here and they will have no
                    problem in getting the money. 

                    Dr M: There is no problem of accommodation and surely the money
                    they wish to bring will not be a big amount exceeding their needs but if
                    they really need a big amount, we will arrange for them to change ringgit
                    into riyal or pound or any currency they preferred. We can give them. 

                    Q: Is this governed by the regulation that it should not exceed
                    RM10,000? 

                    Dr M: The maximum is RM10,000 but if they have to spend more than
                    that and if they provide the proof there is no reason why we should not
                    consider. 

                    Hence we do not at all have any plans to restrict such trips. It has never
                    crossed the government's mind. 

                    We want our economy to expand and progress and to impose controls
                    which would not benefit the people... surely the government would not
                    want this. It only wants our country and the economy to recover and we
                    are confident that with the various measures in place and that to be
                    further taken, we will ensure that the economy recovered. 

                    Previously we were unable to take the measures. For each time we want
                    our economy to recover, they will hit at our ringgit and shares so that we
                    become poorer.... so poor that we will have to seek IMF help and then
                    we will lose our freedom. 

                    Q: From Jan 1 till June, our economy contracted by 6.8 per cent, how
                    do we explain this to the people as many are not clear as to what this
                    contraction means. 

                    Dr M: If we want to take into account trading and economic activities,
                    we can create wealth through this. But if there is less trade, fewer
                    economic activities, there will be less money. This is what is happening.
                    The question is why is it happening? For instance we are producers of
                    microchips for computers but the demand for this had fallen because the
                    whole of East Asia had become poor, unable to buy computers and so
                    on. In Europe also demand had fallen and America is unable to sell
                    computers to developing countries as they make computers but not all of
                    them are sold in America which has a lot of money and they need to
                    export and their own markets (East Asia) had been destroyed. 

                    For instance we are a market for Boeing aircraft but now we no longer
                    buy the aircraft as tourism has fallen and the need for such planes had
                    fallen and so we are not buying and the US economy will decline and
                    when the economy declines the market for our goods also becomes
                    smaller. 

                    The Japanese market had also declined and so demand for our usual
                    exports to them had fallen and this had resulted in our trading and
                    economic ectivities contracting by 6.8 per cent and not from January to
                    June but in the second quarter (three months) from April to June. From
                    January to March (first quarter, first three months) it contracted by 1.8
                    per cent. 

                    Q: Do you expect measures being taken will lead to a lower contraction
                    of the economy and probably in six months result in a slight economic
                    growth, or at least some growth? 

                    Dr M: I'm confident there would be some growth, because now we are
                    focusing not on export activites but on domestic activities and that is why
                    the government will spur infrastructure projects and the construction
                    industry, which means we will spend a lot of money. The construction
                    industry will generate activities in 140 other related industries such as
                    creation of jobs, demand for building materials and if people have
                    disposable income they will spend and all these will mean economic
                    activities. But we have to remember that if we have money but do not
                    spend, or do not save in banks but keep it at home, the money will be
                    meaningless to the economy. 

                    But if the money is used 10 times daily, it will have the multiplier effect
                    and everytime it is used, there will be people who will have money and
                    the people with money will in turn spend it and make profit and the progit
                    will generate the economy. So in this way we can develop our economy
                    and that is why we would like to see, for example, more houses being
                    built and bought and we find that the market for low-cost housing is still
                    very good, so also medium-cost houses and if traders make profit, even
                    luxury houses can be sold. We like to see our economy revived in this
                    way. 

                    Q: Datuk Seri, do we have any changes to our investment policy? 

                    Dr M: No changes to our investment policy, they will still have the same
                    treatment, privileges, tax-free incentives that we normally give. They will
                    have all those and at the same time they can bring in money and they can
                    take out money what is theirs, if they make a profit. Yes, they can take
                    out their profit, and in order to make a profit they have to produce
                    something which they sell, and we'll benefit from their activity of selling
                    especially if they export, if say they export 10 million dollars of goods,
                    they will bring back that 10 million dollars, their profit maybe one million
                    dollars. That one million dollars, take it and repatriate it to their country
                    we don't mind that, but they have to earn the profit first before they can
                    repatriate, they can't simply take the money here and convert into foreign
                    exchange and then send out. 

                    Q: You have said that the government will spend huge sums of money for
                    infrastructure projects, who will build these projects, will the government
                    reassume the role of implementors or will the government continue to do
                    so via privatization? 

                    Dr M: I always believe that the government is less efficient. That's why
                    we go for privatization and it doesn't matter if the money is from the
                    government or the private sector, what is important is money changing
                    hands. When there are economic activities, money will change hands,
                    whether from the government to the private sector or between the private
                    sector itself or to the workers, suppliers, the transport industry people, all
                    these will happen if we spend money. Government or private sector is
                    not the problem, what is important is that money is moved around and
                    not just being kept idle. 

                    I'm confident that if the value of their shares once again is commensurate
                    with the nett assets and the value of our currency is again stable, the
                    companies will recover, if not fully recover, at least their NPLs will be
                    reduced and they can borrow once more. If they can borrow, they can
                    carry out economic activities and make profits and profitable activities
                    will enable them to repay their loans and in this way, they can be revived.

                    Q: Datuk Seri, there must be a sense of urgency all-round in reviving the
                    economy? 

                    Dr M: Yes, I hope that everybody will understand that time really means
                    money, everybody must work harder than usual, in the government I
                    expect the people to work day and night to help the economy to recover.
                    Ministers have been instructed that they must work day and night, they
                    must go and see what's happening on the ground, not enough by just
                    giving direction, go back and sleep, no way they can work that way now
                    and government officers have been told, everybody has been told that
                    you must work extra hard, because we are facing a very difficult
                    economic situation and the only way we can overcome that is really to
                    work very hard and not allow your kind of easy going way to interfere
                    with the economic recovery in this country. 

                    --Bernama