[ Laman Ehwal Semasa ReformIS ]
Date: 27 Aug 1999
Time: 00:29:28
Remote User: -
Malaysia economy still vulnerable despite rebound: Mahathir
KUALA LUMPUR, Aug 27 (AFP) - The Malaysia economy is still vulnerable to hidden risks despite having rebounded from a recession, Prime Minister Mahathir Mohamad warned Friday.
Mahathir, who has been in power for 18 years, warned Malaysians against being too confident of a recovery.
"I worry because over-optimism breeds complacency at a time when we need dedication, commitment and perseverance," he was reported as saying by the official Bernama news agency at an economic dialogue.
"We have emerged from the woods but we are not yet out of the woods," he said. "So long as flaws in the international monetary system are not corrected, small nations are like little boats in a turbulent sea and are therefore vulnerable."
The central bank Wednesday declared the recession over after the economy emerged from five consecutive quarters of contraction to expand 4.1 percent year-on in the three months to June.
While acknowledging that Malaysia had "come a long way," the premier said the recovery process had been slow and painful.
"The fixed exchange rate and selective capital controls have helped to provide a conducive environment to kick-start the economy and restructure the banking system," he said.
"We will no doubt see modest growth this year, but flaws will remain." The government was realistic not to expect any "quick fixes" to the economic crisis but there was still much to do in terms of corporate restructuring, he added.
Mahathir called for reforms in the international monetary system to be speeded up as Malaysia "cannot return to that imperfect system."
Malaysia still believes in free markets despite its imposition of capital curbs but the premier reiterated that the system had been abused by currency traders and short-term capitalists.
"We subscribed to the free market because of the results it promised. Now we see that not only are the promised results not achieved, but whatever little that had been achieved had been systematically destroyed by the same free market system," he said.
"As a doctor, I have been taught to eliminate the cause in order to cure the patient. By preventing Malaysian currency in whatever form from falling into the hands of currency traders, deliberate manipulation of our exchange rates has become impossible.
"The government regained its right to determine the exchange rate while stock market manipulators were deprived of access to stocks they wished to short sell. That stopped manipulation of the stock exchange in order to, intentionally or not, bankrupt the banks, Malaysian businesses and finally the government," he added.
Mahathir blamed foreign currency speculators for sparking Asia's financial turmoil, and imposed the controls as a bulwark last year when the Malaysian economy plunged into its first recession in 13 years.
The government now hopes for a 1.0 percent growth this year and 5.0 percent in 2000.