Oleh/By : DATO SERI DR MAHATHIR BIN MOHAMAD
Tempat/Venue : NEW YORK, USA
Tarikh/Date : 03-02-2002
Tajuk/Title : ENSURING CAPITAL FLOWS IN A
RISK AVERSE ENVIRONMENT
Versi : ENGLISH
Penyampai : PM
1. There is a belief that capital likes risks and
that it thrives only in situations of uncertainty.
Therefore when the risks are partially or totally
removed, then capital would stay away, would not be
invested.
2. Thus when Malaysia removed the risks of exchange
rate fluctuations there were dire predictions that
capital would not only avoid Malaysia but would leave
the country.
3. As you know nothing of that sort happened in
Malaysia when we fixed the exchange rate of the Ringgit
and prevented excessive manipulation of the stock
market by big foreign investors.
4. Business including exports picked up quickly and
the KL Composite Index rose from 262 to nearly 900,
reducing non-performing loans, increasing market
capitalisation and relieving the pressure on Malaysian
businesses. Of course there is no more cost due to
hedging against currency fluctuation, nor did the
fluctuation affect budgeted performance.
5. Speculators and manipulators do not like the
absence of uncertainty but serious businessmen and
serious investors love it. There is still some risks
involved because while the rate against the U.S. dollar
may be fixed, rates against other currencies cannot be
fixed simultaneously.
6. Capital flow in and out of the share market cannot
be controlled indefinitely. When foreigners were
allowed to take out their investments in the share
market, capital did not suddenly flow out. After all
the restriction on taking out capital after dumping
shares had resulted in almost 200% capital appreciation
during the one year restriction was enforced. The
investors so enjoyed the gains they made that even
after restrictions were lifted they did not sell their
shares. Perhaps they expected the shares to appreciate
further. Today the KLCI is well above the disaster
levels of the currency crisis.
7. Capital flows help the economy of a country only
when the flows are inwards. When capital is suddenly
pulled out for whatever reason, the effect on a
country's economy can be disastrous. Admittedly
capital will not flow in if it cannot get free exit.
But speculative or manipulated capital flows benefit
only the capitalists. Countries do not exist solely to
enrich investors. The Governments of countries have a
duty to their citizens, their workers and their local
businesses. There is a peculiar assumption that the
world must be made the cash cow of the investors
exclusively, whatever the cost. This is what free
trade and globalisation seems to be about. There is no
reason why the countries and the people who suffer
should subscribe to this assumption.
8. Capital still flows in Malaysia's risk averse
environment, i.e. serious capital intent upon making
long-term investments for the production of goods and
services. The flow may be smaller but it is much less
disruptive. The economy benefits steadily from this
serious flow even when it flows out. There are no
sudden twists and turns, no distortions. Dull and
unexciting perhaps, but good for developing countries
especially.
9. Government intervention is a necessary part of
business, even in a free trade environment. Why is big
international business pressuring their government to
force through globalisation? If government should not
intervene then the free traders should go about
establishing globalisation purely by their own efforts.
But they demand international agreements, a rule-based
trading system, and government enforcement of these
treaties and laws. Globalisation actually involves
more government intervention in business than less,
i.e. the powerful governments.
10. Of course when disaster strikes them and their
countries they demand that the government interfere,
bail them out. If they say that business does better
in an environment of risk, then they should accept all
risks. We were told that we should accept risks, they
are good for us. But we see that when the risk
translates into business disaster, the advocates of
risk taking are quick to ask government to bail them
out.
11. Malaysia finds no difficulty in managing capital
flows of the serious kind in our risk minimal
environment. Malaysia's economy has suffered from the
economic downturn in the U.S. simply because the U.S.
is our biggest trading partner. Of course after 11th
Sept. things got worse but Malaysia has suffered less
than other countries exposed to financial and market
risks. We will survive and when the world learns how
to manage terrorists, we expect to recover faster than
others, God willing.
12. In the meantime we are injecting government funds,
stimulating local investments and facilitating the
growth of those areas which are still capable of
growing. We have been extremely careful about managing
our finances and we have minimal need to borrow from
abroad. Having a saving rate of 40% of the GDP helps.
We think managing capital flows in a risk averse
environment is entirely possible and easier than in a
chaotic risky environment.
Sumber : Pejabat Perdana Menteri
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