Government spent RM12.5b to resolve 1997/98 financial crisis

KUALA LUMPUR, Oct 13 — The government spent RM12.5 billion to revive the economy through Danaharta during the financial crisis 10 years ago, Second Finance Minister Tan Sri Nor Mohamed Yakcop told the Dewan Rakyat today.

He said the cost was low, being three per cent of the gross domestic product, compared to 52.3 per cent in Indonesia, 23.1 per cent in South Korea and 34.8 per cent in Thailand.

Nor Mohamed said the government also recovered the RM7 billion allocated under Danamodal to recapitalise the banks affected.

He said this in reply to written questions by Lim Guan Eng (DAP-Bagan) on the impact of the 1997/1998 financial crisis, the parties affected and the measures taken.

The third meeting of the first session of the 12th Parliament started today.

Nor Mohamed said no “unseen hand” appeared every 10 years to disrupt the national economic and financial system.

The global financial crisis resulted from weaknesses in the liberal capitalist system dominated by the United States, he said.

According to him, there is a need to find an alternative system that provides a financial structure which is fair and impartial.

“We are also aware that under the current global financial system, 80 per cent of the world’s savings is being used by the US,” Nor Mohamed said.

“In fact, the US borrows US$3 billion (RM10 billion) every working day because the savings rate of its citizens is negative," he said.

Nor Mohamed said to prevent a future crisis in the financial world, priority should be given to ensure that a major portion of the savings by Asian countries and oil-exporting countries be used in this region.

In this context, Malaysia had proposed a mechanism to support such an infrastructure in this region and a seminar on this would be held in Kuala Lumpur on Nov 10, he said.

Nor Mohamed said that Malaysia has to be ready and prepared at all times to face and overcome financial crisis that will occur in the future.

“The crisis to come will be different in nature and we need to have an economic system which is flexible to face the challenges,” he said.

Replying to a supplementary question by Dr Mohd Puad Zarkashi (BN-Batu Pahat) on whether the political situation could affect the economy, Nor Mohamed said an unstable political system could cause problems in attracting investments.

“We should have a stable political system,” he said. — Bernama