Dr M hopes Malaysia won’t be hit by the financial crisis. — Picture by Choo Choy May
KUALA LUMPUR, Oct 21 —Tun Dr Mahathir Mohamad says he has a “feeling” the government is underestimating the effects on Malaysia from the fallout of the global financial crisis.
“I am glad to hear that Malaysia will be spared… This ability to isolate Malaysia and Malaysian banks from the effect of the bankruptcies of all the biggest banks in the world must be regarded as a miracle.
“I hope we are right in forecasting the effect on us of the collapse of the world’s financial system. But I have a sneaking feeling that all is not well,” he wrote in the latest posting on his chedet.com blog.
The Malaysian government has been assuring the country that it is relatively insulated from what is happening to the global financial markets and the collapse of various financial institutions.
Still, Kuala Lumpur has moved to prevent an outflow of liquidity by announcing a full guarantee on bank deposits for the next two years.
Finance Minister Datuk Seri Najib Razak has said Malaysia will not suffer from any “depression”, and continues to project growth for the economy.
Dr Mahathir, who as Prime Minister then, bucked the trend and defied the advice of the International Monetary Fund to introduce capital controls and other measures during the 1997 financial crisis.
In his blog posting, the feisty former PM offered readers a primer on what has been happening in the financial markets.
But in typical form, he also railed against the financial system.
“What is happening in the world today is the collapse of the global financial system. This has been brought about by greedy people abusing the system.
“Instead of doing business in goods and services they now do business in money, in fictitious money.”
Dr Mahathir said he prays that he is wrong in thinking Malaysia will also be affected by the credit crunch.
“I pray that the government is right in declaring that the whole world may collapse but we would be the only country which won’t.
“We will sail calmly through the seas of shattered economies,” he said.
The former PM points out that while Malaysia may not need “several hundred billions” to bail out local banks, financial institutions will still face the problem of unpaid loans incurred by their credit card users.
This is because banks have been lax, he said, in providing credit card facilities.
Unpaid credit card loans now amount to in excess of RM20 billion, he said.
Dr Mahathir added that as a trading nation, Malaysia will soon face the problem of a shrinking market because up to 40 per cent of its exports is to the United States and Europe.
“I may be wrong but I believe that if our buyers cannot pay for what they import from us we would not make the profit we had expected.”
He points out that hundreds of companies trading with the US and Europe will not get paid for their exports, and “we are talking about tens of millions, even hundreds of millions of ringgit worth of goods not being paid for.”
This will result in an increase in non-performing loans and will lead to a credit squeeze which will hurt other businesses.
Basically, Dr Mahathir said, the international financial system and the market economy have failed.
“Unless and until a new system is introduced and governments regulate… we are going to see financial turmoil and collapse repeated over and over again.”-themalaysianinsider
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