Source: Merdeka Review

作者／本刊曾薛霏 Nov 23, 2010 02:50:01 pm

Source: The Sun

Source:The Star

By LEE YUK PENG

Source:Free Malaysia today

Tue, 23 Nove 2010 14:15

 

By Syed Jaymal Zahiid

KUALA LUMPUR: Malaysia’s economy is set to crash if no regulation is imposed on the inflows of hot money, DAP economist Charles Santiago said.

A rallying market and appreciation of the ringgit have forced the government to think twice before imposing capital control.

Second Finance Minister Ahmad Husni Hanadzlah has said in an interview with Bloomberg recently that "we are benefiting from the capital inflows and the appreciation of the ringgit. It's not affecting our property market like many other countries."

The World Bank has warned that Asian economies may need to impose capital controls as "quantitative easing by the US threatens to spur asset bubbles in the region".

Santiago referred to the just-concluded G-20 meeting in Seoul, South Korea, where it was held that emerging markets need to adopt capital controls to stem a recurrence of the financial crisis experienced by this region in 1997.

“Hot money has the tendency to create asset bubbles in the currency, stock and property markets,” the Klang MP told a press conference at Parliament lobby today.

US-waged currency war

In 2009 about US$9 billion worth of hot money flowed between developed and emerging economies and this has increased to some US$46 billion (RM143 billion) since January-September this year.

The US Federal Reserve has recently announced that it will fork out US$600 billion (one per cent of global GDP) to buy up US Treasury bonds.

The US move has triggered fear that developing countries like Malaysia will see an influx of hot money that can lead to greater appreciation of the ringgit and hurt exports badly.

The ringgit appreciated by 9.5% against the greenback in the last five months.

Bank Negara Malaysia said it was aware of the vast cash inflows and was monitoring the capital movement, but Santiago said surveillance alone was not enough.

“As in 1997, the damage was done when we finally imposed regulation when capital inflows went out of control.”

No control signals snap polls

Santiago, who is also Klang MP, argued that the government’s refusal to regulate capital movement signalled its preparation for an early general election.

In theory, the illusion of a strong market and ringgit creates a “feel-good factor”. The aim is to build voter confidence in the government.

Talks of possible snap polls as early as March next year are rife, as Prime Minister Najib Tun Razak is said to be in need of a fresh mandate to implement unpopular reform policies which include, among others, opening up the market.

Regulating capital movement can be seen as anti-free market and may repel investors, which explains the government’s refusal to block hot money inflows, claimed Santiago.

“But the government should be encouraged to view capital controls as a protective policy to insulate the local economy from destabilisation,” he added.

Emerging markets like Brazil, China, Indonesia and Thailand have all adopted protective measures against hot money, he said.

மூலம் :- மலேசியா நண்பன்

Source: Guang Ming

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  查爾斯（中）與出席的嘉賓和市議員們切蛋糕，慶祝屠妖節。（圖：光明日報）

Source: The Malaysian Insider

KUALA LUMPUR, Nov 23 – A DAP MP wants Putrajaya to impose capital controls like that which former prime minister Tun Dr Mahathir Mohamad enacted in 1997 to prevent what he called an impending surge of hot money into the local market would put Malaysia into a tailspin similar to the Asian Financial Crisis.Klang MP Charles Santiago (picture) explained that this time the hot money would come from the US Federal Reserve's move to spend a whopping US$600 million (RM1.8 trillion) to purchase US Treasuries over the next eight months under its quantitative easing programme.

"You will see a surge in the property, currency and stock markets, including even in food and oil. Therefore, Malaysia has to do something in order to control such movements.

"When the money comes in, it may look all nice but when it leaves, it will leave a whole lot of destruction along the way. Thousands will lose their jobs, our SMEs will shut down," he warned.

Santiago said it was imperative for the government to impose capital controls immediately instead of waiting for the present economic crisis to end, pointing out that this was already done in Korea, Indonesia, Thailand and even BRIC nations like Brazil and China.

He was referring to Bank Negara Governor Tan Sri Zeti Akhtar Aziz's statement yesterday that the central bank was not considering implementing capital controls to deal with the inflow of funds, due to massive liquidity in western economies that are seeking higher returns in faster growing emerging markets.

She had also noted that the large and volatile capital inflows into regional economies could pose risks to macroeconomic policies and financial stability, claiming that Malaysia was in the position to intermediate the flows.

The country, she added, had also gained experience from the 1997 Asian Financial Crisis.

Last week, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah had also, in an interview Bloomberg, made a similar statement, pointing out that on the flip side, the country was benefitting from capital inflows.

He also claimed that the appreciation of the ringgit was not affecting the property market like in other countries.

Charles, however disagreed with the view, warning that the country was heading into yet another tailspin like it did in 1997 if it failed to regulate capital inflow and protect the local economy.

He also echoed Dr Mahathir's recent cautionary message that the rising Kuala Lumpur Composite Index (KLCI) was no indication of a healthier economy, pointing out that it was an "artificial" feel-good factor due to the influx of hot money or speculative capital in Malaysia.

In his blog post recently, the former premier had also referred to reports on the US government's move to pump in USD600 billion into theUS economy with part of the money possibly being invested in stock and shares of developing countries, similar to previous episodes of hot money flooding stock markets around the world 12 years ago.

"There is a similar trend that you can find in Indonesia, which you can find in Singapore and Thailand and South Korea, where the hot money is coming in in a very big way into emerging markets and this will push up inflation and asset bubbles, which is the cause of the major crisis in 1997 and, to some extent, the present crisis," said Santiago, an economist by training.

He acknowledged that Malaysia's likely concern against adopting capital controls was the fact that it would be likely viewed by foreign investors as an anti-free market policy.

"I can understand that view because in our current precarious economic situation, foreign investors are not looking at Malaysia, and our government feels that imposing capital controls would be viewed negatively.

"Our government fears that it would only serve to further damage the country's economic standing and competitiveness in the eyes of investors.

"But the world has changed today and now, capital controls is perceived or accepted as a part of a government's policy tool to protect the economy," he added.

Santiago continued that capital controls should rightfully be viewed as a protective policy to insulate the local economy from destabilisation, a phenomenon recently adopted by other countries like China, Indonesia, Thailand, Brazil and South Korea.

He also quoted the South Korean Strategy and Finance Ministry's recent statement prior to the G20 meeting that "the government believes it needs to turn away from the perception that controlling capital flows is always bad and consider introducing measures to improve macroeconomic prudence."

"Therefore, Malaysia should not fear that there will be a market backlash. Even Dr Mahathir was smart enough to impose it at the time of the 1997 crisis. He was seen as a naughty boy then but now, capital controls is an accepted policy tool of the government to regulate money coming into the country.

"Malaysia should not shy away… it is not an anti-free market policy. It is necessary to protect our local industries," he said.

Santiago further pointed to the country's sluggish 5.3 per cent growth in the economy in the third quarter of this year, pointing out that Malaysia could not afford to see a further appreciation of the ringgit.

"If the currency appreciates further, then our SMEs will be in trouble. We cannot compete with other nations and this will impact a loss of jobs," he said.