Malaysian business unaffected by protests<\/p>\n
KUALA LUMPUR (Reuters): Political protests in Malaysia have
\nnot affected business confidence and the government sees no
\nproblems financing a growing budget deficit next year, Second
\nFinance Minister Mustapa Mohamad said on Monday.<\/p>\n
"There's calm in the country, there's not been any effect on
\nbusiness confidence," Mustapa said in an interview with Reuters
\nTelevision.<\/p>\n
"Kuala Lumpur continues to remain to be a very peaceful city.
\nBusiness confidence has not been dented at all and the government
\nis on top of the situation," he said.<\/p>\n
Hundreds of protesters clashed with police in the heart of the
\ncapital Kuala Lumpur in the most violent confrontation since
\nsporadic demonstrations started five weeks ago.<\/p>\n
Police have arrested more than 500 people in the protests that
\nbegan after former finance minister Anwar Ibrahim was sacked from
\nparty and cabinet posts, and which have continued while he has
\nbeen in police detention awaiting criminal trial.<\/p>\n
Anwar was sacked in September after a rift developed between
\nhim and Malaysian Prime Minister Mahathir Mohamad. He has been
\ncharged with several counts of sodomy and corruption, which he
\ndenies.<\/p>\n
Mustapa said the political events would pose no problems in
\nfinancing a large projected budget deficit in 1999 from locally-
\nsourced funds.<\/p>\n
"We were toying with the idea of raising the funds in the
\ninternational market, but conditions have deteriorated
\nsubstantially in the last few months so our focus will be on
\ndomestic sources of funding."<\/p>\n
The Finance Ministry said in its annual report on the economy,
\nreleased on Friday, that various tax cuts and extra spending on
\nthe transport sector would swell the fiscal deficit to 16.1
\nbillion ringgit (US$4.23 billion) next year from 9.6 billion in
\n1998.<\/p>\n
Mustapa reiterated that Malaysia wanted international
\nfinancial reforms before it scraps its tough controls on currency
\ntrading.<\/p>\n
He said there had been a number of positive economic
\ndevelopments lately, including the weakening of the U.S. dollar,
\nand Kuala Lumpur would consider the competitiveness of
\nneighbors' currencies before deciding when to lift the controls.<\/p>\n
"As a major trading nation in this part of the world, we are
\nmindful of the currency position of our neighbors," he said. "At
\nthis point in time, we believe that controls have worked... We
\nare not yet in a position to take any decision on the lifting of
\ncapital controls."<\/p>\n
Mustapa said the funding for the deficit could be drawn from
\nthe state-run pension scheme, the Employees Provident Fund, and
\nfrom an additional 38 billion ringgit ($10 billion) released into
\nthe banking system from a recent reduction in the statutory
\nreserve rate.<\/p>\n
A recent bond issue by the government's investment arm,
\nKhazanah Nasional Bhd, was oversubscribed by three times, raising
\n3.2 billion ringgit, Mustapa said.<\/p>\n
"So there's no shortage of funds in the economy," he said.<\/p>\n
Mustapa said around $16 billion would be needed to
\nrecapitalize the country's debt-ridden financial sector.<\/p>",
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