Mahathir defends Malaysia's fixed exchange rate regime

Mahathir defends Malaysia's fixed exchange rate regime

LONDON (Reuters): Malaysian Prime Minister Mahathir Mohamad on
Wednesday defended the country's fixed exchange rate regime and
said there were no plans to alter the 3.8 to one rate at which it
is pegged to the dollar.

"We have no plans to change it unless we become uncompetitive
with our neighbors," Mahathir told Reuters after speaking at a
Malaysian business conference in London.

Analysts and the International Monetary Fund have in the past
criticized Malaysia's fixed exchange rate regime, set in
September 1998, and some believe the rate is too low.

Central Bank Governor Zeti Akhtar Aziz told the conference
that she believed the ringgit was fairly valued and was supported
by "underlying fundamentals".

"Our exchange rate is only marginally undervalued and it is
not misaligned," she told the business conference.

Mahathir also defended Malaysia's "unorthodox" economic
measures, including controls on investments, which have been
partly lifted, and the fixing of the exchange rate, saying that
without these "much maligned" measures the Malaysian economy
would not be growing so quickly.

"The economy is becoming significantly more resilient to
external shocks," he told the conference.

Malaysia's Prime Minister also suggested that a single
currency, along the lines of the euro, for the countries of the
Association of Southeast Asian Nations (ASEAN) was not likely in
the foreseeable future.

"I think it is a long way off," he told the conference.

ASEAN plus Japan, China and South Korea, agreed at the IMF
meeting in Prague last month to seek a basic framework for a
regional currency safety net at the group's heads-of-state
meeting in late November.

This is viewed as laying the foundation for a permanent
monetary institution in Asia.

But Mahathir said any Asian single currency would have to bear
in mind the fate of the euro, which has tumbled against the
dollar since its launch.

"I would like to see that currency does not get into the hands
of speculators," Mahathir said.