Mahathir sees 'moderate' recovery within a year

Mahathir sees 'moderate' recovery within a year

KUALA LUMPUR (AFP): Prime Minister Mahathir Mohamad said
yesterday that the battered Malaysian currency should return to
"moderate" levels in six to 12 months if people cooperate by
tightening their belts.

"Our actions are important to help the economy recover. We
should have confidence and trust in our economy and our
currency," he told a morning chat show broadcast by Sistem
Televisyen Malaysia (TV3).

"We should not buy imported goods and we should boost savings
and have trust in our banks," he said. "If we do this, I am
confident that we can recover -- not to the original levels but
to moderate levels which are adequate for us -- maybe within a
period of six months or a year."

Asked how long the country's economic crisis would last,
Mahathir said: "It is difficult to determine as long as they
continue to sell our currency."

During the 80-minute interview, which largely focussed on how
Malaysian housewives should deal with the economic crisis,
Mahathir assured the nation that the central bank had adequate
foreign reserves.

"Bank Negara has sufficient reserves as we do not expose much
of our funds nor are we involved in excessive dollar selling to
protect the ringgit," he said. "We have sufficient reserves to
support all the country's needs."

The central bank announced Thursday that Malaysia's foreign
reserves fell to 59.1 billion ringgit (US$21.7 billion) at the
end of December, down from 59.8 billion ringgit in mid-December.

Reserves are expected to decline further following recent
central bank intervention to support the ringgit, which plunged
to a series of all-time lows earlier this week before the bank
intervened.

Mahathir said recent moves to merge Malaysian financial
institutions were aimed at creating bigger entities capable of
competing with foreign banks.

He noted that smaller institutions had previously been
reluctant to merge out of fear of losing their independence. "But
the fact is they are weak and cannot play a role in such critical
times," he said.

Asked why Malaysia has not sought assistance from the
International Monetary Fund (IMF), Mahathir said such a move
would only "expose us to economic colonization" by foreigners.

"The problem is that if we resort to foreign borrowings, this
means that our economy is weak and we need to depend on other
people who could then exert pressure on us," he said, adding that
Malaysians should instead save more.

"If we were not stable, we would have asked for IMF assistance
a long time ago. But we are still able to defend our economy
compared to other countries."

The Malaysian leader admitted that regional currency turmoil
was "beyond our control" and called for denominating an increased
share of trade between Southeast Asian nations in their own
currencies rather than the dollar.

He said Malaysia would specifically seek bilateral payment
arrangements with other members of the Association of Southeast
Asian Nations (ASEAN). "Trade with ASEAN members can be done in
our own currencies," he said.

Other members of ASEAN are Brunei, Myanmar, Indonesia, Laos,
the Philippines, Singapore, Thailand and Vietnam.

Mahathir said the labor market was still tight with the
country relying on an estimated two million foreign workers.