Malaysia freezes yen loans: report

Malaysia freezes yen loans: report

KUALA LUMPUR (AFP): Malaysia has no immediate plans to borrow money from Japan as the soaring yen was seriously affecting its economy, a local financial daily here reported yesterday.

"One-third of the total federal government debt is in yen and we are at the mercy of the Japanese," the Business Times quoted Mustapha Mohamed, Malaysia's deputy finance minister, as saying. Kuala Lumpur had to pay 500 million ringgit (US$200 million) annually to service its yen loans despite reducing its Japanese borrowings by 4.6 percent to 648.3 billion yen ($66.6 billion) in the first three months of this year, Mustapha said.

He said the government had no intention of undertaking more yen-denominated loans "as for now" and also discouraged private sector borrowing from Japan.

Malaysia's yen-denominated loans made up seven billion ringgit or 35 percent of its total debt for last year compared with six billion ringgit or 28.7 percent of the debt value in 1992.

Economists blamed the growing debt partly on Malaysia's heavy reliance on Japanese technology and heavy equipment to propel industrial progress.

Mustapha said Malaysia's national Proton car -- manufactured under a joint-venture with Japan's Mitsubishi group -- was a "classic example" of the impact of the sharp appreciation of the yen.

Proton prices started at 17,000 ringgit after its launch in 1985 but have risen steadily to a minimum of 31,000 ringgit now. Mustapha said although a silver lining was expected in the surge of yen through more Japanese companies seeking cheaper production bases in Southeast Asia, Malaysia still had to compete for such investments.