Malaysia may take drastic measures to boost economy

Malaysia may take drastic measures to boost economy

KUALA LUMPUR (Dow Jones): Malaysia may soon introduce drastic
measures to shore up its flagging economy, Prime Minister
Mahathir Mohamad said Saturday, warning that some of the
population may be unnerved by the new strategy.

But the blunt-speaking premier told doubters they should trust
their leaders. "Have faith in the government," the national news
agency Bernama reported him as saying. "Each time we want to
adopt an approach we'll study it in depth first."

Last weekend, groundless rumors of ethnic riots in the capital
sparked panic, and residents rushed to stock up on essential
goods.

Mahathir was speaking in the East Malaysian state of Sabah,
addressing a 10,000-strong political rally. The premier has
toured the country widely in recent weeks, stoking speculation
that he may call an early general election before the economic
situation deteriorates further.

However, Mahathir, who is now Asia's longest serving leader
with 17 years in office, has dismissed suggestions that he may
take his government to the people before parliament expires in
April 2000.

Malaysia has taken a range of measures to try and put its
shrinking economy, racked by the continuing Asian crisis, back on
the growth track. Agencies have been set up to handle a growing
bad debt problem and recapitalize the country's banks, and a
central policy planning team, called the National Economic Action
Council, is overseeing recovery efforts.

"But we'll not just end here. Much more has to be done,"
Mahathir told supporters.

Although the government says the economy may contract by up to
2 percent this year, private economists suggest a 5 percent
shrinkage is more likely. In any case, it's a sharp reversal from
the last decade of 8 percent-plus annual growth rates, although
unlike Thailand, Indonesia and South Korea, Malaysia has so far
avoided calling in the International Monetary Fund.

But in his speech, Mahathir emphasized that the whatever the
government does, it doesn't intend to bring economic hardship on
the people. In fact, he said the government has been working to
protect the population from the worst effects of the 40 percent
depreciation of the ringgit against the dollar since last July.

Mahathir has firmly put the blame for Asia's financial strife
at the door of rogue currency speculators. He continued on this
theme at the rally, warning that rapid shifts in capital remains
Malaysia's main problem.

Again, he claimed that there was a foreign conspiracy to wipe
out wealth in Malaysia and topple its leadership. Mahathir has
repeatedly stated his belief that Western interests are hell-bent
on recolonizing Malaysia, and that they use the financial markets
to achieve their ends.

A growing number of Malaysians, though, privately say that
Mahathir is just jousting with windmills. But that didn't temper
the premier's call for defiance against the West.

"With the people's support, we can still stand tall and
preserve the national sovereignty and dignity," Mahathir said.

Although Mahathir's rhetoric is frequently extreme, his point
isn't lost on the international community. Agencies such as the
International Monetary Fund and World Bank, as well as individual
governments, are now assessing the need for curbing potential
destabilizing capital flows in the global financial system.