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.