June 11, 2015
Governor Zeti: The Ringgit has taken a beating under your watch; no more of your sweet talk
by Tan Sri (Dr.) Ramon Navaratnam,Chairman, Center of Public Policy Studies–ASLI
The Governor of Bank Negara Tan Sri Dr Zeti Akhtar Aziz publicly stated confidently, on June 8, that “the current weaknesses of the currency will be temporary“ We all hope that her judgment is right. But we cannot in fairness hold her to her current assessment, given the growing uncertainties at home and abroad.
Nevertheless, it is difficult at this stage, to accept that the declining Ringgit is temporary feature, for the following reasons:
1. The Ringgit has been declining steadily and has reached its weakest point in the last nine years under her watch. It is therefore not a sudden slip but apparently the Ringgit could be showing signs of a declining trend on a more permanent basis.
2. The Ringgit is driven down by both weakening economic fundamentals and uneasy sentiments as well. Thus it is important that we should not under play the weak fundamentals nor down play the soft sentiments, for they need not be temporary phenomena, but more longer term in nature.
3. The economic fundamentals, although currently good, are however not that strong in the longer term. The claim of strong fundamentals cannot be assumed to be sustainable and permanent either.
For instance the Budget deficit is still under strain, the Balance of Payments need not be buoyant with the continuing low energy prices. This is aggravated by the higher import prices, due to the fall in the Ringgit. The national debt burden still weighs heavily on our economic shoulders.
Furthermore, private capital outflows continue to be one of the highest in the world and the skilled brain drain is persistent? Corruption is rife and this adds to cost, while undermining public policies and worsening the income disparities , poverty and inflation.
These are fundamental weaknesses that have to be addressed to boost investment confidence and improve business sentiment.
During the 1997 Asian Financial Crisis, Malaysia was forced for peg the ringgit & impose capital controls to stop a massive flight of capital
4. The present political environment is bad, generating negative sentiments. Malaysians generally are fed up with all this unnecessary and unhealthy politicking. Perhaps many politicians enjoy these political games, but most Malaysians are very tired of this distraction from the main purpose of Government and the Opposition, which is to deliver on their election promises, to benefit all Malaysians and promote a better Malaysia.
Instead, everyday we rise to read in the mass media a lot of wasteful discussion on political diatribe and personal character assassinations. This is immature and intolerable .
How can then there be positive sentiments and national confidence? That is why capital and brain power flow out continuously. Graduates by the thousands come out from our universities ill equipped to find decent jobs. We have flip flopped on the teaching of Science and Maths in the modern and universal English Language .How well then can our graduates contribute highly to the economic development and to nation building? In fact there will be widening income disparities between graduates who have a command of English and those who learn a smattering of English . The rich will then become richer and the poor will remain poor. This could cause social problems and disunity ?
5. Racial and religious extremists are increasing and good citizens are called seditious names. Many from both groups also get away with impunity. Safety and security is said to be improving, but people perceive it as declining. Islam and order declining too ?
The 1MDB problems are being investigated, but before the outcome is known , there are those who choose to relentlessly attack the Leaders without respite. Could there not be a Moratorium that could shows dignity, proper decorum, and common decency?
No wonder sentiment is so low and national depression and disgust so high? All this will erode the economic fundamentals and weaken confidence and the currency, which could continue to decline.
For the above reasons, many Malaysians and foreign friends, may share my view that the Ringgit is not going to strengthen in the near future. Its consistent decline, to the bad times we experienced in 1997, is therefore unlikely to be a temporary, but more likely to be more permanent
I almost fear that the Ringgit’s decline could reflect our weakening socio economic fundamentals and the sad sentiments in our beloved country today
In fact we are probably witnessing an unfortunate trend towards a weaker Ringgit – well beyond a temporary phase.
We may thus have to revise our analysis and be prepared to face more challenging times ahead.In the meantime, the Government should appoint an Independent Committee made up of professionals , to make recommendations to the Government on how to ensure that the declining Ringgit is only temporary and does not develop into an irreversible trend , which would seriously undermine our economic well being.