Published October 22, 2008

Dr M sceptical of Najib's take on economy

By S JAYASANKARAN
IN KUALA LUMPUR

	Email this article
	Print article
	Feedback

FORMER Malaysian prime minister Mahathir Mohamad has heaped scepticism on Deputy Prime Minister Najib Razak's sanguineness about Malaysia's relative 'isolation' from the global financial turmoil.

Writing in his usual sardonic style on his weblog yesterday, he noted that 'our ability to manage our financial system better than others must earn us the admiration of the world. But I have a sneaky feeling that all is not well'.

Mr Najib had said on Monday that Malaysia would not suffer a slowdown and projected continued growth for the economy. Even so, the central bank had guaranteed all bank and insurance deposits last week after neighbouring countries moved to do so in an effort to prevent a run on local banks.

Dr Mahathir said that since Malaysia was an open trading nation, there was a danger that Malaysian exporters might not get paid for their exports. 'We would not make the profit we had expected. In fact, we would lose a lot of money as we will not recover the cost of the goods we sell even.'

'We are not talking about one company,' wrote Dr Mahathir. 'We are talking about hundreds of companies trading with America and Europe and other countries not getting paid for their exports. We are talking about tens of millions, even hundreds of millions of ringgit worth of goods not being paid for.' Taken to its logical conclusion, the ripple effect would ultimately cause a credit crunch.

The former premier estimated that the recent reduction in fuel subsidies and food and other price rises meant that each citizen could have lost purchasing power by RM300 (S$126) a year. 'Since we have a population of 27 million, the country's loss of purchasing power amounts to RM8.1 billion,' he said. 'A lot of small businesses would just fold up.'

Dr Mahathir also criticised banks for being 'lax' on issuing credit cards. 'It is believed that unpaid credit card loans is in excess of RM20 billion,' he estimated.

Giving a condensed version of what happened in the United States, Dr Mahathir asked where the US$700 billion bailout package came from. 'From nowhere,' he replied. 'If you ask yourself where does the US$700 billion come from when you know the United States' government has to borrow US$1.5 billion every day, you will find no answer.'

What was needed was an old familiar call from the former premier - an overhaul of the global financial system.

'Basically the international financial system and the market economy have failed,' said Dr Mahathir. 'Unless and until a new system is introduced and governments regulate with the running and operation of national and international finance and the so-called free market, we are going to see the financial turmoil and collapse repeated over and over again.'