Published November 7, 2008

Decision on rates left to central bank, says Najib

Unclear if FTA with US possible under Obama, he says

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(KUALA LUMPUR) Malaysia's Finance Minister and soon-to-be prime minister Najib Razak backed the independence of the country's central bank in an interview late on Wednesday, saying it alone set interest rates.
'I feel the leader of the Opposition is still trapped in the era of 1997. Which is the old IMF way of thinking.'
- Mr Najib

'The question of interest rate I will leave it to Bank Negara (the central bank) to decide as I want to defend the credibility of Bank Negara in the issue of ascertaining the interest rate,' Mr Najib said, according to the transcript of an interview published by state news agency Bernama.

Malaysia's central bank has left interest rates unchanged at 3.5 per cent since April 2006 through a boom, a recent surge in inflation to near 27-year highs and now amid signs Malaysian growth is slowing.

At its last monetary policy meeting on Oct 24, it said that it would 'take swift monetary policy action to provide support to the economy'.

The government this week cut its 2009 growth forecast to 3.5 per cent from 5.4 per cent on expectations that exports would be hit by the global economic slowdown.

'Bank Negara as at this point sees no reason to change the interest rate. Therefore it is good that we have specific options that we can exercise should the situation change,' Mr Najib said, according to the transcript, when asked whether there was room for rate cuts due to declining inflation.

He also told reporters that while Malaysia still hopes to achieve a free-trade agreement with the United States, it was unclear as to whether it will be possible under Democrat President-elect Barack Obama.

'We will have to see the policy direction of the new US administration,' he said. 'Usually, the Democrats are more protectionist than the Republicans.'

Malaysian and US negotiators, seeking to bolster US$52 billion of two-way trade, missed a deadline to sign an agreement in 2007. Malaysia's reluctance to open up its rice market, change policies that benefit ethnic Malays and increase access to government contracts were among issues that derailed talks.

The world needs 'not just help, but a fair and just trade', he added.

Mr Najib, an economist by training, is set to take over the premiership in March next year from Prime Minister Abdullah Ahmad Badawi, whose lacklustre leadership saw the coalition that has ruled Malaysia for 51 years stumble to its worst election result earlier this year.

As well as a tough economic environment, Mr Najib will have to face a resurgent Opposition led by Anwar Ibrahim who was deputy prime minister and finance minister until he was sacked during the Asian financial crisis a decade ago.

Mr Najib said that Mr Anwar had shown during the Asian crisis that he had no answers to problems, adding that he had none now.

'I feel the leader of the Opposition is still trapped in the era of 1997. Which is the old IMF way of thinking,' Mr Najib said.

Mr Anwar was sacked after he backed tough IMF remedies to help Malaysia recover from the financial crisis.

'The leftovers are still in their thinking today and that is why when in the midst of facing the global crisis where the whole world should be advocating intervention measures in the form of stimulus package or an expansionary budget, the Opposition is still putting forward a contractionary budget,' Mr Najib was quoted as saying. -- Reuters, Bloomberg