Published November 13, 2008

Zeti raps Fitch, upbeat on current account

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(KUALA LUMPUR) Malaysia's central bank governor Zeti Akhtar Aziz has criticised a decision by Fitch ratings agency to cut the country's credit outlook to 'stable', saying the current account surplus would remain strong.

Ms Zeti: Fitch overreacted, just like in 1998, when it was proven wrong too

Fitch this week cut Malaysia's outlook from 'positive' and maintained its 'A-minus' long-term rating due to slowing exports and lower commodity prices.

'We have stress-tested our current account and if commodity prices were to come down more, under extreme circumstances, the surplus that we have will still be about 10 per cent of GDP (gross domestic product),' Ms Zeti told the Star newspaper in an interview published yesterday.

Malaysia's government is forecasting a current account surplus of RM22.05 billion (S$9.23 billion) for 2009, according to a preliminary draft of the 2009 Budget.

In the first half of 2008, the surplus was RM37 billion as exports were buoyed by surging oil and commodity prices, although the price of crude oil and palm oil have fallen sharply since. In 2007, the country posted a current account surplus of 25.5 per cent of GDP and foreign exchange reserves are in excess of US$100 billion.

Ms Zeti told the newspaper that Malaysia's reserves are three times short-term debt and 1.5 times external debt, and said that Fitch was overreacting - just as it had done during the 1998 Asian financial crisis.

'They have done the same as they did in the previous crisis, and they were also proven wrong then,' Ms Zeti told the paper.

Malaysian policymakers frequently criticise free- market and International Monetary Fund (IMF) policies after their experience in the 1997-98 Asian financial crisis in which they ignored IMF advice and saw their economy rebound strongly. -- Reuters

Published November 13, 2008

Bakun hydroelectric project can be delayed, says Tenaga

This is due to slowing growth in power demand

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(KUALA LUMPUR) Malaysia can afford to delay the Bakun hydroelectric project, the country's biggest, because of slower electricity consumption growth, said Leo Moggie, chairman of state-controlled utility Tenaga Nasional Bhd. 'We're beginning to see a slowdown in the growth of power demand,' Mr Moggie told reporters in Kuala Lumpur yesterday.

'That gives us an opportunity to stretch the original target of getting transmission through.'

The 2,400-megawatt hydroelectric project, which will flood an area the size of Singapore in Malaysia's part of Borneo, is due for completion by 2010 while the submarine cable to transmit power from the island to Peninsular Malaysia is expected to be laid by 2013. Tenaga, in talks with the government and Sarawak Energy Bhd to acquire a stake in the project and to build the cable, said last year it needed Bakun to meet the nation's demand by 2013.

Slowing economic expansion amid a global financial crisis may limit electricity demand growth to 4 per cent in the year ending Aug 31 compared with 6.1 per cent a year earlier, the company said in October.

'The demand for power is not increasing as fast as it was two or three years ago,' Mr Moggie said.



Che Khalib Mohamad Noh, chief executive officer of Tenaga, wants to conclude talks with the government as soon as possible on the Bakun stake and purchase of power from the project. 'Metal prices have come down by almost half, copper prices came down over the last three months by almost 50 per cent, and construction prices will also come down because steel and cement prices are coming down,' Mr Che Khalib said. -- Bloomberg

Published November 13, 2008

Telekom asked to cut broadband cost

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(KUALA LUMPUR) Malaysia's government may ask Telekom Malaysia to trim the costs of a proposed high speed broadband project valued at RM11.31 billion (S$4.7 billion).

'If existing TNB (Tenaga Nasional) infrastructures are suitable, we will ask TM to trim down the project cost,' said Second Finance Minister Nor Mohamed Yakcop when winding up the debate on Budget 2009 at committee stage.

The government's contribution to the project is RM2.4 billion while Telekom Malaysia is to invest RM2.4 billion over 10 years. The company could use existing infrastructure from electricity utility Tenaga to build out the project, Mr Nor Mohamed said.

Malaysia's government is facing higher budget deficits due to lower economic growth and is seeking ways to save money on large infrastructure projects. -- Reuters