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| Excerpt of CNBC interview with Najib |
| Written by CNBC | |||
| Wednesday, 01 July 2009 15:08 | |||
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ADAM: Clearly when your economic advisers, policy advisers, when you all sat down and talked about the roadmap ahead and all the changes, policy changes that you just talked to us about, do you come to any targets in terms of how it's going to impact economic growth in Malaysia? All of these liberalization efforts and also do you think to some degree, 30% Bumiputera state holding, did you figure out, come to targets in terms of how this will actually benefit growth in Malaysia moving forward? NAJIB: Well, I think this year will be, its not a benchmark year because foreign investment, FDI, will be about 50%, at the level of say a year ago last year. So this is a bad year for everyone. But the important thing is that we have repositioned Malaysia now to take advantage of the recovery when it happens. And we believe by the end of this year, early next year, we should see a steady global economic recovery and when that happens, Malaysia will be in a better position. Malaysia will be much more high up on the radar screen of investors than otherwise we would have been. ADAM: Recently, you did downgrade the assessment of economic growth this year to contraction of between -4% and -5%. Private forecast have the figure close to about 7%. As we look at the macro economic picture, it doesn't look very realistic at this point in time. Is there a risk that you may potentially have to downgrade your assessment even further? NAJIB: It all depends on how our economic stimulus packages work and we expect that the second half this year should see a step up in terms of the implementation and the funds being dispersed to the system. So if the economic packages work well, then we should be on track to achieve 4% to 5% as we predicted. But it is not an embarrassment to review. I mean many countries have reviewed targets more than once. Some have reviewed more than three times. ADAM: ... if the economy, global economy, I'm talking about and of course by extension, Malaysia, sees some more downside later on this year this could potentially come from the exports sector, if domestic spending doesn't really hold up or the FDIs — potentially Malaysia may have to introduce a third stimulus package and the figure I saw was RM15 billion. Is this something that you would entertain if the conditions deteriorate any further and what would a third fiscal stimulus package be able to do that the other two can't? NAJIB: I'm trying to avoid a third stimulus package because I think the second stimulus package is designed to cover a period of two years, and we certainty do not want our fiscal deficit to be too high a level. There's a risk of that happening if we introduce a third stimulus package. But if there are ways in which we can further stimulus the economy, I'm quite open to it if it's necessary but I'm keeping a very close watch in terms of fiscal deficit. ADAM: And if you had to do so, is Malaysia in a fiscal position to be able to afford that without risking any potential credit downgrades? NAJIB: Yes provided we take the liquidity from the market. Not so much from the government account. ADAM: ... Is the government looking at re-internationalizing the ringgit to be able to be traded on foreign exchange markets at all? NAJIB: No, not really because there's no demand for that to happen because as an investor, ringgit is readily exchangeable anyway. There are risk internationalizing the ringgit and led a very painful lesson from the financial crisis, Asian financial crisis in 1997/1998. So we are, we have no plans to internationalize ringgit. ADAM: The value of the ringgit — are you comfortable with where the ringgit is trading right now in the context that potentially we could see this massive debasing in the US dollar? NAJIB: We could but we do not want to manipulate the market in any way. Allowing the ringgit to find its true value has been our policy. We will maintain that policy.
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