Malaysia's Response : LETTERS TO THE EDITOR 
International Herald Tribune
July 30, 1998

Regarding "Malaysia Eases Rules for Foreign Investors" (Finance, July 24):

I write in the hope of clarifying misconceptions and putting other points of speculation to rest.

The matter of "who controls economic policy in Malaysia these days" has been made abundantly clear on numerous occasions. The cabinet under Prime Minister Mahathir bin Mohamad determines the economic direction of this country. There has been no change of leadership, no transfer of control, and there is no "ambiguity about who's in charge."

It is public knowledge that the National Economic Action Council was set up as a consultative body to deal with the present economic crisis, with our prime minister as its chairman and our deputy prime minister and minister of finance as its deputy chairman. It was decided that Daim Zainuddin, the executive director of the council, would announce the plan to the press.

In observing that the finance minister, Anwar Ibrahim, was not present at the announcement you might also have mentioned that the prime minister was not present either.

Malaysia has never believed that the International Monetary Fund owns exclusive rights to a cure to the economic crisis. It is now widely agreed that IMF-imposed austerity measures have not brought relief to the economies of Thailand and Indonesia, while the high social costs inflicted on those nations are evident.

The recommendations in Malaysia's National Economic Recovery Plan are not in "stark contrast" to previous government measures. The government has tried to mitigate the hardships inflicted on the population by the economic downturn.

At the press conference to announce the plan, Mr. Daim was asked where funding would come from to recapitalize the banking sector. He replied that sufficient domestic funds could be raised, for example, by lowering the statutory reserve requirement to boost liquidity. He did not refer to Malaysia's "going it alone" for overall funding requirements since the government's deficit financing makes borrowing a necessity.

As for "not opening up the banking sector," Malaysia, unlike other Asian countries, has for many years allowed 100 percent foreign-owned banks to operate in the country. Banks listed on the Kuala Lumpur Stock Exchange have foreign equity limited to 30 percent for the good reason that our local banks need some measure of protection against fiercely competitive, well-established foreign banks. Once local banks are in a position to compete without adverse social consequences, the sector will be further liberalized.

It should also be noted that in nearly all countries, including the United States, key strategic industries are not open to foreign ownership and control. Malaysia should not be singled out as unique in protecting its national interests.

LYN CHAI.

Kuala Lumpur.

The writer is a spokesman for Malaysia's National Economic Action Council.

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