Malaysians Respond : LETTERS TO THE EDITOR
International Herald Tribune
December 31, 1998
Thomas Fuller

In response to "Mahathir's Economic Policies Could Bring His Downfall," by David Roche (Opinion, Dec. 15):

Mr. Roche presents misleading arguments on Malaysia's economic and financial performance that amount to wishful thinking, viz., that social upheaval will force Prime Minister Mahathir bin Mohamad to resign so that Mr. Roche's friend Anwar Ibrahim can take over.

He says that Mr. Mahathir forced "the central bank to make substantial cuts in interest rates and the mandatory reserves of commercial banks." He should be aware that the United States and many industrialized countries have made rate cuts at the mere prospect of slower economic activity.

He cited the credit overhang as the cause of the economic crisis in Malaysia. Although the ratio of bank credit to GDP was high at 153 percent in 1997, Mr. Roche failed to mention deposits as a percentage of GNP was even higher, at 166 percent. The banks, therefore, have financed their lending from domestic savings.

He also grossly exaggerated the total funding needs of Malaysia at 98 billion ringgit ($25.8 billion), or 37 percent of GDP. Our own estimates show a much lower requirement of 62 billion ringgit. The gap will be more than adequately financed from noninflationary domestic sources without recourse to deficit financing.

K.C. LEONG.

Kuala Lumpur.

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