Saturday September 20, 2008 MYT 6:02:46 PM

Re-peg the ringgit: Dr M

By SIRA HABIBU

(The Star) ALOR STAR: Former Prime Minister Tun Dr Mahathir Mohamad said Malaysia should re-peg the ringgit to relieve pressure from the global economic crisis.

Stabilising the exchange rate would be one measure the Government could take immediately, suggested Dr Mahathir, also a former finance minister.

Malaysia has the capacity to determine the value of the ringgit because it has sufficient foreign currency and substantial savings, with the Employees Providence Fund alone holding more than RM200bil in its coffers.

“We shouldn’t float the currency. The country would lose money if the currency is vulnerable to external forces,” he said at a press conference after presenting a keynote address at a national-level seminar on Development of Higher Learning Institute on Saturday.

He was asked on what advice he had for newly appointed Finance Minister Datuk Seri Najib Tun Razak to cushion the impact of the economic slowdown in developed countries on Malaysia.

He said if Malaysia could strengthen the value of the ringgit by 10% (by pegging the ringgit to the US dollar), the import value should depreciate by 10%.

When the price of imported goods is reduced, the impact would immediately be felt by the rakyat (citizens), he said.

Dr Mahathir said when he was in power he had set up a panel about 10 years ago to tackle the economic slowdown that had affected the country when Asian currencies were attacked by rogue speculators.

He advised the authorities to set up a similar panel comprising professionals, including economists, to help ascertain the root causes of current financial problems, scrutinise all data that has an impact on the nation’s economy, and suggest ways to tackle the issue.

He said effective measures could be taken when there is an in-depth understanding of the nature of the problem.

Referring to Second Finance Minister Tan Sri Nor Mohamed Yakcop’s statement that Malaysia would not be greatly affected by the US financial crisis, Dr Mahathir said there would certainly be an impact as 20% of exports were for the United States.

“Although the trade balance is in our favour, it does not reflect the actual situation. We are enjoying a good trade balance because of the appreciating price of raw materials such as the petroleum, palm oil and rubber that we export.

“But the stock market is not doing well, with recent market capital losses amounting to more than RM100bil,” he said, adding the rakyat were under pressure by the increasing price of goods and construction materials.