Special Economic Committee will do little to soothe markets, say critics

Prime Minister Datuk Seri Najib Razak today announced a Special Economic Committee that will propose immediate and medium-term measures to strengthen the economy, after reviewing concerns about the ringgit and the stock market. — Picture by Saw Siow Feng
Prime Minister Datuk Seri Najib Razak today announced a Special Economic Committee that will propose immediate and medium-term measures to strengthen the economy, after reviewing concerns about the ringgit and the stock market. — Picture by Saw Siow Feng

KUALA LUMPUR, Aug 26 — Malaysia’s bid to restore investor confidence with an economic task force including top bankers is insufficient given questions about a troubled state fund and the absence of the central bank chief from the team, analysts said.

The special economic committee, announced on Wednesday by Prime Minister Datuk Seri Najib Razak, will propose immediate and medium-term measures to strengthen the economy, after reviewing concerns about the ringgit and the stock market.

Najib has been embroiled in a political storm amid graft and financial mismanagement allegations at debt-laden state fund 1Malaysia Development Bhd (1MDB), whose advisory board he chairs.

The 62-year-old, who has denied wrongdoing, is now trying to assert his leadership over the government and a stumbling economy.

The ringgit, Asia’s worst-performing currency this year, hit a fresh 17-year low this week over fears about China’s slowing economy while the Kuala Lumpur composite index improved 1.1 per cent after slipping to a three-year low on Monday.

“There are probably limits to what the committee can do, as a large part of the (stocks) sell-off reflects the politics and 1MDB,” said Chua Hak Bin, economist at Bank of America Merrill Lynch.

Chua said the absence of central bank governor Tan Sri Zeti Akhtar Aziz was “disturbing” and would limit the committee’s options in reviewing economic policies. He added the absence of Bank Negara on the committee would limit its access to policy options.

The committee includes Maybank chief executive Datuk Farid Alias, CIMB Chairman Datuk Seri Nazir Razak, who is the prime minister’s younger brother, Tan Sri Azman Mokhtar, managing director of sovereign fund Khazanah Nasional, and Tan Sri Andrew Sheng, a Malaysian who is chief adviser to the China Banking Regulatory Commission.

Najib said the team would include several top-ranking officials from the finance ministry, central bank, trade ministry and Securities Commission.

It would report to the prime minister once a week and function until the global economy stabilises, he said.

“A lot of the economic issues were created by the PM himself. He has not provided an explanation for a lot of the causes driving down the ringgit so this committee will not assuage market fears,” said opposition leader Ong Kian Ming.

Malaysia’s international reserves have fallen to US$94.5 billion (RM400.2 billion) — the lowest level since September 2009 — the central bank said last week, raising concerns over its ability to manage the depreciating currency.

But both Najib and Zeti have said Southeast Asia’s third-largest economy has no plan to peg the ringgit to the US dollar or impose capital controls as it did during the height of the Asian financial crisis in the late 1990s. — Reuters

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