KUALA LUMPUR, Dec 23 — Bank Negara Malaysia’s requirement for exporters to convert two-thirds of their earnings into ringgit could deter investment and harm Penang and the country’s competitiveness, Chief Minister Lim Guan Eng said today.
In an open letter to the International Trade and Industry Minister Datuk Seri Mustapa Mohamed, he said exporters have reacted negatively to the measure.
“Based on the feedback received from the industry, this measure by FMC will further complicate export transactions which are usually transacted in foreign currencies, especially in US Dollar (USD),” the letter said, referring to the central bank’s Financial Markets Committee.
The FMC comprises representatives from BNM, financial institutions, corporations, financial service providers and other stakeholders.
“Exporters also usually use foreign currency in cost hedging to reduce their cost and import input prices.
“Although exporters usually receive their export proceeds in foreign currency, any foreign inputs for production which are imported are also usually paid in foreign currency,” he added.
He also noted that while the measure may allow residents to hedge import or foreign currency loan obligations into foreign currency up to the value of six months import, the measure by FMC is still seen as reducing the ease of doing business and would increase cost for exporters.
BNM and the FMC announced a new policy demanding offshore banks to confirm through signed letters that neither they nor their corporate clients would trade the ringgit on the non-deliverable forward markets.
The market reacted negatively to the move, with pundits saying the move to force currency traders overseas to stop selling down the ringgit have had little discernible impact on its effort to curtail ringgit’s drop.
Lim also noted that several trade associations and industry groups have already released statements regarding FMC’s measure and has proposed that the requirement to convert 75 per cent of the export proceeds in ringgit should be abolished.
“The state government is of the opinion that FMC’s requirement should not burden industry players who are already facing prevailing business challenges and competition from other countries,” he said.
