ZAFRUL PASSES THE BUCK BACK TO ANWAR - IT WAS THE RINGGIT'S WEAKNESS THAT MADE MALAYSIA LOSE COMPETITIVENESS

Written by Stan Lee, PoliticsNow!

KUALA LUMPUR (politicsnowmy.blogspot.com) - Trade minister Tengku Zafrul Aziz has passed the buck back to Prime Minister Anwar Ibrahim - saying it is the ringgit's weakness and overspending by the government that caused a seven-spot plunge in the country's competitiveness rating, putting it for the first time behind Indonesia and Thailand as an attractive place for investors to do business.

“In 2023, the ringgit was affected, so our competitiveness was affected by that. We should be in a better position in next year’s ranking,” Zafrul told reporters on Friday (June 21).

UNWISE CHOICES, POOR OUTCOMES

Anwar is of course the Finance Minister in addition to being PM - and has been blamed for the ringgit's descent to historic lows since his coalition swept to power in the 2022 general election. At the worst of the ringgit's fall, there were calls for him to surrender the Finance portfolio to more capable hands so that he could focus on the demanding PM's post, which requires extensive foreign travel and obviously, a full-time job on its own.

The 76-year-old Anwar had refused, insisting that a weak ringgit would help exporters and betted on US central bank, the Federal Reserve, reducing interest rates soon. While there is no doubt Malaysia is a net exporter nation, benefitting greatly from the huge revenues earned by national oil firm Petronas as global fuel prices soared and the manufacturing industry too reaped huge windfalls - overall, Malaysians have suffered with ordinary citizens struggling hard to cope with runaway inflation, soaring food prices and costs of living.

Of late, the ringgit has managed to claw back some ground - shifting away from the above 4.80 versus the US dollar lows amid news that American fund manager BlackRock will through its unit take a strategic stake in local airport operator MAHB. However, the ringgit is still unable to appreciate anywhere near the 4.50, a level which would indicate that it had stabilized and on course for further improvement.

As it stands, many bankers and economists believe the ringgit may re-test 4.80 again if the US Fed further delays its rate-cutting and monetary easing exercise. According to research group, the Economist Intelligence Unit, the interest rate outlook has shifted and monetary policy will stay tighter for longer.

"Asian currencies have come under increased pressure from capital outflows as investors roll back their expectations for interest-rate cuts by the Federal Reserve," the EIU wrote in a report sent to PoliticsNow! 

"More muted anticipation of US policy easing is now driving wider interest-rate differentials between Asian economies and the US. EIU now does not expect the Fed to cut rates until September, at the earliest," it added.

SINGAPORE LESSON FOR ANWAR

Earlier this week, Malaysians were rattled by the bad news in connection to their country's business competitiveness and underperformance in several economic sub-indicators. Not only did the country plunge 7 places to 34th spot in the world rankings, it also fell to 10th out of 14 countries in the Asia-Pacific region, ranking it lower than neighbors Indonesia and Thailand for the first time.

Even more startlingly was the performance of Singapore - which was once part of Malaysia. Not only did Singapore, which has opted keep its dollar strong in contrast to Anwar, buck the trend - but zoomed up to top spot and is now the most competitive country in the world, surpassing Switzerland and Denmark.

Meanwhile, according to Zafrul, the Anwar administration had exceeded its budget last year due to the economic effects of the Ukraine-Russia war - and this too had contributed to the poor competitiveness result.

“What was allocated in the budget was lower than what was spent, so this shows inefficiency. Last year, the Ukraine-Russia war caused the price of raw materials to go up," Zafrul said.

“That’s why our allocation for fuel subsidies and others did not meet the target. In fact, we had overspent, causing our points in the competitiveness ranking to decline,” added the trade minister.

Written by Stan Lee, PoliticsNow!

https://politicsnowmy.blogspot.com