The Malaysia Page - chronology

chronology

Idanna Kaplan and Avery Ke are the main contributors of the material on this page.

Aug 16, 1997. The Malaysian ringgit hit new lows of M$2.8210 to the dollar. The currency fell more than 6% after the central bank allowed the currency to float freely outside of its trading band. "Economists said that in Malaysia’s case, recent conflicting statements by Dr. Mahathir Mohamad, the Prime Minister, and his deputy, Mr. Anwar Ibrahim, over whether to delay some large infrastructure projects had contributed to selling pressure." [Malaysian and Indonesian currencies fall. Financial Times: London. pg. 3.]

Aug 20, 1997. Standard & Poor’s downgraded Malaysia’s sovereign rating from "positive" to "stable" and said that Malaysia was unlikely to receive an upgrade within the next 3 years. The reasons given by Standard & Poor’s were that the current account deficit was 6% of GDP, the ringgit remained under threat, and their prediction that total credit to public and private enterprises would reach 170% of GDP. [S&P says it is unlikely to upgrade Malaysia’s debt. Financial Times: London. pg. 24.]

Aug 21, 1997 "Approvals for investment in manufacturing in the first half reached only 5.4 billion ringgit, of which 43% was from foreign firms. This pace is down sharply from the 1996 full year level of 17.1 billion ringgit." Other fears include the rising cost of labor in Malaysia and a looming property glut. [Malaysia’s economy needs a dose of discipline. Far Eastern Economic Review. pg. 80.]

Aug 26, 1997. Mahathir Mohamad has not given up on his large infrastructure projects that have been the hallmark of his leadership. These include the M$13.6 bn Bakun dam, the Multimedia Super Corridor (at least M$35 bn), a new administrative capital for the state of Sarawak, and the longest bridge in the world linking Malaysia to Sumatra. [Mahathir’s whitewater ride. Financial Times: London. pg. 11.]

Aug 27, 1997. Maybank, Malaysia’s largest commercial bank, increased bad debt provisions to 71% of outstanding loans in the year to June 30. S&P downgraded Maybank’s outlook to "negative" from "stable". [Cautious Maybank lifts provisions for bad debt. Financial Times: London. pg. 19.]

Aug 27, 1997. The ringgit fell to M$2.7850 and the stock exchange fell to its lowest level since 1993. The Kuala Lumpur Stock Exchange’s (KLSE) benchmark index fell 3.16 % closing at 856 points. [Fresh turmoil hits rupiah, ringgit. Financial Times: London. pg. 3.]

Aug 28, 1997. "Malaysia is today due to abolish a levy on foreigners’ purchases of property in an attempt to support real estate prices before an expected glut materialises next year." The levy was originally intended to reduce foreign speculation in the real estate sector. The property index of the KLSE did not react to the news. Rents in the capital have already started to fall. [Malaysia ends levy to help property market. Financial Times: London. pg. 6.]

Aug 29, 1997 "The ringgit hit a new all-time low after the KLSE effectively banned the short-selling of shares. The main KL Composite Index fell 4.22% to a four year low." The ringgit was at M$2.8920 to the dollar—it has lost 15% since July 1. [Ringgit leads renewed Asian turmoil. Financial Times: London. pg. 25.]

Aug 30, 1997. Economic growth figures released by Bank Negra yesterday were met with skepticism. "The bank said that growth was an annualised 8.4 % in the second quarter of this year. It also revised upward the growth rate in the first quarter to 8.5 %, from an earlier reported 8.2%. … Authorities have asked some local banks to desist from calling in their margin loans to stock market investors, even when collateral limits have been exceeded. ...Stocks are also regularly used as collateral for new loans, with investors borrowing up to 60% of the value of the shares they hold. … The most vulnerable companies are believed to be those listed on the second board of the KLSE, which has declined 45% from its peak this year in March. The average gearing of second board companies is 195%--massively overborrowed by universal standards, official figures show." [Malaysia’s credibility takes a battering. Financial Times:London. pg. 3.]

Sept 4, 1997. "Malaysia’s PM Mahathir Mohamad is setting up a M$60bn fund to support the plunging national stock market and put up defenses against "racist" foreign speculators who planned to impoverish the country. The key element of the new plan—announced yesterday after the KLSE’s main index closed down 5.65% to a four year low of 750.76—is that shares sold by Malaysians will be bought by the fund at a premium, while those sold by foreigners will fetch only market prices." State agencies have already been buying stocks to stem the market’s decline. The PM said yesterday, "I say openly, these people are racists. They are not happy to see us prosper. They say we grow too fast, they plan to make us poor." [Malaysian PM sets up GBP 12bn fund to support market. Financial Times:London. pg. 1.]

Sept 5, 1997. Dr. Mahathir reversed the ban on the short selling of shares and put on hold several large projects, including the Bakun Dam project. He left in place the plan to build a fund to shore up key stocks. [Fragility of Mahathir’s vision is exposed. Financial Times: London. pg. 3.]

Sept 5, 1997. The compost index was down 2.6% to 731.12. "Anwar Ibrahim, deputy prime minister, has said that Malaysia might use the draconian Internal Security Act to punish locals who aided foreigners in selling down Malaysian shares." [Kuala Lumpur’s 10-day fall reaches 21%. Financial Times: London. pg. 35.]

Sept 6, 1997. The KLSE’s main index rose to 821.59, a gain of 12%, its biggest single day gain since January 1994. The ringgit also strengthened against the dollar to M$2.94. The gain was attributed to the policy reversals announced by Dr. Mahathir. One reversal against banning short sales on the KLSE was reinstated, however. [Mahathir U-turn flues surge in KL market. Financial Times: London. pg. 3.]

Sept 8, 1997. The government is likely to spend much less than its announced M$60bn to prop up the KLSE. "Dr. Mahathir acknowledged that a stock-market recovery would reduce the urgency of raising rescue funds and called the plan a ‘standby’ measure." [Malaysia spending to boost stocks is likely to be limited. Wall Street Journal. pg. A15. ]

Sept 8, 1997. "Mahathir Mohamad, Malaysia’s PM, toned down weeks of anti-foreign rhetoric at the weekend after a meeting with foreign fund managers. He described them as ‘serious investors’ rather than manipulators of the local stock market." [Mahathir tries to reassure foreigners. Financial Times: London. pg. 4.]

Sept 22, 1997. At the annual meetings of the World Bank and International Monetary Fund, Mahathir Mohamad, lashed out against George Soros (international investor/speculator) and blamed him for Malaysia’s troubles. He said, "I am saying that currency trading is unnecessary, unproductive and immoral. It should be stopped. It should be made illegal. Quite a few people who are in the media and in control of the big money seem to want to see these Southeast Asian countries and , in particular Malaysia, stop trying to catch up with their superiors and to know their place." Mr. Soros replied that Dr Mahathir’s comments were "so inappropriate that it doesn’t deserve serious consideration" and that the PM is "a menace to his own country. Interfering with the convertibility of capital at a moment like this is a recipe for disaster." [Soros and Malaysia’s Mahathir cross swords. The Wall Street Journal. pg. A16.]

Sept 22, 1997. "Anwar Ibrahim, deputy prime minister and finance minister, is winning credit as the calm voice of economic reason, particularly among the foreign traders and investors who may matter most to Malaysia’s economic stability. .. Last week, while Dr. Mahathir was traveling abroad, Mr. Anwar appeared to consolidate his grip on economic management. He confirmed the postponement of several huge infrastructure projects, vowed to reduce Malaysia’s current account deficit and said Malaysia would cut public spending by 2%." [Malaysia’s finance chief gains in stature: Anwar emerges from economic crisis as voice of reason. The Wall Street Journal. pg. A18.]

Sept 25, 1997. Depositors initiated a run on Malaysia’s largest finance company, MBF Finance, yesterday. Bank Negra urged depositors to remain calm and pledged the funds to protect depositors if necessary. They stated, "Bank Negra Malaysia would like to reassure depositors that there is no cause for alarm. The public should remain calm and not resort to premature withdrawals which could cause them to lose interest accrued." The run was attributed to rumors that MBF Finance’s chairman was ill or had died. [Depositors flee Malaysian finance group. Financial Times: London. pg. 3.]

Sept 25, 1997. In an interview with Michel Camdessus, Managing Director of the IMF, he gave his outlook on the East Asian countries. In regards to Malaysia he stated, "They know pretty well that we will certainly tell them that it is prudent in the present context to slow down spectacular investments, strengthen the monetary stance to prepare themselves better against speculation. But I believe that they should take this approach and not rely too much on administrative controls which wouldn’t be helpful in establishing confidence and in promoting the long-term development of Kuala Lumpur as a financial centre." [Interview—Michel Camdessus: The art of control. Far Eastern Economic Review. pg. 64.]

Oct 2, 1997. "The ringgit’s collapse to all-time lows, and PM Mahathir Mohamad’s renewed call either to regulate or ban foreign exchange dealings sent KLSE down 2.3 %. At the close, the composite index was 18.7 lower at 795.83." [Collapse of ringgit hits Kuala Lumpur. Financial Times: London. pg. 51.]

Oct 7, 1997. "Mahathir Mohamad, Malaysia’s Prime Minister, dismissed speculation that he may resign, and criticised foreigners for allegedly trying to oust him by sowing discord between him and his deputy, Anwar Ibrahim." [Malaysian PM denies rumours. Financial Times: USA edition. pg. 1.]

Oct 18, 1997. Malaysia yesterday announced a new budget that is designed to cool the economy. In the 1998 budget, they projected 7% growth, a 1.9% increase in government spending, and a cut in corporate taxes from 30% to 28%. Financial markets did not react strongly to the news, the KLSE’s main index was down .9% by 7.22 to close at 794.80. The ministry of finance also announced in its annual economic report that they expected M$13.9 bn in short-term capital to leave the country in 1997. [Malaysia moves to cool economy. Financial Times: London. pg. 3.]

Oct 30, 1997. Critics of the new budget argue that it is mildly expansionary. Also independent estimates project GDP growth to be between 5 and 6%. Critics argue that they worry the government will increase spending to reach their growth targets. The government expects a surplus of 3% of GDP. [Is Malaysia’s budget what the doctor ordered? Far Eastern Economic Review. pg. 61.]

Nov 6, 1997. ASEAN has set up a central bank forum to "formalise co-operation between member central banks and financial institutions such as the IMF." [Central bank forum set up. Financial Times: London. pg. 3.]

Nov 20, 1997. Of all of the East Asian countries involved in the economic crisis, Malaysia’s Mahathir has the least to fear politically. Mahathir is the head of United Malays National Organization (UMNO) the dominant party in the United Front government. UMNO’s platform is based on a plan to bring Malaysia to developed country status by 2020 by raising the income of the bumiputra class. The first signs of whether the crisis will affect Mahathir will be in April when the UMNO holds its first party polls to elect the delegates who will vote in the 1999 election. [Southeast Asia: the next battle. Far Eastern Economic Review. pg. 18]

Nov 27, 1997. A recent increase in tension between the United States and Malaysia is helping Mahathir politically. The US has responded to Mahathir’s previous remarks by suggesting that Malaysia’s national oil company, Petronas, could face sanctions if it invests in Iran. Additionally, a US congressman drafted a bill asking Mahathir to resign over his alleged anti-Semitic remarks. A sign that these recent remarks may have helped Mahathir is Anwar’s announcement that he is initiating an unprecedented parliamentary vote of confidence for Mahathir. The vote is expected to be passed unanimously. The US Ambassador to Malaysia, Ambassador Malott, reminded Malaysia of the special role played by the United States in Malaysia. He stated, "Let us remember the facts. The U.S. buys more Malaysian products than any other county… We’ve invested more here in manufacturing, energy and services than anyone else… We’ve transferred more technology and educated more Malaysian children than any other nation." Ambassador Malott also reminded Malaysians that if their Multimedia Super-Corridor has any chance of success it will require the co-operation of the United States. [Two-edged sword: anti-American mood angers U.S. but helps Mahathir. Far Eastern Economic Review. pg. 22.]

Nov 27, 1997. Clifford Herbert, the secretary-general of Malaysia’s Ministry of Finance will resign at the end of the year. [Intelligence. Far Eastern Economic Review. pg. 14.]

Dec 4, 1997. PM Mahathir has announced the formation of a National Economic Action Council that will review all economic maters. He compared this Council to the National Operations Council, which suspended the Malaysian constitution in 1969 following the country's race riots. This action along with a ban on senior government officials from taking vacation, and postponement of major projects, are all seen as methods to prevent the IMF from intervening. Analysts believe that the IMF would force a rethinking of the country’s long-time development plan: the New Economic Policy. This program is designed to raise the living standards of the bumiputra class (60% of the population) with subsidies and special access to government projects and education. [Anything but that: Malaysia’s worst fear: a visit from the IMF. Far Eastern Economic Review. pg. 82.]

Dec 5, 1997. "Malaysia’s currency plunged to a new low against the U.S. dollar here after PM Mohamad reportedly confirmed that the country will proceed with a 10 billion ringgit road, rail and pipeline project [the land bridge project between Malaysia and Thailand]… The currency fell about 1.7% yesterday to a record low of 3.73 ringgit to the dollar." [Malaysia’s currency drops to new low after costly freight plan is revived. The Wall Street Journal. pg. A15.]

Dec 11, 1997. "On November 30, the KLSE clamped down on five brokerages believed to be facing cash-flow problems. At least another seven are suspect, say bankers and analysts. Most carry huge loans to favored clients who pledged paid-up shares as collateral." [Boom and bust: Asia’s finance firms are headed for a shake-out. Far Eastern Economic Review. pg.64.]

Dec 18, 1997. On December 5, Anwar announced a reversal of economic policy. He revised downward growth estimates for 1998, cut government spending, and postponed all megaprojects including the land bridge. It was unusual for Anwar and not Mahathir to make this kind of policy change. Some analysts suspect that Anwar wanted to pre-empt measures that might be taken by the newly formed National Economic Action Council. Analysts worry that well connected businessmen will be appointed to the council and that they may take steps to protect their interests. "It’s clear that the crisis of confidence was reaching dangerous proportions. … According to several bankers, huge amounts of money were withdrawn from at least five local banks and placed with foreign banks incorporated in Malaysia. [Malaysia: Hit the brakes: Deputy Premier Anwar decisively halts the high-growth policies that have left Malaysia’s financial system overextended; He’s now firmly in charge of the economy. Far Eastern Economic Review. pg.15.]

Jan 3, 1998. In an attempt to restore confidence in the banking system, Malaysia’s central bank proposed merging finance companies and commercial banks to create healthier institutions. While no explicit plans were announced, Bank Negara said that 70% of business was concentrated in 5 or 6 finance companies and that by the end of the first quarter it would be 90%. The central bank stated, "With merger plans well on track, depositors should be assured their deposits would be in bigger, hence stronger, finance companies, " and that "all deposits plus accruing interest would be safe, irrespective of finance companies involved in the mergers." [Malaysia sets out finance sector reforms. Financial Times: London. pg.3.]

Jan 12, 1998. "Malaysian authorities have taken the controversial step of reaffirming a waiver granted to UEM, which excuses the road toll company from having to make a general offer for the shares of its parent Renong, a politically well connected infrastructure company… The question of whether stock market rules would be waived for UEM has been seen as a test of the Malaysian government’s commitment to institutional regulations and transparent corporate governance… The UEM deal, for which the road toll operator had to borrow M$2.4 bn was seen as a forced bailout of a heavily indebted parent company by its subsidiary." [Malaysia waives share rules. Financial Times: London. pg.4.]

Feb 4, 1998. The KLSE’s main index rose up 23% to close at 701.31. This represented a gain of 131.80 points since January 26. The market had been closed for 5 trading days for Ramadan. [Investors pour into Malaysia. Financial Times: London. pg.4.]

Feb 6, 1998. In the Finance ministry’s consolidation plan, the 39 finance companies will have to merge into 6 groups by March 31. Each group will be centered on an anchor firm. The government cannot force the firms to merge, but has announced that any firm that refuses to merge will not be bailed out if they run into trouble. Industry officials expect that the consolidation will cost about 25,000 jobs. [Malaysia prods banks to merge. The Wall Street Journal. pg. A17.]

Feb 7, 1998. "Bank Negara Malaysia is reducing the statutory reserve requirements (SRR) of banking institutions, in what economists say is an attempt to ease the liquidity constraints of the smaller institutions and more, important, to lay the groundwork for a series of mergers." The reserve requirement would be cut from 13.5% to 10% of their eligible liabilities. "Bank Negara said reducing the SRR would release about M$14 bn to the banking institutions." [Reserve requirement cut. Financial Times: London. pg. 2.]

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This page was last revised on September 09, 1998.