bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

Prime Minister Mahathir Mohamad faced a rising tide of calls yesterday from the country's exporters to adjust the ringgit's peg to the US dollar to help them to retain their competitiveness.

Growing fears that the peg may be ditched or amended contributed to steep slides in Malaysian stock prices last week, but observers say there is little real chance yet of this happening.

The latest appeal from exporters met with a firm rejection from the government. It came from manufacturers in the northern island of Penang, the heart of the country's export-dependent electronics industry.

The regional chairman of the Federation of Malaysian Manufacturers (FMM), O. K. Lee, said that with the ringgit fixed at M$3.80 to the US dollar, while other Asian currencies retreated, his members faced a struggle to win export orders, according to local reports.

'The second half of last year and this year . . . has spelt drastic changes in the global economic environment,' he was quoted as saying by the New Straits Times.

'Malaysia is no longer competitive with the current ringgit peg.'

Mr Lee said the fixed rate should be replaced by a so-called crawling peg, allowing the ringgit to move in a controlled fashion alongside other regional currencies.

The comments were rejected by Finance Minister Daim Zainuddin, who told Asean finance ministers meeting this weekend in Kuala Lumpur that Malaysia would stand by the peg.

The demand from the FMM comes just days after a leading group of the country's Chinese businessmen issued a similar plea for the peg to be adjusted.

Economists say pressure is building on the peg as the Japanese yen loses ground against the US dollar, tugging other regional currencies downwards in its wake.

So far this year the Japanese currency has lost about 10 per cent of its value against the US dollar. Elsewhere, the Singapore dollar last week hit its lowest level against the US dollar in more than 11 years, while the Thai baht has reached lows last seen during the financial crisis of 1997-1998.

Malaysian exporters have suggested that Kuala Lumpur allow the currency to move within a tight band each month. Each successive month, Bank Negara, the central bank, would fix a fresh peg according to the currency's average traded value over the preceding 30 days, they said.

'There is a need for a flexible exchange rate to reflect the changing economic fundamentals, our competitiveness and the intrinsic value of our ringgit,' the FMM leader told the newspaper.

Despite the growing demands, Mr Mahathir is unlikely to act. Observers say the present mechanism has as much political as economic significance.

The peg was introduced along with capital controls at the height of the regional financial crisis in September 1998.

It forms the centrepiece of Malaysia's policy response to external financial pressures outside framework proposed by the International Monetary Fund and the World Bank.

Economists say Malaysia's declining foreign-exchange reserves may indicate capital leaving the country in expectation that the ringgit could soon be devalued.

Bank Negara has repeatedly rejected this assertion, saying that its reserves remained 'strong, usable and unencumbered'.

The country's reserves have retreated to US$28.9 billion at the end of February compared with US$31 billion at the end of 1999.

Recently, Mr Mahathir said that the peg would be reviewed only if other regional currencies shifted in value by 20 per cent or more.



Manufacturers step up pressure on Mahathir to relax currency peg