Malaysian Economy

[Schye]

I dont think any company will share the weight of each elements that they use in their model... that is what they use to earn $$ right.

Upon the issue of reviving the peg, in the long term, there wont be much effects of the interest rate but the value of RM will be unstable for a period and this will effect the economy activities that need to deal with foreign currencies.

However, I thought the act of pegging RM was to stabalize the value but not to protect it. Could anyone please advice on this?

[Randomphantom]

If there's any problems with my explanation please do correct it...

The act of pegging the RM would be to stabilise it.

Protecting the RM is another matter, as any form of fixed exchange rate policy would still be exposed to currency attacks by speculators. That said, a strong currency would fare better than an overvalued one. Therefore, undervaluing the peg could be seen as a move to protect the RM. As in the case of China, they are reluctant to shift their peg which is significantly undervalued, as they want to enjoy the benefits of foreign capital inflows.

Real "protection" on the RM would be the tight control on capital flow during the asian financial crisis.

[__earth]

Pegging and capital control is one of the same thing.

The exchange rate in a open economy depends on capital movement. Restriction on capital inflow/outflow effectively controls the movement of the exchange rate, given everything else the same.

But enough of exchange rate. It's kind of clear that the govt won't do anything to the current policy until China changes their policy.

IMO, the biggest issue related to Msia macroeconomy ATM is the budget deficit.

[Thirdshifter]

Whats the total of Malaysia's Debt to date? US$ 5 trillion or something?

[__earth]

USD 5 trillion is a bit too much for Malaysia. We would have been bankrupt if that were the case.

I think it's around USD 130 billion.

[DecentMerson]

if u guys are talking about external debt... according to CIA factbook... it is $53.36 billion (2004 est.)

[Thirdshifter]

I meant to say $0.5 trillion as in $500 billion but as decent pointed out.. well it's at 54 billion. I guess We're actually not doing that bad since the goverment controlled petronas alone brings in about US$ 30 billion/year.

[Schye]

Originally Posted by __earth

But enough of exchange rate. It's kind of clear that the govt won't do anything to the current policy until China changes their policy.

IMO, the biggest issue related to Msia macroeconomy ATM is the budget deficit.

Thats very true. I am going to exchange all my Japanese Yen to RM if China really change their polisy and revising their yen. In fact, Malaysia sent a convoy to China when we peg our RM to ask for their cooperation <---- dont have the time to find the news now, lectures starts in 1 minutes

[Irresistible]

Untill now,Msia economy is not fully recovered yet fr. the economy crisis 1997. Why our country is so badly affected in yr 97? Why not Spore, Hong Kong? It is bcoz our economy is not strong, just one attack, we can't survive.

Undervalued the exchange rate is a good policy to encourage people to invest to recover our economy.
However, it also affected some of the citizen like me. I have to pay ACCA at a higher exchange rate. For those who study in overseas, have to pay more $$ bcoz of the high exchange rate........

However, in economic view, fixed exchange rate policy is the right way to protect RM since our currency is still not strong enough to face challenges.

[__earth]

Originally Posted by Irresistible

Undervalued the exchange rate is a good policy to encourage people to invest to recover our economy.
However, it also affected some of the citizen like me. I have to pay ACCA at a higher exchange rate. For those who study in overseas, have to pay more $$ bcoz of the high exchange rate........

Correction: for those that live abroad, outside of the US and other countries that pegged their currency with the USD.

It is a blessing to live in the US, from forex pov. How are you Anglophiles, Aussiephiles and Europhiles doing? =p

Actually, we have recovered and a return of such severe crisis would not meet another unprepared Msia. Many have agreed that it is unlikely for Msia to face the scenario in 1997/1998 again due to financial reform done in recent years.

At the same time, KLSE level might be lower than it was before but most of it was hot money anyway. P/E was way overblown, in retrospective of course.