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and only at the peak of those operations did it sell US$1 billion a day.[82]

A central bank normally traded in the foreign-exchange market to influence the exchange rates of its country's currency, to buy other currencies in order to pay overseas obligations, or to occasionally adjust and balance its foreign-exchange reserves. Denials notwithstanding, Bank Negara was out to turn a profit. It actually needed cash on the way to buying heavily into the transportation industry. In September 1989, Bank Negara acquired 21 per cent of Malaysian Airlines System from the Minister of Finance Inc. for about RM772 million, raising its stake in the national flag carrier to 42 per cent. And in June the bank paid an estimated RM680 million to increase its stake to about 30 per cent in Malaysian International Shipping Corporation, the country's largest shipping company operating overseas.[83] The transactions were made by Finance Minister Daim Zainuddin to enable the government to pre-pay foreign debt.[84]

It was precisely in this period, between June and September, that other traders reported Bank Negara entering the market at the same time almost daily: at the start of morning activity, before the market had established a clear trend. Its heavy trading volume was enough to influence the direction of the market during Asian trading hours. Carrying out much of its trading in the highly liquid Singapore market, Bank Negara was able to cause the dollar to move up or down by between 0.75 yen and 1 yen.[85]

The bank cleaned up nicely at first, even if it irked the Fed on principle and upset the central banks of other major industrialized countries, which were trying to weaken the value of the dollar while Bank Negara's trades often attempted to strengthen it. Boasting one of the most sophisticated trading rooms in the world, Bank Negara turned itself into a profit centre for the government by using the country's rapidly mounting gold and foreign currency reserves to play the markets in Asia, Europe and the United States.

In retirement, Dr. Mahathir confirmed he had given Bank Negara the green light to continue currency trading after he was told about it. "They had a trading room and they informed us, and I went to see the trading room. I was quite impressed...I thought it was great and I did not disapprove of it," he said. Dr. Mahathir said the young people doing the trading were "very quick in making decisions" and he described their activities thus: "Not so much manipulation, which I was much against, but they were seeing the movement of currencies and they thought that if they are judicious in the management they can make money."[86]

As always, Dr. Mahathir was keen to take on the developed countries at their own games. He and other Malaysian leaders deplored what they saw as the arrogance of currency initiatives taken by the key industrial nations without consulting the rest of the world. Rather than submitting to such dictates, Bank Negara was encouraged to go on the offensive, joining the pack of private currency traders trying to outwit the major central banks.[87]

Dr. Mahathir was particularly unhappy about the 1985 Plaza Accord, by which the then G-5 — the United States, France, West Germany, Japan and Britain — agreed to devalue the dollar in relation to the yen and deutsche mark. The aim was to reduce the U.S. current account deficit and help the American economy emerge from recession. The dollar declined by 51 per cent against the yen over the next two years. Malaysia and some other Southeast Asian countries reaped huge benefits as Japanese manufacturers moved offshore in search of cheaper land and labour to remain competitive. But there was a downside, too, as the plethora of yen loans that Malaysia sought under the government's Look East policy became much more expensive to repay. Dr. Mahathir focused on the negative side. In one of many criticisms of the Plaza Accord, he branded it "a political decision made largely because Japan's trade rivals wanted to reduce the competitiveness of Japan". The yen appreciated to the detriment of the Japanese economy and made life more difficult for people in many poor countries, for whom cheap Japanese goods meant higher living standards, he said.[88]

Bank Negara revelled in its anomalous reputation as a "maverick, yet conservative institution".[89] Under Governor Jaffar Hussein, it won respect for nursing Malaysia's shaky financial system back to health after a recession in 1985-86.[90] Central bank inspectors became adept at detecting bad loans, mismanagement and fraud, swooping on errant banks, finance and insurance companies, and savings and credit societies. Where necessary, Bank Negara did not hesitate to take them over temporarily. But by engaging in unbridled currency trading, Bank Negara was not only assuming irrational risk but also indulging in monumental hypocrisy. Part of its mandate was to curb speculation, and it periodically reprimanded or punished foreign banks for what it called currency manipulation and rigging.[91]

Finding itself on the losing end of George Soros's bet against sterling on that fateful day in September 1992, Bank Negara was helplessly exposed. Rather than admit that it behaved irresponsibly and grossly misread the market, the bank tried to conceal the disaster. Bank Negara buried a brief reference to a charge of RM9.3 billion against special reserve funds deep in its balance sheet at the end of its 1992 calendar year annual report, which ran to nearly 300 pages. The depth of the hole simply was not immediately apparent among discrepancies and accounting changes noted in the balance sheet. Only in response to written questions from the foreign press did the bank issue a three-page statement, attempting to explain the 93 per cent plunge in special reserve and contingency funds to RM752.6 million at the end of 1992 from more than RM10 billion a year earlier.[92]

Bank Negara attributed the charge almost solely to the appreciation of the Malaysian ringgit against the bank's foreign-exchange holdings. It did not mention going for broke on the British pound and other currencies that fluctuated wildly and

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