Two days ago, the Second Finance Minister, Datuk Johari Abdul Ghani told Malaysians there is no need to panic about the weakening ringgit, stating that the nation has in place an ecosystem that encourages investment and an open economy.
“Don’t panic, we shouldn’t panic,” Johari said. The ringgit, which has weakened along with other emerging market currencies against the US dollar, has all the strength to bounce back, he added.
“We have the ecosystem to make it right, ensure political stability is intact and (continuously) apply the right policies to facilitate investors,” he said when asked on the ringgit’s decline to 4.4805 per US dollar.
The Second Finance Minister’s attempt to assure the Malaysian public has zero credibility and if that’s his only answer to the depreciated ringgit, then 2017 will only see further pains for our currency and economy.
Perhaps, Datuk Johari has forgotten that this is the first year we have hit bottom. In fact, even I myself was a little surprised to discover that his is not the second, but the third consecutive year where the ringgit has become the worst performing currency in Asia.
In 2014, the ringgit slumped 6.3% from 3.281 on 1 January to 3.502 a dollar on 31 December.
Last year in 2015, the ringgit collapsed 18.5% in 2015 from 3.505 on 1 January to 4.303 a dollar on 31 December.
Despite repeated assurances from the Government and Bank Negara that our currency was undervalued and unjustifiably depreciated for the past 2 years, the ringgit tanked a further 9.6% this year.
As the saying goes, once is an accident, twice a coincidence and three times a pattern. Hence the Second Finance Minister sounds exactly like the boy who has cried wolf too many times. No Malaysian with any sense left believes or is assured by what he is saying. In fact, his open call “not to panic” is likely to have had the opposite effect as it showed that the Government is completely clueless and incapable of stemming the disastrous decline of the ringgit.
Worse, even the oft-repeated excuse that the ringgit’s ignominy as Asia’s worst performing major currency was a result of the drastic decline in global crude oil prices is no longer tenable. Malaysia is a major oil producer in Asia (excluding the Middle East).
The Brent Crude price per barrel has indeed declined from US$102.10 in January 2014 to US$60.70 (Dec 2014) to US$36.57 (Dec 2015). However, for the month of December 2016, the Brent Crude has been trading 50% higher at around US$55 per barrel compared to a year earlier.
If the global oil price drop had been the reason why we were the worst performing currency in 2014 and 2015, there is certainly no reason why we should remain the worst performing currency in 2016 with the substantially higher oil prices.
It appears that everyone knows the real cause of the ringgit’s terrible performance except our clueless or pretend-to-be-clueless Ministers. The fundamental cause is because of the complete collapse in confidence in our currency and economy ever since we have been outed as a major global kleptocracy and the failure of the Malaysian authorities and Government to take any action against those responsible.
In a country where the Prime Minister, Dato’ Seri Najib Razak who has been referred to as the Malaysian Official One by the US Department of Justice as having misappropriated US$731 million into his personal bank account in Malaysia can get away scot free while all attempts to bring him to justice, including cartoonists, are met with oppression and intimidation by the police, there can be little surprise that Malaysia has lost the confidence of both local and foreign businesses and investors.
Unless and until there exist Ministers and a Government in Malaysia who is willing to call a spade a spade, and is willing to take concrete actions to redeem ourselves from the kleptocratic bottom, Malaysia’s economy will only continue to struggle to stay afloat and its currency continuing to significantly under-perform relative to its peers.