ON SOLID GROUND: Malaysia will use other existing
financial instruments to tackle any market volatility
MALAYSIA will not impose capital controls for now but will use other existing financial instruments to offset any market volatility.
Prime Minister Datuk Seri Najib Razak said capital controls will only be used as a last resort.
"Most of our debts currently are domestic, especially the long-term ones, and our reserves are strong at over US$130 billion (RM410 billion) and the ringgit has also strengthened recently.
"We are on solid ground and the chances of us defaulting on our debts are minimum," he said in an interview with CNBC's anchor Martin Soong during the CNBC Summit Conference Malaysia 2013, here, yesterday.
The interview will be aired over the network at 5pm today.
Najib, who is also Finance Minister, said despite outflow of foreign funds, Malaysia's reserves are now stronger than the US$30 billion it had during the 1997/1998 financial crisis.
Capital controls include the pegging of the ringgit to the US dollar such as the one seen during the regional crisis in September 1998.
At the time, Malaysia imposed capital controls to curb speculative attacks against the ringgit by unscrupulous hedge funds and bring stability to the economy.
The measures enforced by Bank Negara Malaysia saw the ringgit dive to RM2.40 against the greenback before it was pegged at RM3.80 to US dollar before it was lifted in July 2005.
On negative ratings by international rating agencies, Najib said Malaysia's economy, which is forecast to grow at between 4.5 and five per cent this year, is still resilient as its has strong savings such as in the Employees Provident Fund, the Pilgrims' Fund Board and the Pensions Trust Fund.
On whether Malaysia would sign the Trans-Pacific Partnership Agreement given the possibility of signatory countries having to waive their sovereign rights to independent monetary policies and impose capital controls unless there was consultation between member countries, the prime minister said: "We want the TPP but it has to be on the government's terms and this is still in progress. Some of the terms go beyond the trade and investment considerations and they impinge on the question of sovereignty and state-owned enterprises.
"So, there will be tough negotiations that will be undertaken by us, but essentially they are listening. Our bottom line is that we will not forego our national interests for the sake of TPP."