[Rencana ini terlalu teknikal, tetapi ia cukup baik untuk kita melihat sepandai mana kerajaan Mahathir menguruskan ekonomi negara.

Pelabur sudah tidak berminat dengan Malaysia, kerana Malaysia tidak mampu menyediakan iklim yang baik untuk pelaburan. Mereka tidak yakin pelaburan di sini menguntungkan kerana ada banyak gangguan yang menyusahkan. Itu semua sentuhan orang-orang yang dipilih oleh Mahathir seorang untuk meng'kuruskan kekayaan.
- Editor]

http://www.msdw.com/GEFdata/digests/latest-digest.html

Malaysia: Tracking the Capital Flow

Anita Chung and Daniel Lian (Singapore)

Helped by strong external demand, Malaysia registered a trade surplus of US$15 billion (customs-based) in the first 11 months of 2000, only US$4 billion short of the record US$19 billion in 1999. Full-year balance of payments figures are yet to be released. Customs-based external trade data suggest that the current account surplus was likely to be at about US$9 billion for 2000, the third consecutive year of current account surpluses after the Asian crisis.

In early 1998, the Asian crisis drained Malaysia's reserves to a low of US$20 billion. The current account surplus in 1998 and 1999 helped the central bank, Bank Negara Malaysia (BNM), to replenish the foreign reserve holdings to US$30.9 billion by end-1999. Foreign reserves continued to rise to US$34.4 billion in April 2000 before reverting to a declining trend. However, the current account surplus failed to raise the central bank's foreign reserves last year. Since May 2000, foreign reserves have dropped by nearly US$5 billion to US$29.6 billion in January 2001.

Why Do Foreign Reserves Decline?

When Malaysia reverted to running current account surpluses after the crisis it began to export capital. As long as the surplus is enough to pay for the capital outflow, this should not be a cause for concern. However, last year foreign reserves fell because capital outflow exceeded the current account surplus. Without a full set of balance of payments data available, we estimate that the decline in reserves could be due to:

1. Mis-invoicing understating the trade surplus: To circumvent capital controls there is a tendency for exporters to under-invoice exports and for importers to over-invoice their imports. We have tried to estimate the mis-invoicing of external trade by comparing the value of Malaysia's exports to its three largest markets, the US, Japan and Asia/Pacific, against the value of their imports from Malaysia. Exports to these three markets accounted for 80% of Malaysia's exports in 2000. Due to the difference in the methodology (exports are reported as f.o.b. and imports are reported as c.i.f.), there should be a small discrepancy between the two reported figures.

We found that from 1995 to 1999, the difference between the two sources averaged US$0.7-0.8 billion a month. The implementation of capital controls in September 1998 did not disrupt the trend. However, since January 2000, the gap has widened to an average of US$1.3 billion a month. If we look at the ratio of this discrepancy to the reported export figure from Malaysia, it also rose, from 16% in 1995-99 to 21% in 2000. Similarly, a wider gap was seen between the value of Malaysia's imports from these three markets and their corresponding reported exports to Malaysia. If mis-invoicing in external trade is true, the actual trade surplus in 2000 was understated and it should be higher than the US$15 billion reported by the customs department.

2. Accelerating capital outflow: With the current account surplus at about US$9 billion and foreign reserves falling by US$1 billion, the balance would be a deficit of US$10 billion in 2000, significantly higher than the US$8 billion deficit in 1999. Actual figures from the balance of payments account showed a net outflow of US$1.8 billion in the first half. The balance should have been a net capital outflow in 2H00, which would agree with the decline in reserves in 2H00. In contrast, capital outflow actually accelerated. Malaysia's reinstatement into the MSCI indices in May failed to attract significant foreign capital inflows.

Tracking the Capital Flow

The acceleration in net capital outflow in 2H00, which was reflected in the decline in foreign reserves, could be due to higher capital outflow or a lack of capital inflow. In Malaysia, we believe that it was a combination of the two.

Capital flow focuses on three areas: external debt, FDI and portfolio investments. In 1Q-3Q00, Malaysia repaid a net external debt of US$1.2 billion. The external debt level was not high in Malaysia and debt repayment has averaged US$1 billion a year since 1997. We do not think debt repayment is a major factor contributing to capital outflow.

That leaves FDI and portfolio investment, which we believe, are the culprits. FDI approvals have had two consecutive years of decline since 1999. In the first 10 months of 2000, FDI approvals fell 25% compared with the same period in 1999. We cannot track the actual FDI given the lack of data but weak FDI approvals should point to a decline in actual FDI inflow.

Concomitantly, the net portfolio outflow accelerated and was close to US$3 billion from June to December, compared with US$1.2 billion for 1999. According to BNM data, in June 2000 the external account still showed a net portfolio inflow of US$1.1 billion. However, the account reverted to an outflow of US$1.8 billion in December. In other words, about US$3 billion was repatriated during the six-month period.

Net Capital Outflow Could Occur Again in 2001

Foreign reserves were at US$29.9 billion at the end of 2000. This reserve level was equivalent to 4.5 months of retained imports, low for a country that has a fixed exchange rate. For example, Hong Kong's foreign reserve is about 17.8 months of retained imports, for China, it is 8.8 months of merchandize imports. With capital controls in place the low reserve level should not pose an immediate threat to the ringgit peg. However, we believe that this capital flight reflected investors' loss of confidence in the investment environment. There are two implications for this. First, the portfolio outflow is accompanied by a decline in the stock market index, which suggests the yield from investing in the Malaysian market might not have reached investors' expectations. Second, investors might expect a ringgit devaluation, either through revaluing the peg or abandoning the policy altogether.

If investor confidence is not restored, portfolio investment outflow could be repeated in 2001. Foreign debt repayment has to continue and Malaysia has US$4.7 billion of short-term debt that matures in 2001. To stop foreign reserves from falling further, the government has to come up with some stringent measures, such as implementing forced repatriation of external trade earnings or inducing more FDI, in our view. Strengthening corporate governance and accelerating debt restructuring are keys to attracting FDI. Meanwhile, the central bank's foreign reserve data, which are released on a biweekly basis, should be a good way of monitoring capital outflow.

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