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Putrajaya’s frank debt disclosure unusual but positive in long term, experts say

KUALA LUMPUR, May 31 —  Finance Minister Lim Guan Eng’s insistence that Malaysia’s liabilities are greater than previously disclosed is unorthodox but augurs well for transparency in the future, according to economists.

Responding to Malay Mail about the effects of Lim declaring the country to have over RM1 trillion in liabilities, they conceded that the disclosure may concern investors in the short term.

However, all believed it would encourage greater investor confidence in Malaysia’s administration and its finances once the initial concern is overcome.

“Transparency and access to information are critical forms of good governance and as such revealing economic situation does not constitute any irresponsibility,” said Institute for Democracy and Economic Affairs acting chief executive Ali Salman.

He said Malaysians were also entitled to know how and where the government spends public funds, particularly in the wake of the 1Malaysia Development Bhd (1MDB) corruption scandal in which several federal agencies and government-linked corporations have been implicated.

The change in power during the 14th general election led to the discovery that the previous Barisan Nasional government may have committed the country to RM38 billion of 1MDB’s liabilities.

It also came to light that both Bank Negara Malaysia and sovereign wealth fund Khazanah Nasional were made to bear billions of the troubled state investment firm’s debt and interest payments.

The Finance Ministry alone paid nearly RM7 billion directly to 1MDB’s creditors last year.

“The public were kept in dark about the bailouts. That is why IDEAS have been generally critical of role of government in the business.

“All GLCs are not necessarily inefficient or corrupt, but their control and ownership by a central government poses great risks of financial misconduct,” Ali said.

Lim previously said the Pakatan Harapan government would call “a spade a spade” and openly disclose that the Putrajaya’s liabilities were over RM1 trillion or 80.3 per cent as a ratio of the entire economy.

He said much of the additional liabilities had been kept off the books in order to portray the country’s debts as around 65 per cent of the economy.

Yeah Kim Leng, professor of economics at Sunway University Business School, said it would be normal for investors to be spooked by these revelations.

“On the other hand, increased transparency, integrity, credibility and trust in the government will restore investors’ confidence quickly,” Yeah said.

Institute of Strategic and International Studies director of economics, trade and regional integration, Firdaos Rosli said he lauded such openness in the government, but cautioned that officials must be clear and detailed when talking about such data.

He noted that prior to Lim’s explanation, Prime Minister Tun Dr Mahathir Mohamad had made similar claims without supporting information beyond blaming it on the beaten Datuk Seri Najib Razak.

Firdaos stressed the importance to be consistent when defining how much the country owed, however, saying it should always include both debt and liabilities.

“I welcome the government’s declaration of corruption and mismanagement of the previous administration,” Firdaos said.

“However, I don’t think it is necessary for the government to give doubts on the accuracy of our official numbers when it is in fact the interpretation of them,” he added.

First published in, 31 May 2018

2018-05-31T12:17:29+00:00 31st May 2018|News|Comments Off on Putrajaya’s frank debt disclosure unusual but positive in long term, experts say