By: Our Correspondent


Malaysia’s central bank is clearly losing the battle to defend its national currency, the ringgit, which fell to RM4.2275:US$1 on Aug. 24 before recovering slightly on Bank Negara buying, with the pace accelerating as the international financial community continues to lose confidence in the country’s  deteriorating economic position and its massive twin financial scandals.

Events over the weekend did little to inspire confidence, with police arresting 29 protesters before they could even start a rally and charging them with Sec. 124 of the penal code, a nebulously worded amendment that deals with “activities detrimental to parliamentary democracy” and carries penalties up to 20 years in prison.

The electoral-reform group Bersih has called for mass street protests in Kuala Lumpur, Kuching and Kota Kinabalu on Aug 29 and 30. Police have vowed to stop the rally and jail its organizers.  The harsh penalties leveled at the protesters over the past weekend may have been aimed at frightening next week’s participants.

UBS issues currency alert

The Swiss bank UBS last Friday, Aug. 21, issued an alert saying the magnitude and speed of the currency’s decline “exceeded our bearish expectations,” falling 24 percent against the US dollar over the past year and bringing the rate to a 17-year low.  But although UBS set a short-term target of 4.35, privately UBS bankers are saying the currency could go to RM5.0:US$1 just this week. It shot through the psychologically important barrier of 4:1 last week without a hitch.

With international reserves having fallen to US$94.5 billion as of Aug. 15, Bank Negara has few tools to stop the slide. Bank Negara Gov. Zeti Akhtar Ahmad last week ruled out currency controls, leaving her only the weapon of raising interest rates, which would play havoc with the economy, given high household and government debt.  With crude oil and other commodity prices sliding, GDP growth fell to a still-respectable 4.9 percent for the second quarter.

The Kuala Lumpur stock market has headed for collapse as well, falling by 12.7 percent since Aug. 3 and 2.17 percent today alone.  Although all Asian markets have been descending in line with China’s crashing bourses, the KLSE is the worst-performing market in Asia and looks set to get worse.  Foreigners have been bailing out of the market, the currency and foreign direct investment, with FDI plummeting by 41.8% to RM21.3 billion in the first half of 2015, although officials said the sharp fall was due to a high base year in the first half of 2014.

Throw it away

Prime Minister Najib Razak is seemingly willing to wreck almost every government institution in his bid to stay in power in the face of a widespread effort by the opposition and members of his own party to oust him over two massive scandals, one a US$681 “donation” from unnamed Middle Eastern interests into his personal account, supposedly in gratitude for fighting ISIS. However, US$650 million was spirited back out of the account in 2013 to another Najib personal account in Singapore – then disappeared out of that account to somewhere else, raising more questions than it answered. 

The second is his stewardship of 1Malaysia Development Bhd., a state-backed investment fund which, according to critics, has US$6.6 billion worth of unfunded liabilities that a revolving door of chief executive officers and accounting firms have been unable to explain. The Sarawak Report, edited from the UK by Clare Rewcastle Brown, alleged that hundreds of millions of dollars have been diverted to accounts in Singapore and elsewhere held by the young Penang-born tycoon Jho Taek Low, who was instrumental in persuading Najib to establish the fund.