THE FINANCIAL CRISIS OF 1997 - 1998

THE FINANCIAL CRISIS OF 1997 - 1998

By Nor Mohamed Yakcop

A moment comes, which rarely comes in a lifetime, when a particular event redefines a person's life and changes the course permanently. For me, the meeting with Dr. Mahathir Mohamad in Buenos Aires (Argentina) on the evening of October 3, 1997 was such an event. It enabled me to devote the next 6 years of my life working for Dr. Mahathir Mohamad, meeting him almost daily. In the process, it enabled me to see, at very close range, the abilities of this great man http://www.chedet.com/2008/06/oil-price.html> . The combination of many noble qualities in one person is rare, and it is this unique combination that has enabled Dr. Mahathir Mohamad to transform Malaysia from an otherwise typical third world country into a thriving and vibrant nation, well on the way to become a developed nation. It is also this combination of qualities that enabled Dr. Mahathir Mohamad to save Malaysia from becoming another IMF nation during the financial crisis of 1997 - 1998. I am often asked about my involvement in the recovery plan implemented on September 1, 1998.

It began on September 29, 1997, when I received a telephone call from the office of Dr Mahathir Mohamad informing me that the Prime Minister wanted to see me. The PM was in Cuba at that time, and I asked (in jest) if I was to meet the Prime Minister in Cuba ! I was told (not in jest) that he will be arriving in Buenos Aires on October 3, 1997 and I was to make sure I was in Buenos Aires at least a day before he arrived. I packed my bags and left for Buenos Aires, and arrived in Buenos Aires on October 2. The PM arrived the following day at 5 pm and we met immediately at his suite. He informed me that he had asked many people to explain to him what was causing the financial crisis but no one was able to give him a satisfactory reply. He asked me whether I could explain to him what exactly was happening. I asked him how much time he had, and he said two hours.

I explained to him how the forex market works, about short positions and long positions, about hedging and how currencies are borrowed and sold, the difference between "bid" and "offer" and how funds can be transferred from one country to another at the click of a button. I also explained how the equity market works and the relationship between the forex market and the equity market. Dr. Mahathir hardly said anything, asked one or two questions, and listened intently. After two hours, he had to end the meeting to get ready to go for an official dinner. He asked me about my plans for the night and I said I had been invited for the same dinner. Dr. Mahathir said to me: You go back to your room and write down all that you have been telling me for the last two hours, and see me at 7 am tomorrow. I went back to my room, skipped dinner, and wrote it all down, finishing at about 6 am. I saw him the next morning at 7 am and gave him the report.

He asked me to take a rest and come back again at 2 pm.. When I returned, he told me that he had read the report and that he now understands what was happening in the financial markets. We started discussing various methods of overcoming the crisis, and our discussions continued when we returned to Malaysia. I met him almost daily for discussion, sometimes at his house and sometimes at his office. We tried a few mechanisms to overcome the crisis, some of which worked initially, but the hedge funds were so strong that it was difficult to proceed successfully with these mechanisms. In early 1998, Dr. Mahathir Mohamad asked me to explore the idea of imposing an exchange control regime to overcome the crisis. I remember preparing voluminous notes on this subject.

Dr. Mahathir went through the notes carefully, and kept asking for more and more details. We went through many rounds of discussion, until he was finally convinced both with the concept as well as the proposed mechanism. The rest, I guess, is history. Dr. Mahathir also asked me to prepare a paper on how to put an end to Malaysian shares traded in CLOB (Central Limit Order Book) in Singapore. Dr. Mahathir was of the view that an important reason for the falling stock market was the short-selling of Malaysian stocks in CLOB. I prepared the report and Dr. Mahathir understood, for the first time, how exactly CLOB operates. The report, which was also implemented on September 1, 1998, put to an end the trading of Malaysian shares in CLOB.

I should add that the exchange control measures were crafted in such a way as to minimize the control aspects and maximize the outcome. The Prime Minister went through the proposed mechanism many times to make sure that the control elements were as few as possible, but adequate enough to ensure a positive outcome. There were no bureaucratic elements in these measures, such as requiring importers to obtain Bank Negara's permission to import. The Ringgit was also pegged at a level where it was not overvalued. In almost every other country, which imposes exchange control measures and pegs its currency, there would, almost by definition, be numerous bureaucratic controls, and the currency would also be pegged at an overvalued rate.

It is often assumed that the system of exchange control (including fixed exchange rate) that we implemented on September 1, 1998 saved the country. The measures of September 1, 1998 were undoubtedly a necessary condition, but it was not a sufficient condition to overcome the crisis. Malaysia was saved, not by exchange control measures per se, but by Dr. Mahathir Mohamad. Let me explain. Any other developing country, facing a similar crisis, if it had introduced the measures that we introduced in September 1998, the measures would probably have failed. The fact that in Malaysia these measures succeeded is due to the ability and character of Dr. Mahathir Mohamad.

The economy and the financial system, under Dr. Mahathir's leadership, was in a very healthy state-healthy enough for the exchange control measures to be implemented without negative consequences. Moreover, the Prime Minister's hands-on management style enabled quick and timely decisions to be made, which was vital under the new exchange control regime. Dr. Mahathir, as Prime Minister, had ensured that the Malaysian economy was fundamentally strong. Ringgit was strong and stable. On the back of the currency stability (at RM2.50 against the US dollar) Malaysia was doing very well. At the end of 1996, real Gross Domestic Product (GDP) grew at almost 8.5 per cent and the growth was expected to continue for many more years.

The government was enjoying a fiscal surplus. The external debt was low, at 40 per cent of the Gross National Product (GNP). The current account of the balance of payments had narrowed from a deficit of 10 per cent to 5 per cent of GNP, and was expected to improve further. Inflation was at its lowest at 2.1 percent. We had steady growth of over 8 per cent for a major part of that period. And this fundamental strength of Malaysia was a critical factor that enabled the exchange control measures to succeed. For a period of more than a year after the measures of September 1, 1998 were implemented, the Prime Minister met with a small group of us everyday - 6 days a week - for at least 2 hours to go through various economic data, including data on loan growth, exports, imports, property overhang etc.

This enabled the Prime Minister to take quick actions, whenever required. I remember one morning when we were going through the property figures, he looked at me and directed that I should organize a property fair to clear the overhang of properties. I did, and property worth more than RM 3 billion was sold. Even after the crisis was over, Dr. Mahathir continued to meet with the group regularly, though no longer on a daily basis. And Dr. Mahathir continued to go through all the economic data with a sharp pencil. No other Prime Minister in the world, either in developed or developing countries, employs such a hands-on approach in managing the economy.

We can see, therefore, that it was not the exchange control measures per se that saved the country but the man - Dr. Mahathir Mohamad - himself. The period 1997 - 1998 was, to paraphrase Charles Dickens, the worst of times, but it was also the best of times. The worst conditions brought out the best in Dr. Mahathir Mohamad. There is a saying that a good leader is like good tea - you only know the true quality when he is in hot water ! Throughout the crisis, the Prime Minister was focussed on resolving the crisis. Day and night, he thought of nothing else but the crisis.

He read all he could on finance; he kept asking me to prepare notes on various technical issues. Sometimes he was sick with bad flu and cough, but he did not take time off to rest. He was convinced that he had to understand the issues before he could work out the solutions. His native intelligence and ability to focus on core issues were there throughout the crisis. He did not show any sign of fear even at the worst of time, only concern at the fast deteriorating state of the economy. He was, at all times, confident that he would prevail in the end. I would like to add two additional points related to the financial crisis. The first is that, in implementing the measures of September 1, 1998, Dr. Mahathir not only saved Malaysia but the neighbouring countries as well.

Let me explain. When Malaysia imposed its exchange control measures on September 1, 1998, the currency speculators realised that the other affected countries (Thailand, Indonesia and South Korea) could also impose similar controls, and they, therefore, stopped their activities in its track. The speculators backed off. They bought back the currencies that they had sold. This is resulted in the regional currencies appreciating. Moreover, the International Monetary Fund (IMF) was not happy with what Malaysia had done, particularly since, after implementing the measures, we did exactly the opposite of what the IMF wanted us to do, i.e. we lowered our interest rates and injected liquidity into the system. The IMF, therefore, started relaxing conditions in other countries and allowed them to lower their interest rates and allowed them to inject liquidity to stimulate their economies so that Malaysia would not outperform the IMF countries.

Therefore, it is no exaggeration to say that Dr. Mahathir Mohamad not only saved Malaysia, but the other affected countries in the region as well - Thailand, Indonesia and South Korea. My second point is regarding what would have happened if the exchange control measures were not implemented. If the measures were not implemented, many of corporations in Malaysia would have gone under, due to the high interest rates http://jebatmustdie.wordpress.com/2008/04/30/theres-something-about-anwar-alright> . When the corporations fall like dominos, banks would have faced severe liquidity and solvency problems due to the ballooning NPLs. The problems of the banks would have resulted in a credit squeeze, which would have led to another round of corporate failures. The Government's revenue would have fallen drastically as fewer firms would be paying corporate taxes, thereby reducing the Government's ability to stimulate the economy through fiscal policy measures. As a result of the problems faced by corporations and banks, unemployment would have increased substantially, leading to a second round of problems.

This is the classic vicious cycle, which could have, in the end, destroyed the social and political stability of the country. This was a scenario that was waiting to happen. It did not happen because of the decisiveness and guts of Dr. Mahathir Mohamad, who decided to take the path less travelled. We owe Dr. Mahathir much gratitude for what he has done for Malaysia over the last 22 years. Solving the financial crisis of 1997 - 1998 was just one, albeit perhaps the most important, of Dr. Mahathir Mohamad's many contributions to the nation. On a personal note, over the last 6 years, I have come to admire this great man for his abilities, his high moral values and, most of all, for his sincerity. Certainly, a man like Dr. Mahathir Mohamad is not born everyday. (23rd. October, 2003)

Sign - Hijau Atau Merah?

Dear company collegue,
Anonymously written.

For your info, we have already stated our case to the management last Thursday. We have engaged the management enquiring them into getting clarifications for the new salary increment. Believe me, it did catch their attention. And on Friday, a group of staff have collectively stated their case to the advocates, hence HR. The two main issue that was brought up are the concern as the salary difference are not equitable throughout the years of difference, and that the salary gap between those with years of experience almost matches the salary of new entrant.

So far, the Carigali HR seems concerned and has been very helpful, and they are trying to seek further clarification from the Task Force. At the end, the group has demanded two things: HR to share the formulation of how the new salary is calculated and the justification on the differences for the salary adjustment. But then, there’s nothing else that can be done at this point in time.

If you choose to run petition, you can expect that it will trigger just the wrong side of the management. And look at this:

STAFF WILL REJECT
- New entrants are still getting the new salary increment regardless. So you can see yourself earning much lower than the new entrants.
- New allowance package will not kick in (your meal, travel, new salary progression, etc)

STAFF WILL ACCEPT
- We have stressed to them that loyalty will remain a concern

In the end, you see that you are in the losing end with only ONE option to choose from.

Don’t just give in to resentment! Perhaps you are angry that you are not getting what you deserve and started to compare against others. But the HR answer was that you are not supposed to make comparison. What you earn is Private & Confidential and you are not allowed to share it with others. In other words – it’s better than nothing, right?

So listen, I know that in the angry mode you’d be telling yourself that the company does not value your years of experience. The thing is, if you are an E1 in the market (a junior engineer in this case), the market does not treasure your experience and hence what they have applied here. So you would see that you are not getting much higher than the new entrants. Yes, the task force must have consisted of some older G that are probably envious to the current state in which we lack of E2, and E1 are mostly the doer nowadays. They don’t value our experience because during their times, you do not seek independence within 2 years of working experience. Well, they should wake up obviously. I doubt that there was any Technical personnel view accounted for when they came up with the salary revision.

But anyway, that’s an old issue. Let’s look ahead and work with what we have. Yes, pride should be accounted for. The company should reward us for our hard work, and differentiate performers with non-performers. But with debts of more than RM300 K, I am in no position to argue. Perhaps I should just reap the company of its knowledge and trainings, and ensure that I use this opportunity to enrich myself. Some might not be here long, but for some others, you’d realize that the package will reward you long term. They are making it up in other ways, ie. Salary progression increment which has doubled, new allowance package and revision to your current EPF. I had my first tantrum with the company on Thursday, but I soon settled off. Some say that I went back against what I believe so much, and decided to accept. But my answer is I do not want to be on the losing end.

Yes, I will accept. But at the same time, I’ll try harder into making the management listens. If I succumb to rejecting the offer, I might just not get anything. And dear friends, 16th September political uncertainty is something to ponder.

Anonymous?

Peace Not War

The first world war is what people terms as The End of War. Well, no one has then figured that it was actually the very beginning of a disaster.

What makes human think that they are superior? What has mankind do that they could be proud off?

Remember Hiroshima & Nagasaki – the mass massacre of more than 150’000 Japanese civilian and US prisoners of war, and injuring tens of thousand more? Imagine what the pilot must have felt the moment he agreed to take up the task of dropping Little Boy Bomb on the U.S. B-29 Enola Gay on August 6, 1945, which explodes with the force of 15kilotons of explosive AND three days later in Nagasaki, the Fatman bomb dropped by the U.S. B-29 Bock’s Car exploding with the force of 22 kilotons explosive. What then would be running through the pilot’s head when the nuclear weapon actually hit the ground?
You can see remain of dead bodies and shattered buildings within a mile. The survivors waited for death as emergency services were minimal. Cremation fires were burning day and night. This my friend, was THE merciless killings that had change the course of World War II.

At one time, Malaysia under the leadership of then Datuk Seri Dr Mahathir Mohamad has reach-far in promoting peace and harmony.

Bosnia Herzegovina was a good example. The Muslims, Croats, and Serbs were racially indistinguishable, except perhaps for their religious belief. When Serbs and Croats partition the country among themselves through ruthless ethnic cleansing in particular the genocide of Muslims, it shattered the world.

Remember the Summer of 1994 in Srebrenica, a town in Western Bosnia Herzegovina where 8’000 Bosnian Muslim were murdered in a football field under the watchful eyes of the Peacekeepers (UNPROFOR)? After the United Nations peacekeepers withdrew their fleet, Malaysian troops (more than 10’000 in total) were the only one who has chosen to remain as garrison, and this are all done at our own expense. Tun Mahathir, enraged towards what was happening, went further than anyone in the matter. In the end, it just needed the push from the most powerful country in the world to put an end to it - when President Clinton finally made a stand and decided on taking some drastic measurement.

But the ‘powers that be’ may not be all that great. Iraq is a good example of how sometimes power and money can become the strongest motivating factor. After spending more than USD500 Bil (and USD3 Trillion long term) and losing more than 3,900 American coalition personnel, some say the US authorities are now moving in as parasites - reaping the oil benefit from the country. Iraqi civilians killed ranges from 81,532 to 1,120,000 where 70% do not have access to clean water, 80% without sanitation and 90% of Iraqi’s 180 hospital lacks the basic medical and surgical supplies. Whether the lives lost equate the Million of Barrels of oil gain, you be the judge of that. 79% of the Iraqi has already voted to oppose the presence of Coalition, and 64% American oppose the war in Iraq. But, did anyone cares to listen?

America has not been all that successful in winning their wars. Probably they still have not recovered from the deep cut of losing the Vietnam war.

Well, the deep cut of living years in oppression and detest towards the Western was the main reason that pushes Osama bin Laden to plan the perfect revenge on the America’s World Trade Centre Towers on September 11 killing 2,752 people. It may have well resulted in the invasion of Afghanistan, but it clearly shows that revenge will come your way at one point or another. And when it does, it is an option of whether you can fight back, or exemplify Japan during Hiroshima, where they picked up the pieces and recover. If the United States can plan the perfect war on Hiroshima & Nagasaki, why do they stumble when they are given back the taste of their own medicine? Isn’t there such belief as karma – what you give, you get back in return?

At this point in time, Malaysia is going to war amongst ourselves. Political drift have causes the people to forget the very reason that independence was achieved. Somehow, you’d see that sons and father argue about their belief, and husband and wife separated due to clashes in opinion.

We should consider ourselves fortunate that our democratic voices are being heard of, and that our kids ie Tan Hong Ming (from the PETRONAS TV commercial) do not know the meaning of races. Don’t let the fate of 13 May become another nightmare streak that may be repeated. Do not let this happen! Treat others the way we want to be treated. It is time to turn away from even the mini-war that we have amongst each other and unite towards making a better future.

So, turn to the person right next to you, and give a friendly shake. Be reminded to thank your friend and yourself for the wonderful country of Malaysia.

So, what happen in the past define us. We will not be able to go back in the hope of trying to change the past, but then rest assured that the course of the future is still something that we can steer. What happens now may be the present that we have chosen. But the future of tomorrow is still very uncertain. So, be cautious when making decision! Peace, and out.

Note: Again another Toastmaster Speech. Speech #7 from the Manual. Peace and out.

The SuperModel Me

Note: My 5th Speech for Toastmaster 'Body Movement' made in TMI. There was quite a few body movement imititating the supermodels. Haha... Enjoy..

Ready
Pose
Action
Click

What do you need to become a great supermodel?
Height? Look? That certain poise? And the list that never ends.

I had my first modeling encounter when I was in Form 4 when I was spotted by a Talent Scout while making the normal window shopping round in Sungei Wang. I was with my best friend at the time, when came this girl who approached me and gave me a card.

A week later, I was already in a boarding school in Jasin. When I made the normal routine call back home every week, my sister mentioned to me that someone from the Agency called. It struck me. Were these people serious? Would this be my ticket out from the boarding school that I hated so much, at that time? I nearly made the decision about skipping school and pursue what could be a different path than now. I thought that as my sister was already doing some part-time modeling, so probably it runs in the family.

Well, that was 10 years ago minus the pimple and fat acid. I have definitely evolved since then.

When Tyra Banks came out with ‘America's Next Top Model’, it was definitely any girl’s favorite show. Everyone wants to be best friend of Gisele Bunchen, Naomi Campbell and Tyra Moss. They want to look, dress and be like a model. Sorry boys, but just bear with me for the sake of your wife/girlfriend.

You know how some ladies are we term as plastic? Ladies, at times, we are drawn to the kind of lavish lifestyle of Beverly Hills, or OC. Some talk with a made-accent when they are just plain ‘Mek Yah’ from Bachok, Kelantan. At some point in time, everyone is trying hard to be the Mat Saleh celup.

The basic rule is, to dress to impress, the walk that people will talk, and definitely to have the look that kills.

Ladies best friend are their 4-inch high heels that kills their feet. Learn to stand like a supermodel by practicing your posture. This means that you pull your shoulders back and create the illusion that you’re leaning back a little, rather than hunching forward. This obviously, I fail rather badly.

How do you walk? Train yourself to keep your weight balanced. Put one foot in front of the other (literally) and walk such that your footprints should form a single line. This is what most acrobat would do well. And don’t take big steps as you will look ungraceful, and you do not want to have the ‘FALL’ing experience in front of a crowd. Trust me, it is not all that fun. Been there, done that. You just have to remember to recover gracefully as if nothing has ever happen.

Face expression is a critical element in modeling. Have you watch the show Zoolander, played by Ben Stiller and Owen Wilson. Two dumb witted characters who would come out with various patented look. There are various impressions such as the sultry stare, the creepy stare or even the trying-too-hard stare.

To be successful, you must develop your own signature walk. Inject some personality into it, and grace your audience as if you are the legendary diva. Move your body swiftly, Remember to experiment, as practice makes you perfect.

If you can’t do any of the followings, you can just dress like one. The Gucci dress, Prada shoe, and scarf from Hermes makes you feel like you are worth a Million Dollar!

But I do secretly fancy having my face printed a thousand times. And yes, I do have my famous moment when my face was used for our various brochures in some of the program organized by PETRONAS and montages produced in-house. I didn’t get people asking for my autograph sadly, but I am happy to lead the kind of life I have now.

I am proud to be handing out business card with an Engineer title at the back, one which I only recently acquire 3 months ago when I changed to a new job. I would rather have people wondering about what I do, rather than having my face plastered all over the tabloid over some scandal which I would probably have asked the papers to put up in order to publicize my career.

So, be happy with what you have, and I’m sure that things would work out for you in one way or another. Sometimes, when you secretly want something badly, it will eventually work out for you. Fingers crossed!