ASEAN KEY DESTINATIONS
Malaysia & Thai Manufacturers call for curbs on hot money
They said any failure to do so, could result in attacks against regional currencies and cause a repeat of the devastating 1997/98 financial crisis with adverse effects on Southeast Asian economies.
The Federation of Malaysian Manufacturers (FMM) and the Federation of Thai Industries (FTI), said, they were concerned with the high inflow of currencies into the region.
This had resulted in a significant appreciation of their currencies in recent months, attracted by higher yields, relative to the low interest rates earned in developed countries, they added.
"Most of these inflow may be speculative in nature," the FMM and the FTI said in joint statement on the impact of inflow on the appreciation of regional currencies.
They explained that the gradual strengthening of currencies per se is not a cause of concern when it reflects the underlying strength of the real economy.
"We are, however, concerned that unbridled speculation and inflow of hot money that impacts financial markets will work its way through the real economy to adversely affect output, trade and jobs," they said.
"We are constantly reminded of the debilitating impact the 1997 financial crisis had on manufacturers and their operations.
"Credit lines were squeezed, operating capital withdrawn and exports collapsed because of the volatility of the currency that made trading agreements/operations impossible, plunging our economies into recession.
"The crisis had serious long term consequences for many businesses including manufacturers who collapsed, affecting millions of workers who depended on them for a living," they highlighted.
In 1997, unbridled speculation by hedge funds against regional currencies led to a free fall of the Thai baht, Malaysian ringgit and Indonesian rupiah as well as the Korean won.
In recent times, economies including Brazil, India, Japan and South Korea have also expressed similar concerns and some have to date, already instituted measures to counter the impact.
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