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June 14, 2007

Malaysia Always Self-Finances Its Development: Nor Mohamed
The Malaysian government has always used domestic funds to develop the country, Second Finance Minister Tan Sri Nor Mohamed Yakcop said June 13.

While many other countries were very dependent on foreign financing, Malaysia has sufficient local funds for development projects and this also helps to further spur the economy, he pointed out.

"We don't need to borrow from overseas; this is one of our superior qualities," he said during a live interview over RTM1.

Most of the domestic funds are sourced from the Armed Forces Fund, the Employees Provident Fund and the Pensions Fund, he added.

Nor Mohamed said the government borrows only about 10 percent of the total loans from overseas and this was mainly to demonstrate the country's international creditworthiness and for roadshows to draw foreign investors.

And all these foreign loans are repaid well ahead of schedule: "While some countries need to re-schedule their foreign debts or pay according to schedule, we pay ahead of schedule."

He stressed that the hallmark of the government since the country's independence has always been its disciplined financial management, borrowing domestically only for development projects and relying on its own revenues for the upkeep of the government machinery.

And the government has also to be credited for always being pragmatic in managing the economy and even in overcoming economic crises.

He pointed out that during the 1997/98 regional financial crisis, the government determined the most pragmatic way to overcome it and succeeded, leading the International Monetary Fund and World Bank to compliment it on getting the recipe right.

Nor Mohamed explained that it is achievements such as this that have enabled the country to build its capacity and confidence in facing and overcoming any economic crises in the future.

"In the next 50 years, we could face challenges and crises that could arise suddenly and in a different form, but because the government has developed this capacity and confidence we are better prepared to face them," he said.

"But most importantly, we must always be in a state of preparedness and consistently gain new knowledge in the context of a new era."

Nor Mohamed also emphasised on the credibility of official statistics on the economy, pointing out that this is best demonstrated by the investor confidence, expressed in the dramatic rise in the market capitalisation of Bursa Malaysia from 640 billion ringgit in 2003 to more than 1 trillion ringgit last year.

"Likewise, the government-linked companies since their restructuring have been generating more profits, more than 106 billion ringgit in the last three years," he added.

Nor Mohamed said this is among the reasons why he is confident that Malaysia's economy will grow by at least six percent a year in the next few years.

On the impact of the wage increases in the public sector, due in July, impacting on inflation and the country's overall deficit, he said this matter was fully considered by the government before it decided on the higher salaries.

"We are confident the wage increases won't disrupt our deficit, which will remain at the current 3.4%. Inflation, too, will remain below 2.5%," he added.

On the other hand, the wage hikes will have a positive impact on the economy, expanding consumption and exports, which are important for generating economic growth, he said. Bernama

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