TWENTY-FIVE years on, Malaysia is still grappling with the foreign-exchange (forex) losses chalked up by Bank Negara between 1991 and 1993.
The highlights after the first week of the hearing by a Royal Commission of Inquiry (RCI) set up to unearth the ghost of the past were the quantum of losses, and the aspersion that there was a deliberate suppression of information and an attempt to cover up the losses.
In the 1994 Bank Negara accounts, the losses were recorded at RM9.3bil. Former Bank Negara assistant governor Datuk Abdul Murad Khalid had said that the losses were US$10bil (about RM25bil at that time). This week, the chairman of the RCI, Tan Sri Mohd Sidek Hassan, declared that the losses were RM31.5bil.
The figure RM31.5bil is not really new.
In 2007, Datuk Seri Anwar Ibrahim, who was the finance minister when Bank Negara incurred the forex losses, had put the figure at RM31.3bil – almost the same amount as announced by Sidek.
The losses were arrived at after deducting gains of RM2.5bil that Bank Negara’s forex dealing operations had made prior to the losses.
The one name that comes up often is that of Tan Sri Nor Mohamed Yakcop, the Khazanah Nasional Bhd deputy chairman. He used to head the dealing room managing Bank Negara’s forex operations.
The picture portrayed so far is that Nor Mohamed was solely responsible for the losses.
Is that really the case?
He was not the governor of the central bank. And certainly, it is hard to fathom that the central bank’s reserves were managed by one single person without check and balance. There is nothing wrong in holding an RCI on Bank Negara’s costly forex adventure in the 1990s. In fact, it’s long overdue.
However, what is the real objective of the RCI now?
It is not as though there is no information on the 1990s’ forex fiasco to the extent that an RCI must be held to dig out information.
From the bits and pieces of information seeping out now, it is quite clear that the central bank had conducted its own investigation and probably has all the information that the RCI is seeking.
As a matter of fact, Anwar’s figure of RM31.3bil that he had revealed in 2007 would not have been plucked from thin air. As the-then finance minister, he would have known the extent of the losses.
The figures may not have been well-publicised before because Anwar was no longer with the ruling party when he spoke about the forex losses.
Now that an RCI is ongoing, what people may want to know is how was it allowed to happen?
Did anybody violate the laws governing the central bank’s reserves? Was there an attempt to suppress information?
And most importantly, did anybody gain personally from the losses?
In the last 25 years, nobody has pointed a finger to state that any one person involved or tied to the Bank Negara forex losses has gained personally from the fiasco.
Nor Mohamed and the-then governor of Bank Negara, the late Tan Sri Jaafar Hussein, resigned from the central bank in 1994 after disclosing the losses incurred by the central bank due to its forex speculation activities.
Nor Mohamed only came back to the government in 1998 when the country needed him most. He was the architect of bringing stability to the ringgit when it came under attack from international currency speculators.
Former Prime Minister Tun Dr Mahathir Mohamad turned to Nor Mohamed when textbook solutions were not working to stop the international speculators attacking the ringgit. Nor Mohamed finally engineered capital controls, something that was not acceptable to the international markets.
Today, even the International Monetary Fund sees capital controls as a short-term solution for countries whose currencies are under constant attack by speculators.
As for breaches of the laws governing the central bank’s reserves, at that time when the forex activities took place, Bank Negara was not alone.
According to dealers, other central banks had also taken positions in the forex activities.
However, Bank Negara was “guilty” in aggressively taking a position in the forex market compared to others.
Assuming that the losses were RM31.3bil, the positions taken against foreign currencies would have been huge. The trading volume would have been large. This is something central banks don’t do.
The question now is was there a framework in place in Bank Negara then to check the trading positions of its dealers?
Were limits placed on dealers of Bank Negara and its chief dealer Nor Mohamed? If there were, did they trade above their permissible limits?
This is something that the RCI could unearth, although this information would probably be with the central bank.
However, is taking excessive positions in the forex market a crime?
It probably is if such information was suppressed or kept from the superiors. But in this case, it does not seem to be the case.
The late Jaafar resigned, taking responsibility.
Was Dr Mahathir aware of it? He would have been told, as he has spoken about the matter before.
The final question is, should Bank Negara have revealed the losses much earlier, say in 1994?
As a journalist then, it was a piece of information that most of us wanted.
However, if Bank Negara had revealed the extent of the losses, it could mean that the central bank was in financial trouble.
We can imagine the kind of impact such news would have had on the ringgit and the economy in 1994 or 1995, considering our reserves were in the region of only RM60bil.
The ringgit would have gone on a downward spiral then, and not in 1998.
That could be a reason why the information was suppressed – deliberately or indeliberately.