Malaysia should first check yen loan terms, advises economist

Executive director Dr Zakariah Abdul Rashid said MIER was revising downwards Malaysia's economic growth forecast to 4.8%.

KUALA LUMPUR: Malaysia should first look at the terms and conditions (T&C) attached to the securing of yen-denominated loans from Japan to ensure the credit obtained will reduce the government's debt outright, says an economist.

Malaysian Institute of Economic Research executive director Emeritus Prof Zakariah Abdul Rashid said details such as the loan amount and if it would involve certain trading packages that only favoured the Japanese, would be the key elements that Malaysia needed to study thoroughly.

“For instance, will the T&C come with biased trading conditions that require us to export our oil and gas or palm oil at a certain price within a certain time period? Or would it be associated with the opening of a Japanese university branch in Malaysia?

“These are details which we have to study carefully before we secure the loans,” he told Bernama.

Prime Minister Tun Dr Mahathir Mohamad made a request to his Japanese counterpart Shinzo Abe to extend yen credit in the form of soft loans to help resolve Malaysia's government debt which had exceeded RM1 trillion during his just-ended official visit to Tokyo.

Zakariah cautioned that these loans could also be used as a “tool” for the Japanese government to strengthen their financial presence in South-East Asia, given the fact that Malaysia was strategically situated in the region.

“From a political economy perspective, Japan still wants to have a significant presence in the region where China also shows an immense interest in,” he said.

However, the economist noted that if the loans come with a low interest rate, such as the 0.7% offered during the 90s, it would be beneficial to Malaysia.

“But, we have to remember that the situation in the 90s was very different from now, as China's economy had yet to emerge then.

“Therefore, I am not sure if the loans given by the Japanese government would be able to help us to lower our debt, but of course, a lower interest rate is better to address the issue,” he said, adding that Japan also, is no longer the world's second largest economy like what it was back in the 90s.

Zakariah said should the yen credit materialise, this would encourage more Japanese foreign direct investments (FDIs) into Malaysia, as any loans would illustrate the strengthening economic relationship between the two countries.

According to the April 15 Star Online infographic quoting the Statistics Department and International Trade and Industry Ministry, Japan had the second largest cumulative FDIs of RM71.6bil in Malaysia last year while China was the third with RM65bil. — Bernama