Businessmen have mixed views over need to arrest currency slide

PETALING JAYA: As Malaysians anxiously watch the ringgit heading south, businessmen have begun debating whether the 1998 pegging formula can work its magic again.

Some are all for the move, which was credited to have halted Malaysia’s economic decline during the 1997/1998 Asian Financial Crisis but there are also those who are not so keen on a fixed exchange rate.

MCA’s small-and-medium enterprise (SME) bureau chief Datuk Ei Kim Hock said it would “not be a wise move” to peg the ringgit against the US dollar or any other currency.

“Malaysia is a player in the international market. Pegging the ringgit to some currency will reduce the competitiveness of our businesses.”

Ei added that the depreciation would make Malaysian goods cheaper in the global market, adding that the rise in demand would push the ringgit back to its market value, which would not happen if it was pegged.

Federation of Chinese Associa­tions of Malaysia president Tan Sri Pheng Yin Huah, however, said most businesses in the country did not have access to the global market.

“SMEs and heavy industries are the backbone of our economy. Unfortunately, they are mostly domestic businesses and are now badly hit by the falling ringgit.”

Pheng said the manufacturing sector was forced to pay much more to import raw material under the depreciated ringgit.

He said many businesses were now “struggling to survive” because of the falling ringgit and other factors including the sluggish economy, the Goods and Services Tax (GST) and foreign competition

“We hope the Government can peg the ringgit just like in 1998. At least, it can stop the fluctuations and restore investor confidence in our currency,” he said.

Both Ei and Pheng agreed that domestic businesses could expand into the global market although there were many challenges to face.

“Many businesses are keen to be part of the export industry but lack research and development, and capacity,” he said.

As a solution, Ei has been pushing for the Government to consolidate SME expertise and lead these businesses into the global market.

The ringgit declined sharply against the US dollar to a six-year low in the second week of July, surpassing the 3.8000 peg imposed in 1998 after the local currency collapsed during the Asian financial crisis in 1997.

On Monday, it hit a 17-year low of 3.8517 against the US dollar.