DR M UNSURE IF JAPAN WILL GIVE SOFT LOAN
Facility can cut cost of high-interest loans taken by BN govt, says Dr M
MALAYSIA is uncertain as to whether Japan will provide it with a low-interest 0.7 per cent soft loan, says Prime Minister Tun Dr Mahathir Mohamad.
He said Malaysia, however, was hoping that the yen-denominated soft loan would be offered at a low interest rate as Japan had once done.
He said the previous Barisan Nasional administration had taken high-interest loans from Japan.
“We are trying to secure a Japanese loan facility to reduce the high financing cost because the loan interest rate for the previous administration was too high — up to six per cent — while Goldman Sachs was given a 10 per cent commission of the total debt. This means the previous government took 90 per cent of the debt proceeds, but had to pay the interest on a 100 per cent debt,” he said in the Dewan Rakyat yesterday.
Dr Mahathir said Malaysia, at one time, had received an offer for a soft loan from Japan at an interest rate of 0.7 per cent, with a 40-year repayment period.
“We do not know whether the Japanese government can offer a rate as low as this again.
“By repaying the loan in yen, we will no longer be burdened with a high interest rate, such as the six per cent (from the) original loan,” he said.
He was responding to a question by Datuk Seri Dr Ahmad Zahid Hamidi (BN-Umno Bagan Datuk) yesterday.
Zahid had raised the possibility that Malaysia could again be dragged into a financial crisis reminiscent of those in the 1980s and 1990s after the strengthening of the yen, following Malaysia’s loan with Japan.
Dr Mahathir said the government was not plagued by debt difficulties in the 1980s and 1990s after undertaking a soft loan from Japan.
He said figures gleaned from Malaysia’s annual financial reports showed that the debts at the time did not exceed RM300 billion, at only 27 per cent of the Gross Domestic Product (GDP).
“This can be seen in the annual reports of the 1980s and 1990s. These are actual figures.
“If anyone can show a different set of numbers, I would be most grateful as I would be proven wrong. I was there for 22 years, so I know a little bit about growth numbers, debt, as well as the country’s finances.
“We never had a debt of RM42 billion at one time. We never had a debt of a trillion ringgit, we never even heard of the term ‘trillion’ before.
“I don’t know if RM300 billion is more than a trillion, though,” quipped Dr Mahathir.
He challenged any quarter who claimed that Malaysia was laden with debt following its loan with Japan, to present evidence and not just make wild accusations.
“Bagan Datuk (Zahid) mentioned a few figures but nothing in terms of written evidence to prove that the debts before were greater than what it is now.”
Responding to a supplementary question from Datuk Dr Noor Azmi Ghazali (Independent-Bagan Serai) on the government’s targets in setting a debt ceiling, Dr Mahathir said the rate agreed upon was that it should not exceed 55 per cent of the GDP.
He said this also applied to companies which were whollyowned by the government to ensure that financial burdens which could take place due to high-risk business transactions would not become a problem in the future.
“The government cannot have the debt at more than 55 per cent (of the GDP), so it formed a company that was 100 per cent owned by the government.
“This company took on debts that was more than the ceiling as it was not bound by the restrictions imposed on the government, hence why we are now bearing this financial burden.
“There were also cases where debts went unrecorded, but put in another category until ultimately, the burden of settling these debts went to the government.
“In the case of 1Malaysia Development Bhd, for example, the debt was returned to the government and is among the factors why the government’s debt rose.
“This was because there was non-compliance with regards to abiding by the debt ceiling,” he said.