Malaysia requests yen credit from Japan – Dr Mahathir
TOKYO: Prime Minister Tun Dr Mahathir Mohamad said Tuesday he has asked Japan to extend a yen credit to Malaysia to which his counterpart Shinzo Abe said he would consider the request.
Briefing Malaysian journalists on the outcome of his threeday working visit to Japan, Dr Mahathir said he mentioned to Abe at their meeting earlier about the soft loan extended by Japan when he (Dr Mahathir) was the prime minister previously, with an interest rate of just 0.7 percent repayable over 40 years.
“At that time, Japan’s financial position was very good. But, this time, we also asked him to consider providing the yen credit to Malaysia and he agreed to consider,” he said.
“The credit that they (Japan) will provide us is to be used for what we promise them, perhaps we will retire some of the highcost borrowings that we have and replace them with the yen credit.
“Then the interest rate will be cheaper and we don’t have to bear the interest for many, many years to come,” said Dr Mahathir.
The new government under Dr Mahathir, who was sworn in as the country’s seventh prime minister last month, discovered that the federal debt had reached RM1 trillion and it was finding ways to bring the debt level down.
“If the yen credit is given as a soft loan, it will help us to deal with our big debt problem. We do not necessarily have to retire the old loans but this cheap loan can contribute to the recovery of our debt situation,” he explained.
Dr Mahathir drew attention to the fact that Malaysia had previously obtained loans at a very high interest rate, of up to six percent, and the people who managed the credit had obtained a commission of up to 10 percent. “When we give a commission of 10 percent, it means that if we take a loan of 100 million (in any currency), we get only 90 million but we still have to repay with interest for 100 million.
“So, if we take 90 million but repay for 100 million, it means the interest increases from six percent to seven or 7.5 percent. This causes our cost of borrowing to be too high.”
“If we can reduce that cost by borrowing from other sources with a lower interest rate, we can retire the old loans,” he said.
He said no amount of the yen credit request was discussed with Abe.
Dr Mahathir was also queried on a report that the Kuala Lumpur-Singapore High-Speed Rail (HSR) project had not been scrapped but postponed.
“In a way, it is postponed, but at this moment we need to restudy, and if we are short of funds we can delay the implementation of the project or reduce the scope of the project,” he said.