‘Po­ten­tial yen credit won’t dis­rupt eco­nomic growth’

The Sun (Malaysia) - - SUNBIZ -

PETALING JAYA: Am­Bank Re­search said the po­ten­tial credit line from Ja­pan could be used for eco­nomic de­vel­op­ment and to sup­port small and medium scale in­dus­tries, which en­sure the econ­omy con­tin­ues to grow at a sus­tain­able pace with­out strain­ing liq­uid­ity.

“While the credit fa­cil­ity should help sup­port the do­mes­tic eco­nomic ac­tiv­ity, it also pro­vides room for the govern­ment to con­tinue ‘clean­ing up the red files’ with­out dis­rupt­ing the eco­nomic growth,” it said in a re­search note yes­ter­day.

It ex­pects the loans to be on a spe­cial rate of around 1% or even lower, de­pend­ing on the type of projects, over a long-term pe­riod of 30 to 40 years.

Dur­ing a re­cent visit to Ja­pan, Prime Min­is­ter Tun Dr Ma­hathir Mo­hamad has asked Ja­pan for yen-de­nom­i­nated loans to pare down the coun­try’s hefty debt load of RM1.09 tril­lion or 80.3% of gross do­mes­tic prod­uct (GDP). Ja­pan’s Prime Min­is­ter Shinzo Abe said he will study the re­quest and that no spe­cific amount was dis­cussed.

Malaysia has also re­quested Ja­panese as­sis­tance to im­prove ex­ist­ing rail­roads to in­crease the fre­quency of freight and pas­sen­ger trains run­ning on un­der­used tracks and sta­tions, with the aim of re­duc­ing road traf­fic and en­hanc­ing rail trans­port.

The re­search house said the de­ci­sion to seek credit from Ja­pan re­sem­bles the sce­nario of the 1997 Asian fi­nan­cial crisis. Af­ter a fouryear halt of the Ja­panese Of­fi­cial De­vel­op­ment As­sis­tance, Malaysia ran into dif­fi­cul­ties and had sought help in 1998 af­ter the crisis.

“We have been seek­ing fi­nan­cial aid from the Ja­panese govern­ment since the First Malaysia Plan, and would have been ex­posed to a to­tal of more than US$2.8 bil­lion (RM11.2 bil­lion). We feel that the lat­est re­quest sug­gests the coun­try could po­ten­tially run into dif­fi­cul­ties due to the huge pub­lic debt and the need to bal­ance the books with a fis­cal deficit-to-GDP ra­tio at 2.8%.”

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