On September 24 scores of depositors in Malaysia tried to withdraw their savings from several branches of MBf Finance, the country's largest finance company. Bank Negara, the central bank stepped in to "reassure depositors," backing MBf Finance.
The run is a sign that the regional economic crisis triggered by the devaluation of the Thai currency in early July is far from over. Total loans by Malaysian financial institutions this year are estimated to approach 170 percent of the projected 1997 gross domestic product - the highest level of indebtedness in Southeast Asia, according to Standard f Poors, the international credit rating agency. SfP revised the country's sovereign debt September 25 from "stable" to "negative" and opposed Prime Minister Mahathir Mohamad's moves to restrict currency trading.
Tensions escalated between Malaysian government officials and international capitalist investors when Mahathir declared that currency trading "should be made illegal" at a mid- September annual meeting of the World Bank and International Monetary Fund (IMF) in Hong Kong. At a previous gathering, Mahathir denounced currency speculators as "rogues" and "crooks who make millions of dollars by making Malaysians 20 percent poorer." The Malaysian ringgit has declined in value by a rough 20 percent. To discourage currency trading, Mahathir introduced new rules on the Kuala Lumpur Stock Exchange requiring sellers to deliver physical share certificates to their brokers before selling.
Billionaire currency speculator George Soros responded, calling Mahathir a "menace to his own country" who "is using me as a scapegoat for his own failures."
As more turmoil looms in the region, Thailand's finance minister, Thanong Bidaya, stated that the recent contraction of the economy was expected to cause 1 million people to lose their jobs. Michael Mussa, chief economist for the IMF, said September 18 that Thailand would experience a painful economic slowdown that "is certainly going to feel like a recession."
In a move to quell unrest, the military sent 3,000 soldiers, tanks, and heavy weapons into Bangkok September 18, supposedly for a parade. "Please tell people not to panic," said a military spokesperson trying to assure people that a coup was not being prepared. A few days earlier, several thousand workers from factories and state enterprises had protested in Bangkok demanding government assistance and the resignation of Prime Minister Chavalit Yongchaiyudh.
Meanwhile, the Financial Times of London reported September 29 that Southeast Asian governments may have to pay risk premiums on bonds as high as those paid by most Latin American regimes to attact international investors.
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