KUCHING: The country requires a capital and financial market that is competitive, with low transaction costs and minimal bureaucracy.
Senior lecturer at Universiti Malaysia Sarawak’s Faculty of Economics and Business, Dr Dzul Hadzwan Husaini, said this is the quickest approach to increase demand for holding the ringgit and, as a result, raise the ringgit’s competitiveness in the foreign exchange market.
“I anticipated that the Prime Minister will announce a strategy that will expand the number of foreign investors that engage in our capital market, which will undoubtedly raise demand for holding the ringgit,” he said yesterday.
Apart from that, he added that this is the time to completely transform the capital and financial markets so that they can support the stability of the ringgit in the short and long terms.
Unkike before, the global market is now extremely competitive, he said.
The global economy has shifted to a new economic model that is more towards a circular economy and digital economy, especially after the Covid-19 pandemic.
“As a result, we can no longer rely on what we did in the past to maintain our economic competitiveness. Reform is now essential for advancing the economy.”
The marginal revenue of an investor will rise if the cost of transcription is reduced, he said.
“Increasing marginal revenue is unquestionably a positive motivator for investors. They do not want to lose money, they want to make money.”
The Prime Minister’s announcement also included a pledge to streamline the administrative procedures in the capital and financial markets.
“This is an excellent offer, in my opinion, for creating a climate that is friendly to investors.
“Well, in my opinion, the central bank will hike the OPR once again to encourage the development of our capital and financial markets if this short-term measure yields positive results in the current time frame. Consequently, we will be able to see how this improves the value of the ringgit.”
Dr Dzul said from the perspective of fiscal policy, if the capital and financial markets are capable of providing investors with a competitive return, the government may expect to generate additional revenue through tax collection.
As a result, the government will have more money to spend in order to boost the domestic economy.
Besides that, he said there is an external factor which contributed significantly to the depreciation of the ringgit.
“Undoubtedly, one of the major contributors is the United States’ haphazard monetary policies. Due to the fact that our economy is so dependent on US monetary policy, we are unable to escape this situation. Nearly 90 per cent of our transactions involve USD,” he said.
He added that due to this scenario, Malaysia won’t reap tonnes of benefits as it imports more products.
“The price of production will increase due to a weak ringgit. The final product ultimately becomes more expensive and less competitive. Additionally, this situation will cause inflation to rise.
“The demand for our export products is also affected. The recent announcement is still insufficient to solve the situation we are now experiencing,” he added.
The government, he said, must also consider long-term strategies to draw more highly qualified investment.
“A complete reform is required. For instance, our educational system must be able to develop human capital capable of navigating the concepts of the circular economy and the digital economy.
“This is the future trajectory of the world economy. Political stability is the second. A flip-flopping policy is not what we desire.
“To persuade foreign investors to invest in our nation, we need an economic strategy that is transparent and long-term in nature,” he said.
