Malaysia more worried about oil than FX

http://www.malaysiakini.com/link/eNoFwW0KgCAMANAb+fEjiEA6yhCbKNg23MK6fe81Mzm8X2u52ilT6XngKxNVXeHbV4T6jAFqPD8nTc7CZEgG/UoxhH2LP26rGPw=


Malaysia more worried about oil than FX

Posted online: Tuesday, August 30, 2005 at 0000 hours IST




SINGAPORE, AUG 29: High oil prices are more of a concern for Malaysia?s
exporters than any marginal appreciation in the country?s currency, a
Malaysian government minister said on Monday.



The ringgit has risen just over one percent since the government dropped a
six-year old currency peg against the dollar at 3.8 per dollar to adopt a
managed float on July 21. But world oil prices have risen more than 60
percent so far this year, hitting a fresh record high on Monday above $70 a
barrel, which could threaten the economic wellbeing of the countries
Malaysia relies on to buy its exports.

?The impact (of a rise in the ringgit) is very marginal. The private sector
already knows how to cope with minor movements in the ringgit,? Rafidah
Aziz, Malaysia?s trade and industry minister, told reporters. ?There has
been a marginal change in the exchange rate,? Rafidah said. ?It has not
been completely floated, so it is not volatile. This should create a
predictable situation for businesses.?

She said a one-percent move in the value of the ringgit would have little
impact on Malaysian exporters, which generate the equivalent of 100 percent
of the country?s gross domestic product. ?Malaysia is a very open economy,?
said Rafidah. ?If our trading partners are badly affected then our exports
could be impacted.? Malaysia?s economy grew by 4.1 percent in the year
through the second quarter, its weakest pace in three years, as
manufacturing exports cooled, the central bank said last week.

RISING INVESTMENTS

Malaysia is a net oil exporter, so it gains from a higher international oil
prices. But rising oil prices can slow the economic growth of its trading
partners. Malaysian officials said foreign direct investment in Malaysian
factories was $2.1 billion in the first seven months of 2005, though no
figure was given for the same period a year ago. That compared with $3.4
billion in FDI secured in manufacturing by Malaysia for all of 2004. The
trade minister said Singapore?s investments between January and July of
$398.8 million were already greater than the whole of 2004. ?More Singapore
companies are expanding offshore.

It is logical to move to the southern part of Malaysia. More companies are
using Malaysia as a base for the region,? she said. Lim Hng Kiang,
Singapore?s minister for trade and industry, told reporters both countries
should work together to develop economies of scale to compete with growing
competition from China and India.

?We need to adjust. If we work together we can compete with the rest of the
world more effectively,? Lim said. Lim said Singapore and Malaysia needed
to promote further trade liberalisation and regional economic integration.

?Reuters
======================================================





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