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Wednesday, December 14, 2016

Matrade: Weak ringgit won’t result in higher trade surplus

Matrade CEO Dzulkifli Mahmud dismisses tycoon Vincent Tan's claim, saying other factors affecting major trading partners need to be considered.
Matrade-CEO-Dzulkifli-MahmudKUALA LUMPUR: The depreciation of the ringgit will not result in a higher trade surplus, Malaysia External Trade Development Corporation (Matrade) said today.
In correcting a contradicting viewpoint made by businessman and investor Vincent Tan, Matrade CEO Dzulkifli Mahmud said the ringgit’s decline will however, benefit Malaysian companies that are operating abroad.
In a report earlier today, Tan told FMT that the currency depreciation, as seen during the Asian financial crisis in 1997, will lead to a higher trade surplus and positive growth for the country.
“I cannot agree with his statement. Trade surplus depends on how much we can export,” Dzulkifli told a press conference at the Matrade tower here.
“But in order to export more, we have to read (the situation affecting) our trading partners worldwide.
“If we look at China, the United States, and Europe, some of them are importing less now.”
He said Tan’s statement was accurate to describe his trading position at the moment, especially as the latter would profit more from the weakening ringgit.
“Tan has a number of businesses overseas and the revenues from these operations would bring greater gains should it be brought back and converted to ringgit, while the ringgit is weak,” Dzulkifli said of the Cardiff City football club owner.
The same applies to other businesses operating outside Malaysia, Dzulkifli reiterated.
“Before the currency dropped, US$1 may give them RM4. Now they can get much more ringgit for the same amount.
“So these businesses can get more in terms of ringgit when they bring their revenues back here.
“Some Malaysian companies said they can gain extra profit margin of 12% to 15% because of the difference in the foreign exchange rates,” he said.
Dzulkifli also stated that while the country is still enjoying a trade surplus, import and export demands had dropped in October this year.
The Malaysian ringgit currently stands at RM4.44 to US$1.
Local economists have said the depreciation in the value of the ringgit might affect certain industries while others said it could actually be a blessing in disguise in the long run.
This is because goods manufactured in Malaysia might seem cheaper and will make the country more competitive.
Dzulkifli agreed with the latter and said companies that export Malaysian products will end up winning. -FMT

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