GEORGE TOWN: Penang has again called for a rethink on the Bank Negara ruling that exporters must convert 75% of their earnings to ringgit.
It was reported last month that as a measure to increase demand for the ringgit, Bank Negara is compelling exporters to convert 75% of their earnings into the local currency.
Before this, they were allowed to hold their proceeds in foreign currencies. Most are holding their export proceeds in US dollars with local banks. Based on reports, it is estimated that close to RM90 billion is being held in foreign currencies by exporters.
But Penang Chief Minister Lim Guan Eng said today that the measure imposed by Bank Negara Malaysia last month had obviously failed to help the ringgit, Asian’s worst performing currency.
He said the central bank imposed the measure when the ringgit was valued at 4.20 against the US dollar, but instead of improving, the ringgit fell further to 4.50 recently.
“It proves that this is not an effective measure to arrest the ringgit’s decline. The ruling should be scrapped.
“If the government wants to save face, then reduce it to 25%. But abolishing it will be best,” he told reporters at Komtar today.
Lim, who had already raised concerns about the ruling last month, said the conversion requirement burdened exporters, impacted the manufacturing sector badly and hurt the investment climate.
“Exporters face a double whammy with this ruling, which is unfair to them.
“They have to bear transaction costs, paying commissions when they convert the currency into ringgit and then back to the US dollar when they trade later, and then face foreign exchange losses.”
Lim said his administration had been getting a lot of complaints from exporters that operated in Penang.
Although none of the foreign investors had said they were pulling out because of the ruling, he said the state was worried that it would be very tough to attract future investors.
“There are talks now that this ruling is a prelude to the government imposing capital controls like in the late nineties.
“This will cause investors to lose interest in Malaysia. They will now think carefully about investing in Malaysia,” he said.
Lim also said this situation was not helping Malaysia when US president-elect Donald Trump had openly declared his distaste for American companies moving their operations overseas and has promised to impose punitive taxes on them.
“With Trump, it is already going to be tough. Imposing this currency conversion ruling does not help at all. It is a ‘makan tuan’ move,” he said, using the bahasa term for “doing something that ends up hurting oneself”.
Lim said he would write to Prime Minister Najib Razak, who is also Finance Minister, in the next few days to ask him to rethink the ruling.
“We should be trying to regain investors’ confidence, or at least allay fears of capital control,” he said.
Lim also announced the appointment of technopreneur Cheok Lay Leng as the new general manager of state agency Penang Hill Corporation.
Cheok, 55, was president of Asia operations at Netronome Systems Inc, an American-based tech startup focusing on data centre networking and cybersecurity solutions, before retiring in April last year.
Lim said the position was reserved for engineers by training as the corporation dealt with the operation of the funicular train, which was recording increases in passenger traffic.
Last year, the passenger load recorded over 1.6 million people, an increase from 2015’s 1.57 million.
“We aim to make Penang Hill into the number one hill tourist destination in Malaysia. There are many new attractions for people to see.
“This is going to be a tough year due to the economy but we hope to maintain the good performance so far,” Lim said. -FMT