by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Penang on Thursday, June 10, 1993:
Public Accounts Committee should ask Tan Sri Jaffar Hussien to explain how Bank Negara could lose RM 10.2 billion from the British sterling crisis last September when one American could make a profit of RM 5 billion from British sterling in the same currency crisis
When the Public Accounts Committee (PAC) of the Dewan Rakyat meets tomorrow and on Saturday on Bank Negara’s colossal foreign exchange losses last year, it should ask the Bank Negara Governor Tan Sri Jaffar Hussein to explain how Bank Negara could lose RMl0.2 billion from the British sterling crisis last September when one American could make a profit of RM5 billion from British Sterling in the same currency crisis.
According to Bank Negara’s l992 accounts, it could lose RMl2.8 billion from foreign exchange dealings last year – although if other unstated items are taken into account, the losses could reach as high as RMl6 billion.
It has been estimated that 80 per cent of Bank Negara”s foreign exchange losses last year was because of its speculation in the British pound during the European currency crisis last September.
Going by the Bank Negara’s own figures of RMl2.8 billion losses last year, this means that Bank Negara would have incurred RMl0.2 billion losses merely from speculating in the British pound.
It has been reported in the international press that one American money-manager, George Soros, 62, made a profit of RM5 billion from speculating on the British pound in the same sterling currency crisis last September. Apparently, Bank Negara lost RMl0.2 billion because it bought sterling long while George Soros made RM5 billion because it sold sterling short.
George Soros had been described as a latter-day Robin Hood, he takes from the exchequers and pockets of the rich West in order to provide much-needed capital for the poor East”.
According to one news magazine report: “After his sterling coup, Soros wasted no time in redistributing the spoils: within the next three months he had set up a US $l00 million to support science in the former Soviet Union, organized a US $25 million loan to Macedonia and then made the largest single private donation ever to a humanitarian cause when he gave US $50 million to aid organizations in Bosnia and Herzegovina.”
In contrast, what are the consequences of the RM 10.2 billion losses of Bank Negara for speculating in the British sterling crisis last year?
The country is desperately in need of money, for instance, to resolve many long-standing socio-economic infrastructure problems like the national energy crisis, the massive flash floods and traffic congestion in the Federal capital – as evidenced by the frequent power black-outs throughout the country and the crippling of Kuala Lumpur last Monday after a few hours of downpour.
The Cabinet Committee on Infrastructures headed by Deputy Prime Minister, Ghafar Baba, has failed in its objectives when the Federal capital could be crippled by a few hours of downpour and the national economy paralysed by frequent power black-outs.
Yesterday, the Finance Ministry Parliamentary Secretary, Senator Mustapha Mohamed told the Dewan Negara that projects to improve the drainage and irrigation system in Kuala Lumpur costing RM 760 million are due to be completed by 2007. These projects include widening of the Klang, Batu and Gombak rivers with a total length of 94 km.
What Kuala Lumpur needs is an immediate plan to resolve the crippling flash flood problems now and not in 14 years’ time, by which time Kuala Lumpur would be half-submerged in flood waters as a result of further aggravation of the situation.
The RM 740 million should be spent not by 2007 but by 1997, particularly before the 1988 Commonwealth Games. The Government cannot claim that it has no money when Bank Negara could squander RM 10.2 billion speculating on the British sterling last year.
This is why the statement by the Prime Minister, Datuk Seri Dr. Mahathir Mohamed that the government could only resolve the flash flood and massive traffic congestion problems in Kuala Lumpur if the people are prepared to pay more taxes is not acceptable at all, as it highlighted the enormity of the Bank Negara forex scandal.
PAC should find out the additional amount of Bank Negara forex losses absorbed the re-evaluation of 2.3 million ounces of gold
The PAC in its investigations into the Bank Negara’s foreign exchange losses should demand a detailed account of Bank Negara’s speculation in the British sterling in last September’s European currency crisis, and it must reject all excuse by Bank Negara that such details are ‘important banking secrets’ as they are definitely nothing of the kind.
Even more important, PAC should ascertain the full foreign exchange losses incurred by Bank Negara last year, which could exceed RM 12.8 billion.
This is because last year, Bank Negara changed its accounting policy to value its gold and other securities at current market rates than at the rates when they were acquired.
Much of the large quantities of gold held by the bank had been bought before 1970 when it was priced at US $ 37 an ounce. It was worth US $ 333 an ounce at the end of last year. This re-evaluation helped to swell Bank Negara’s foreign reserves by 58 per cent to RM 46.1 billion and may have offset forex losses.
According to the latest International Monetary Fund statistics, Malaysia had 1.37 million ounces of gold in 1970 and in 1991, this had increased ti 2.35 million ounces.
This means that the 1.37 million ounces og=f gold held in 1970 would have appreciated in its value by 100 per cent, as it was priced at US $ 37 an ounce in 1972 and US $ 333 at the end of last year.
In Parliament last month, I had estimated that thus re-evaluation of golg could net for Bank Negara an additional RN 2 to 3 billion – bringing the total foreign exchange losses suffered by Bank Negara to RM 16 billion.
PAC should find out the amount of the additional foreign exchange losses suffered by Bank Negara which had been hidden and absorbed by the re-evaluation of Bank Negara’s gold holdings last year.