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Malaysian Studies Book Review

“The Malaysian Currency Crisis: How and Why It Happened” by Mahathir Mohamad
1. Strong Economic Fundamentals
Back in July 1997, Malaysia has experienced a speculative trading attack and being
uncertain on the rapid depreciating of Malaysia currency for a long period with the
trading rate at around 2.50 against the US dollar. At that time, the ringgit was
considered at stable condition but some intended it was slightly undervalued. The
stability in all sectors and the ringgit exchange rate were always focused by the
Malaysian government, as the stability is significant for growth and development and
also for the good management in business sector.
Comparing the Malaysian ringgit to the regional or neighbors’ currency, such
as Thailand and Philippine, the ringgit’s exchange rate was basically quite well and
stable. 1 ringgit to 10 Thai baht and 1 ringgit to 10 Philippine peso. At the end of
1996, the real Gross Domestic Product (GDP) raised at about 8.5 per cent per anum
for 10 consecutive years and will be continue for more years. In 1977, according to
the World Trade Organisation (WTO), Malaysia was the 18th biggest exporting and the
17th biggest importing country in the world, where the total external trade has reached
more than USD 158 billion. The external debt was basically low, at 40 per cent of
Gross National Product (GNP). Inflation was at its lowest at 2.1 per cent.
On financial font, the banking system was sound, as reflected in strong
capitalization and the high asset quality. The average risk-weighted capital ratio
(RMCR) of banking system was greater than 10 per cent, compared with the 8 per
cent of minimum international standard.