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Ref: http://www5.austlii.edu.au/au/journals/UNSWLRS/2017/41.pdf
AROSS P. BUCKLEY AND SARALA M. FITZGERALDN ASSESSMENT OF MALAYSIA’S RESPONSE TO THE IMF DURING THE ASIAN ECONOMIC CRISIS
Conclusions:
AROSS P. BUCKLEY AND SARALA M. FITZGERALDN ASSESSMENT OF MALAYSIA’S RESPONSE TO THE IMF DURING THE ASIAN ECONOMIC CRISIS
Conclusions:
Malaysia’s economic policies during the Asian crisis, on balance, delivered slightly better, and certainly no worse, economic results than those in countries under IMF programs. It has been argued that Malaysia would have fared even better with IMF assistance, because unlike some other program countries Malaysia had the political will to undertake significant reforms. This willingness to undertake significant reforms may have resulted in a faster recovery for Malaysia than in fact occurred there. Unlike others in the region, Malaysia had a strong corporate regulatory and legal framework,151 which helped it to cope with problems caused by the crisis better than other crisis countries.152 This may have made it a much better candidate for IMF assistance. However, this argument entirely ignores the fact that, in reforming its system, Malaysia was implementing home-grown policies, not those imposed by an external supranational institution. Policies developed abroad are rarely likely to be adopted and enforced with the enthusiasm and rigor of those developed at home. This is a simple fact of human nature. We all do more willingly what we choose to do, rather than what we are told to do. What can be said with certainty is that Malaysia’s policies during the crisis were better suited to its specific circumstances than those in other IMF program countries were suited to their circumstances. In particular, Malaysia has a history of economic affirmative action in relation to its Bumiputra population that was accommodated during the crisis. An IMF program in Malaysia was unlikely to accommodate these cultural issues. Malaysia’s policies were also preferable to those implemented in IMF program countries because they had a more benevolent impact on the poor. Fiscal austerity almost inevitably takes money from programs that benefit the poor. Malaysia’s approach was more equitable. It did not punish the poor to repay capital that had principally benefited the rich when it had flowed into the country. 148 Ian Vasquez, Why the IMF Should Not Intervene, http://www.cato.org/speeches/sp-iv22598.html, 4 July 2003 149 Hak K Pyo, 'The Financial Crisis in Korea and its Aftermath: A Political Economic Perspective', in Dipak Dasgupta, Marc Uzan and Dominic Wilson (ed), Capital Flows Without Crisis? Reconciling Capital Mobility and Economic Stability, 2001, 237 at 248 150 Ibid at 248 151 International Monetary Fund, Malaysia: Selected Issues, 1999 at 85 152 International Monetary Fund, Malaysia: From Crisis to Recovery, 2001 at 7 23 Malaysia’s refusal to adopt IMF policies also allowed it to keep control of its own economic destiny. This was preferable because it meant Malaysia could act solely in its own best interests. Unlike the IMF, it was not responsible for protecting the international financial system as a whole. Retaining control of economic policy also ensured that decision-making power in Malaysia remained with those who were elected to represent its citizens. This is desirable because it promotes democracy and because it prevents the country being dominated by more powerful states and international organisations which may not act solely in its best interests. So, whilst Malaysia’s policies may not have made a large difference to its “bottom line” during the crisis, there are many important ways in which they were good for Malaysia. Given that Malaysia’s policies certainly delivered no worse economic results than IMF policies elsewhere in the region, there can be no doubt that Malaysia’s decision not to request IMF assistance and instead pursue its own path out of the Asian Economic Crisis was right for Malaysia.
