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Mahathir: No Need To Change Fixed Forex Regime

June 7, 2001

TOKYO (Dow Jones)--Malaysian Prime Minister Mahathir Mohamad said Thursday the Malaysian government currently has no intention of changing its fixed exchange rate regime for the ringgit.

Mahathir, speaking at the United Nations University in Tokyo, said a devaluation of the currency wouldn't be advantageous as it would raise the cost of imported components used in many exports. It would also eventually push up wage costs due to higher import prices, he added.

"The advantage of devaluation isn't there," Mahathir said. The outspoken leader said that despite dire predictions, fixed rates worked, noting the Malaysian economy grew 8.5% last year.

"This year, growth will be much lower, but it isn't due to capital controls or fixed exchange rates. It is due to the failure of the U.S. economy, which takes up 20% of Malaysia's exports" Mahathir said.

Saying that there was a risk of another financial crisis, Mahathir said Asian nations needed to strengthen their regional cooperation.

Such steps could include setting up an "Asian Monetary Fund," a regional free-trade agreement, and in the long term a regional fixed exchange rate and monetary regime.

Turning to the stalled World Trade Organization round, Mahathir said the agenda for the new round must be set before kicking it off. He added that developing countries needed time once the agenda was set to come up with a common stance so they could negotiate from a position of strength.

Poor nations need to band together, Mahathir added, to prevent the WTO from pushing on them the agenda of rich nations.

"The WTO isn't about fair trade. It is about forcing down the throats of the unwilling the ideas of the rich to help enrich themselves further. In the WTO, globalization and a borderless world would not only be promoted, but would be imposed," he said.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.