Currency "sabotage" should be an international crime
by Martin Khor
PENANG, MALAYSIA: The Malaysian Prime Minister, Dr Mahathir Mohamad, has said the international community should make sabotaging of currencies by financial speculators a crime.
"Otherwise, the currencies of developing countries will continue to be sabotaged," he told the media in Alor Star, a Northern Malaysian town, on 27 July 1997.
Dr Mahathir said he was disappointed with countries that preach the open economy to developing countries but practise double standards when free market manipulation hurts them.
Citing an example, the Prime Minister said when three or four people manipulated the trading of junk bonds in the US, causing others to incur huge losses, the authorities arrested and jailed them. "But when this happens to us, they define it as an open market situation."
Dr Mahathir had been asked by reporters to comment on remarks made by the US State Department spokesman Nicholas Burns, who was in Kuala Lumpur for the ASEAN Regional Forum meeting.
On 26 July, Burns had told the press the US did not think there was a conspiracy behind the currency destabilisation affecting Southeast Asian countries. The speculation was the result of economic forces at work and they could be corrected by sound economic policies.
Speaking to the press on 26 July, Dr Mahathir had named George Soros (an American of Hungarian nationality) as the man he had blamed for destabilising Southeast Asian currencies.
"He (Soros) is known as a man who has tried to use his financial clout in the US to block Myanmar's admission into ASEAN," Mahathir had said, in responding to a denial by the Soros Fund Management on 24 July, that it had intervened in the Asian currency markets to punish certain governments that support Myanmar's admission into ASEAN.
Soros, in a statement from New York, admitted he wanted Malaysia and Thailand to oppose Myanmar's admission to ASEAN and said he "continued to consider the acceptance of a totalitarian and repressive regime a threat to the region's prosperity and stability. However, I do not believe that the cause of freedom in Myanmar would be advanced by linking it to currency speculation."
Commenting on Dr Mahathir's allegation that Soros was behind the speculation, State Department spokesman Burns said he could not speak for Soros, but described Soros as a "man of courage" whom "we respect a lot and who has done a lot of good in the world."
Currency sabotage should be a crime
Speaking on 27 July to the media, Dr Mahathir said all countries would be exposed to the risk of currency sabotage as long as the international community did not regard it as a crime. He added that unless the international community acted against such a practice, the currencies of developing countries would continue to be sabotaged.
"This phenomenon will be repeated and it is for this reason that we must regard it as a crime."
Asked what action could be taken against people like Soros, Mahathir said that Malaysia could not do anything because it was not a superpower. "If we are a superpower we can use our laws outside our country, send out soldiers to arrest a person and bring him back to trial," he said.
Meanwhile, the Thai Foreign Minister, Prachuab Chaiyasarn, said ASEAN had to design a formula that would give the region immunity against currency speculators out to destabilise the economies of member countries.
"I call it a financial virus. We have to acquire immunity against this virus which has a tendency to relapse," he said, adding he was very supportive of the Malaysian Prime Minister for raising the issue at the ASEAN ministerial meeting.
Earlier, in the third week of July, leaders of ASEAN attacked financial speculators for being responsible for the recent fall in the value of their currencies and pledged to work together to combat the threat.
ASEAN's joint communique
On 25 July, at the end of the ASEAN ministerial meeting in Kuala Lumpur, the Foreign Ministers issued a joint communique expressing concern over "well-coordinated" efforts to destabilise ASEAN currencies for "self-serving purposes, thus threatening the stability of all ASEAN countries."
The communique called for further intensification of cooperation to safeguard and promote ASEAN's interests.
Malaysian Foreign Minister Abdullah Ahmad Badawi, who chaired the meeting, told the press that the finance ministers and Central Bank governors from member countries would look into ways to see "what we can do collectively."
This was echoed by the Thai Foreign Minister, Prachuab Chaiyasarn, who said the finance ministers would now have to get down to the formula or mechanism to safeguard ASEAN from currency manipulations.
Earlier, speaking at the meeting (which he had inaugurated), Dr Mahathir Mohamad blamed currency speculators for causing the fall of currencies in ASEAN countries, and criticised the "well-planned effort to undermine the economies of all the ASEAN countries by destabilising their currencies."
The Prime Minister said ASEAN's economic fundamentals were good, yet "anyone with a few billion dollars can destroy all the progress that we have made."
Questioning the benefits of free trade
Noting that developing countries are told to open up for totally free trade and commerce, Dr Mahathir commented: "Free for whom? For rogue speculators? For anarchists wanting to destroy weak countries in their crusade for open societies, to force us to submit to the dictatorship of international manipulators?"
He questioned the benefits to developing countries of free trade advocated by the industrial countries and warned that liberalisation may only facilitate the Northern corporations to penetrate into the developing world.
"The world now talks glibly of a borderless world, of the Information Age, of open markets and societies. ASEAN, as a group of developing countries, will need to know how all these new concepts about international commerce and politics will affect us," he said.
"It is wonderful to know that all the huge markets of the developed countries will be open to us in exchange for our opening up of our tiny markets. But can we really gain access to these markets? Or will the removal of borders cause a flow in one direction only?"
Dr Mahathir added: "We want to embrace borderlessness but we still need to protect ourselves from self-serving rogues and international brigandage."
"Already we are seeing giant companies swallowing up chunks of the business in the developing world. They monopolise the services sector through their huge shipping, airlines, insurance companies and banks. Also, the media, print and electronic, are now controlled by them throughout the world."
"Already they have formed powerful trade blocs. And eight of the most powerful nations (a reference to the G-7 industrial nations plus Russia) have decided that they, and they alone, should determine the fate of every country. When they agree on anything, as for example, the revaluation of the yen, we have to pay the price. And when they quarrel we will be trampled under."
"Alone, none of the Southeast Asian countries will be able to protect itself. But nine Asean countries with half a billion people may be able to do something to help themselves."
Dr Mahathir said he was disappointed that while certain people championed human rights, the same people allowed those like Soros to undermine the economies of not just countries but regions.
"We have worked 30 to 40 years to develop our countries to this level, but along comes a man with a few billion dollars and who in a period of just two weeks, has undone most of the work we have done. And as a result, the people of our countries suffer."
The Prime Minister said there was much talk about human rights and the protection of people, but the public "must be protected from people like Soros who has so much money and so much power and is totally thoughtless because he is not only hurting the people of Myanmar but the poor people in Indonesia, Malaysia, the Philippines and Thailand. These people suffer because the cost of everything has gone up."
On whether he considered Soros a criminal, Dr Mahathir said: "Well, as much as people who produce and distribute drugs are criminals because they destroy nations, people who undermine the economies of poor countries are also."
"If you want to devalue the pound or the US dollar, you can go ahead and do it. But if you do this against poor countries and you think you are doing a great job, a charitable job, I think you must be somewhat distorted in your idea about things." (TWE No. 167, 16-31 August 1997)
Martin Khor is the director of Third World Network.