[PEN-L:6857] IMF/WB & Malaysia Internal Politics

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Malaysia snubs World Bank loan, cancels IMF meeting

                   Move comes after World Bank chief meets Anwar's
                   wife

                   From Eddie Toh in Langkawi


                         ALAYSIA has snubbed a US$300 million
                         (S$513.2 million) loan from the World Bank
                         a day after its president James Wolfensohn
                   met the wife of former deputy prime minister Anwar
                   Ibrahim.

                   Malaysia has also called off a meeting with
                   International Monetary Fund managing director Michel
                   Camdessus in another sign that the country has not
                   repaired damaged ties with multi-lateral agencies who

                   have advised a more conservative economic approach.

                   Second Finance Minister Mustapa Mohamed said
                   Malaysia would no longer seek the balance of an
                   agreed US$1b loan from the World Bank. To date,
                   US$700 million of that amount has been disbursed.

                   Mr Mustapa attributed the decision to a rosier
                   economic outlook but his statement came a day after
                   Mr Wolfensohn had met Wan Azizah Wan Ismail --
                   the wife of jailed leader Anwar Ibrahim -- in KL en
                   route to Langkawi for the sixth Asia-Pacific Economic

                   Cooperation (Apec) conference.

                   Speaking in the East Malaysian state of Sabah, Dr
                   Mahathir could not resist a sarcastic jibe at the
                   meeting.

                   "I hope she can resolve the World Bank problem and
                   tell Mr Wolfensohn how to run it," Reuters quoted Dr
                   Mahathir as saying to reporters when asked about
                   Thursday's meeting.

                   "I'm quite sure she will give good advice to him."

                   In Langkawi, Mr Mustapa said: "Any Malaysian can
                   meet anybody ... We also believe Malaysians are
                   rational and in general Malaysians do not like
                   foreigners to interfere in the domestic politics of
                   Malaysia."

                   He was speaking at a press conference following the
                   opening of the Apec meeting yesterday.

                   Besides improved economic conditions, he said
                   Malaysia has secured over 10 billion Malaysian
ringgit
                   (S$4.5 billion) in loans under Japan's New Miyazawa
                   Initiative. Malaysia will also soon embark on a
global
                   roadshow to sell up to US$3 billion worth of
sovereign
                   bonds to help finance its economic recovery.

                   Diplomats criticised the snubbing of the World Bank
                   loan pointing out that the loans are cheaper and do
not
                   come with the type of strings attached to other
sources
                   of funds.

                   The diplomats said that the Japanese money, which
                   was pegged at low interest rates, may have conditions

                   attached to it.

                   "They wanted a piece of the action when it gave the
                   money for the infrastructure projects," said an Asian

                   diplomat.

                   As for the US$3 billion bond issue, which is also
                   aimed at boosting the credit worthiness of Malaysia,
                   they said it will be more expensive than loans from
the
                   World Bank.

                   Last November, the Malaysian government was irked
                   by meetings between Dr Wan Azizah and several
                   foreign leaders on the sidelines of the Apec
conference
                   in KL.

                   And last month, tempers flared again when Dr Wan
                   Azizah, who recently formed an opposition party to
                   challenge the national ruling coalition, met
Philippine
                   President Joseph Estrada while on a visit to Manila
at
                   the invitation of former president Corazon Aquino.

                   While Mr Mustapa went ahead with his meeting with
                   Mr Wolfensohn last night, the meeting between Dr
                   Mahathir and Mr Camdessus was called off.

                   Mr Mustapa said it was merely due to a conflict of
                   their schedules. "PM is now in Sabah and Camdessus
                   was not able to agree to the time proposed."

                   Diplomats said the aborted meeting could also be due
                   to Malaysia's frequent criticisms of the IMF's
                   shock-therapy approach to tackling Asia's economic
                   crisis.

                   Malaysia has also called for checks on currency
                   trading which is at odds with the views of the IMF
and
                   incoming US Treasury Secretary Lawrence Summers.

                   Yesterday, Malaysia showed no signs of backing off
                   from that stance.

                   "Although there have been signs of stability in the
                   world economy, the need for reforms is there because
                   the risk remains to be tackled. We do not want this
                   urgency to reform the international system to wane in

                   the current stable climate," Mr Mustapa said.

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