Malaysia and "autarky"

[Trond Andresen <trond.andresen@xxxxxxxxxxx>]

>From Webster's dictionary:

>Main Entry: au·tar·ky
>Pronunciation: 'o-"tär-kE
>Function: noun
>Etymology: German Autarkie, from Greek autarkeia, from autarkEs
>self-sufficient, from aut- + arkein to defend, suffice
>Date: 1657
>1 : SELF-SUFFICIENCY, INDEPENDENCE; specifically : national economic
>self-sufficiency and independence
>2 : a policy of establishing a self-sufficient and independent national
>economy

Her on PKT, "Z.CUI" <zcui@xxxxxxx>, quotes Dani Rodrik
<dani_rodrik@xxxxxxxxxxx>,

>Date: Fri, 20 Nov 1998
>From: "Z.CUI" <zcui@xxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Dani Rodrik's Polanyi-type proposal

Dani Rodrik wrote an article:

>New Republic, November 2, 1998
>The Global Fix
>By Dani Rodrik
> A plan to save the world economy.

In this article he among other things said:

>....
>Had the IMF come up with intelligent advice on
>capital controls--rather than treating them as taboo--Malaysia might well
>have chosen more appropriate interventions over the complete financial
>autarky it is pursuing now.
>...

I sent Rodrik a private e-mail where I asked:

QUOTE
"I have followed Malaysian developments quite closely for the last year,
and can't understand what is "inappropriate" with the country's currency
controls. I furthermore can't understand why it is reasonable to
characterize them as "autarky", since

- trade both ways are not hindered.

- FDI is still encouraged.

- profits for foreign investors may still be repatriated.

What is it with Malaysias recent economic action that is unreasonable
towards the rest of the world? Could you please elaborate?"
UNQUOTE

While waiting for a reply, it seems to me that the Malaysian measures are
not autarky in the sense of  "a policy of establishing a
self-sufficient..economy", only in the sense of "a policy of establishing an
......... independent national economy". The distinction is very important,
since the second goal is reasonable, while the first goal implies something
much stronger, to cut off (most) trade and investment relations with the rest of
the world. Since "autarky" in this discussion is used with a negative
connotation (i.e. Malaysia has gone "too far") *even* among those who are
critical to the IMF etc., I think this use of the term has done some damage.
To me it seems that any critic of the IMF and Western powers' handling of
the SE crisis has to make a ritual statement to demonstrate that one is not
a crank, that "of course I don't support the extreme measures of Malaysia!"

But I have until this date not seen *any* article (by Krugman or others)
that explains, based on knowledge of the actual measures taken by that
country, how these measures are extreme or unresonable. The Bank
Negara (the M. central bank) measures are put on my Web page, for those who
wish to check themselves. See

http://www.itk.ntnu.no/ansatte/Andresen_Trond/malaysia/bnm.html
and
http://www.itk.ntnu.no/ansatte/Andresen_Trond/malaysia/ecmnotic.html

There I have also placed the index for the Kuala Lumpur Stock Exchange since
capital controls were implemented on 1 Sep, see

http://www.itk.ntnu.no/ansatte/Andresen_Trond/malaysia/klse-0109-1612.gif

The daily updated index may be found on

http://www.jaring.my/star/klse/daily.html

Finally, here are the latest Malaysian assessment of 3.5+ months with capital
controls. Event if this is from THE STAR, a gvt.-friendly newspaper, and should
be taken with a pinch of salt, I think these are good results compared to South
Korea, Thailand and Indonesia:

>                    POSITIVE TURN
>
>                    Criticisms on capital controls have ceased, says
>                    Mustapha
>
>                    By B.K. Sidhu and Mokhtar Hanafiah
>
>                    KUALA LUMPUR: Negative comments on Malaysia's capital controls have
>                    ceased, just three months after they were implemented, said Second Finance
>                    Minister Datuk Mustapha Mohamed.
>
>                    He said that despite the barrage of adverse media reports and remarks by
>                    critics earlier that such controls would create a black market, Malaysia had
>                    done quite well.
>
>                    "There is now clear evidence that there is no black market for under or
>                    over-invoicing, or even transfer of pricing.
>
>                    "As of today, I can say that the comments have made a U-turn," he said at
>                    the CEO of the Year award ceremony yesterday.
>
>                    He said Malaysia had been able to maintain the controls in an environment of
>                    stability and there had been no major problems in the past three months.
>
>                    "The capital controls are essential as they have restored confidence in the
>                    economy," Mustapa said, adding that the controls were meant to protect the
>                    country from currency speculators.
>
>                    Mustapa, who is also Entrepreneur Development Minister, said there were
>                    discernible signs that the worst may be over for the country.
>
>                    "Firstly, the contraction in the economy appears to have bottomed out with
>                    the gross domestic product growth in the third quarter of this year improving
>                    by 2.3% over the previous quarter," he said.
>
>                    "Secondly, recent indicators have pointed to a revival in the private sector's
>                    confidence. Car sales, for example, have picked up while the home
>                    ownership campaign will provide stimulus to the property sector."
>
>                    Mustapa also noted that the KLSE Composite Index had recovered by more
>                    than 100% from its low of 262 points in September to surpass the 500-point
>                    mark.
>
>                    The nation's external position had also improved with a trade surplus of
>                    RM44.5bil recorded for the first 10 months of this year.
>
>                    On the banking system, Mustapa said non-performing loans (NPLs) had
>                    declined from RM66.8bil in August to RM55.8bil at the end of October.
>
>                    "These are some of the key economic indicators that are indeed encouraging.
>                    We are confident that growth will turn positive in 1999 and continue to
>                    strengthen progressively in subsequent years," he said.
>
>                    However, he added that while a turnaround in the economy was anticipated,
>                    the external environment remained fluid.
>
>                    "There are still risks of renewed volatility in the regional financial market
>                    while global economic slowdown could affect our external demand," he said.
>
>                    Malaysia, therefore, had to persevere even more with its economic and
>                    financial adjustment programmes to strengthen its resilience against external
>                    shocks and lay the foundation for sustainable long-term growth, he said.
>
>                    He said the recently-launched home ownership campaign would also help
>                    reduce the NPLs of the banking sector.
>
>                    Earlier, after witnessing a contract signing ceremony between Malaysian
>                    Resources Corp Bhd and Titian Hartanah Sdn Bhd in Shah Alam, Mustapa
>                    said there were between RM70bil and RM90bil worth of unsold properties in
>                    the market.
>
>                    "Of the total NPLs in the banking institutions, about 50% come from the
>                    property sector. Through the campaign, we hope to clear some of the
>                    overhang properties and improve the NPLs," he said.
>
>                    He also advised developers to be innovative and creative in undertaking
>                    projects as their failures would affect other productive sectors in the
>                    economy.
>
>                    "Developers should be more careful. They should build more affordable
>                    houses. There is still demand for medium-cost houses but there is an
>                    oversupply in high-cost homes," he said.
>
>                    On whether the Government had set any target figure for loan growth next
>                    year, Mustapa said this had yet to be decided.
>
>                    "The banks will give their projections and will consult with Bank Negara on
>                    this matter. We will give a target every year. We want to see growth. There
>                    is still demand," he said.


Trond Andresen