It is good that the new Finance Minister has come out quickly to state in this malaysiakini article Najib: No ringgit re-peg.There are costs in the ringgit peg just like there are costs in trying to keep the ringgit within a certain exchange rate.
For thing for certain is that no central bank has enough reserves to bet against the market and if there is a run on your money, you will lose all your reserves very quickly betting against the speculators.
I read somewhere that Malaysia has about US$800m(?) in foreign reserves but this amount is small compared to the daily market flows. We could use up all the reserves within a week.
A ringgit peg is basically a foreign exchange control and results in lower investment flows and a repeg now will be considered the great "financial flip-flop".
The new Finance Minister must draw up comprehensive plans to make our economy more competitive and I would suggest we should be looking at producing graduates who better fit the market place, reducing the civil service by 20 to 25% by 2020 and encouraging industries that make use of IT rather than the usual mega-projects.
Projects like public transport should be boosted and designs approved that are scalable but with long-term possibilities.
Photo: thanks to malaysiakini
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