Mazlan Nordin

Criticisms from the expected are sometimes balanced by paeans of praise from the unexpected. Thus it is as the good ship Malaysia sails on course.

First, the critique. Presented in Singapore recently by Nobel Prize winner Professor Melton Miller was an analysis criticizing Malaysia's capital controls.

Quote: "What did Malaysia's experiment with controls actually accomplish? The most favourable answer is nothing. Malaysian flirtation with currency controls must be written off as a failure, and one whose costs will be borne by the Malaysian people for many years to come."

He sounds like the oracle of Delphi in ancient Greece who proffered sage advice and also told what would happen in the future.

A detailed 11 point reply was given later by former Bank Negara Deputy Governor Tan Sri Lin See Yan, who obtained a PhD in Economics from Harvard University.

'Who are the so-called costs listed by Miller? Where are the costs Miller claims future Malaysians will have to bear?" he asked.

Not much is known about Miller in this country apart from the a report which appeared in the Weekend Australian newspaper in early October 1998 following the debacle of the Long Term Capital Management hedge fund headed by John Meriwether, described as Wall Street's most celebrated trader.

The report was written after a visit to his office in Greenwich, Connecticut, a hour's drive from Wall Street in Manhattan. The price for a cup of coffee in the posh area is US$1.50. Some excerpts from the Australian report:

"The shiny new Greenwich offices from which he and his team of Nobel prize-winning economists and computer boffins planned their billion-dollar investments is overrun with financial investigators trying to work out how one hedge fund could do so much damage"

"It was from these offices that Meriwther and his colleagues from Long Term Capital Management invested US$90 billion in risky wagers which, when they turned sour, forced the US Federal Reserve to arrange a US$3.6 billion rescue package financed by Wall Street's leading firms."

Mentioned several paragraphs later was that Meriwether earlier on had "lured Nobel laureates Merton Miller and Myron Scholes" to join his firm.

The report about the LTCM collapse, as one which could have destabilized the financial markets and harmed the the banking industry, was published on Oct 3, 1998.

In early July this year, just nine months later, Miller was delivering his lecture at a conference in Singapore!

In contrast is an article which appeared in the leading Israeli economic daily, Israeli Business Arena, on May 31 titled Look to Malaysia. It began with the reminder about Israeli traditionally looking westward for economic role models.

The commentary continues: "they studiously ignore Japan's economic methods, let alone those followed by other Southeast Asian nations. Yet if they took the trouble of looking, they would see that, much to the astonishment of western economists, foreign capital is making a strong comeback to Malaysia, which, in defiance of International Monetary Fund and western advice, set a fixed exchange rate, reinstated currency controls and increased its budget and its budget deficit.

"How did the Malaysia economic rogue succeed in pulling such a stunt? The answer is that Malaysia also succeeded in protecting the value of its national currency against all attacks, as well as effecting positive economic growth.

"Malaysia's behaviour sharply contrasts with that of other Southeast Asian countries, which, while coming under the same market forces' attack on their currencies, followed the advice of western economists who sought to transform the Southeast Asian economies into western style ones.

"The outcome? Malaysia's neighbours are still in deep economic crisis. One example that comes readily to mind is Indonesia.

"Malaysia's success was so striking that even IMF chief Michel Camdessus astonished everyone by conceding that some circumstances justify local currency controls and that free market economy is not a universal panacea."

Once asked by a reviewer was the question: What have the following in common-Laxness, Gjellerup, Sillanpaa, Echegaray, Pontoppidan? Answer; They all won the Nobel Prize for Literature. One doubts that they have avid readers in this country.

There are laureates and laureates,. There are those involved in business and high finance also. sometimes they lose.