Bearing in mind past actions, it will not be a surprise if Malaysia were to take an independent path when dealing with currency volatility. Finance Professor Didier Cossin from Switzerland's IMD Business School said any intervention, however, must be taken for the correct purpose and objectives.
“Fundamentally, I'm not against pegging or capital controls, but such a move must be for the right perspective and purpose,” said Cossin.
He was commenting on the discussion whether Malaysia should consider pegging the ringgit or taking another action similar to capital controls, as the ringgit reportedly declined 0.4 per cent to 4.3905 per US dollar recently.
Cossin was one of the speakers in the IMD Orchestrating Winning Performance (OWP) programme that ran from Nov 16 to 20 in Singapore.
The ringgit had dropped to 4.4005, the weakest level since Oct 5, and lost 2.1 per cent last month.
Against the Singapore currency, the ringgit weakened to 3.0822 to one Singaporean dollar at one time.
Between 1997 and 1999, Malaysia proved to the international community through capital controls that one can navigate out of an economic crisis that has affected other Asian nations badly, despite the move being looked down upon, initially.
It is believed that because Asian currencies are no longer rigidly pegged, the region now has a greater ability to adjust to changing circumstances.
Nevertheless, currency volatility will continue for some time yet as nations continue to face problems adjusting to the monetary policies of China and the United States.
When asked what China will do next, Cossin predicted that Beijing would head a move for a new global currency in a few years’ time.
“China is learning from the market and will need at least two years to plan (such a move)," said Cossin, who described it as a possibility that Asian nations would come together to create a currency like the euro to reduce currency volatility.
He was talking to a group of Asian journalists who were invited to attend the OWP programme recently.
Meanwhile, IMD Business School’s Professor Arturo Bris, while describing that China would no longer enjoy high growth, also said that many countries had lost their competitiveness and coupled with the security situation has affected the world economy further.
Asking the audience to guess which country was in the top 10 richest countries in 1978, quite a few must have expected either Japan, Saudi Arabia, United Kingdom or Germany.
But, the correct answer was Libya!
“If you can't predict the past, do you want to predict the future?" asked Bris, with a smile with his audience agreeing with him.
With the International Monetary Fund (IMF) predicting growth at only 3.5 per cent next year, and while it is only 3 per cent this year, a lot of countries will record less or no growth.
There is hope if a government can enforce legislation that is business-friendly and transparent, focused on job creation, open to trade, enjoys a healthy financial situation and is stable.
Bris pointed out that to facilitate better growth, a country with good infrastructure like Malaysia and Singapore in this region had to have a good base to grow, economically.
“Notice the placement of IKEA locations across the globe. If a country has good infrastructure, IKEA will be there," he said.
He also pointed out that one new factor that had to be considered when one talked about the economy, that was security vis-a-vis terrorism.
According to IMF researchers Barry Johnston and Oana Nedelescu in their 2005 paper, "The Impact of Terrorism on Financial Markets", acts of terrorism inflicted direct and indirect economic costs.
The direct economic costs are shorter-term in nature, and include the destruction of life and property, responses from emergency services providers, restoration of systems and infrastructure, and the provision of temporary living assistance.
The indirect costs of terrorism can be significantly larger, as they affect the economy in the medium-term by undermining consumer and investor confidence.
A decade after 9/11, the New York Times published a survey of estimates of the true economic costs of the attacks.
The total cost of 9/11 was put at a staggering US$3.3 trillion (RM14.13 trillion).
The authorities in France are still counting the cost of the Paris attacks. At the same time, they are launching operations against the enemies in Syria with the cost expected to rise.
Uncertainty in security can now be included as a factor impacting an economy, perhaps currency, too, adding to the volatility factor.
The writer is BH Features/Op-Ed Editor