Pointing the Wrong Way

Malaysian Prime Minister Mahathir Mohamad has been pointing a finger at foreigners, blaming them for his nation’s economic woes. Well known for his anti-West rhetoric, Mahathir crossed a nastier line last week by blaming his troubles on “the Jews.” He knows full well that the free fall in Malaysia’s currency, the ringgit, and other disruptions are, in part, of his own making.

The prime minister has produced no evidence that foreign currency speculators triggered the 20% drop in value of the ringgit since July, when a financial crisis began to engulf Thailand, the Philippines and Indonesia. First he blamed the problem on currency speculation by American financier George Soros. Then last Friday, in remarks reported by the Malaysian government news service, he suggested that Jews who “have an agenda” were responsible for the economic problems in the Muslim country.

In fact, it is the prime minister’s words and actions that are battering confidence in Malaysia. In August when the stock market slumped, he introduced a ban on certain types of securities trading. That only worsened the market and the ban had to be lifted. In September at a Hong Kong meeting of the World Bank and IMF, he made his accusations against Soros and threatened to ban trading in the ringgit altogether. The result: It plummeted to a new low.

While he tries to shift blame, the economic setback is forcing Mahathir to scale back his ambitious plan for an industrialized Malaysia by 2020, this after a decade of 8% annual growth. Interest rates remain low, further undermining the ringgit. Banks, meanwhile, have to deal with a large volume of now-dubious loans granted in better times.

Fanning nationalistic fires with anti-foreign rhetoric won’t get Malaysia out of this mess, and Prime Minister Mahathir should know that.