Monday, July 30, 2007

Shahrir: Focus on Strenghtening the Ringgit

If you recall my previous article, Push The Ringgit Higher, you can see this somewhat similar thing spoken by Shahrir Ahmad today.

Last Saturday, there was an article by The Star entitled The Ringgit Debate

Among the notable details:

1. A weak ringgit is not good. The stronger value outnumbers the cons of a having a week ringgit. One main thing is that it boosts exports. Sooner, there will be a stiff competition and there is a need to compete, rather than relying on the monetary value.

2.Anticipation of a “still undervalued ringgit” has lead many to come in droves, both to capitalise on the appreciation of the stock market and the foreign currency exchange.

3. For starters, the wealth of its residents increases almost immediately. Just think of the many times when we Malaysians went holidaying overseas, and the foreign exchange itself gives us an inferiority complex. Just across the Causeway, the wealth of Malaysians is instantly halved by the superior Singapore dollar.

4. The yen and Swiss franc have appreciated because their economies are very competitive and they produce global companies. This in turn attracts inflows of foreign funds.

5. The big reason: A strong currency means that raw materials can be imported at cheaper prices and then converted into relatively expensive finished products. An observer adds that the biggest profits are made in finished goods, not in raw materials.

6. However, many are under the illusion that a weak currency leads to more foreign income. However, it is extremely inflationary and this is evident in the higher cost of living in countries with weak currencies. Simple everyday goods are extremely expensive. This means that a person earning RM2,000 in Malaysia would be worse off than an American earning US$2,000 and a Singaporean earning S$2,000 because the Malaysian has to pay a lot more ringgit to buy the same shirt sold in the other two countries.

This is clear indeed. Faster time needed to strengthen our monetary value!

We are losing against other nations. If we are to beat poverty, do so now. Strengthen to 3.06!

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