Prime Minister Datuk Seri Anwar Ibrahim plans to gradually increase the use of the Ringgit in trade, hoping to soften the foreign exchange impact as the U.S. dollar strengthens against many Asian currencies.
This year, the Malaysian ringgit has dipped by around 5% against the U.S. dollar, hitting its lowest in 25 years in late October as the U.S. Federal Reserve continued to raise its rates. With the dollar dominating global trade, a weak local currency would mean higher import costs. It would also increase the burden of dollar-denominated debt for emerging economies.
In an exclusive interview with Nikkei Asia in Tokyo on Sunday, Anwar stressed that the ringgit continued to dip among its peers despite improving economic fundamentals in his country.
“Growth is good, unemployment is low, inflation is low, and investments [are] coming in. How is the ringgit low? It goes against the economic fundamentals, but nobody can explain,” said Anwar, who is also the finance minister. “Well, the reason is the Fed.”
The prime minister acknowledged the dollar’s importance and that his country does not aim for independence from the greenback. “In fact, my intervention here … is not de-dollarization. It will take time. The U.S. dollar is still an important [medium of] international exchange, but [we want to reduce dependency] at least gradually.”
Malaysia has been promoting the use of its currency with some of its regional trade partners. According to the Bank Negara Malaysia, the central bank, 19.7% of trade with Thailand was settled in the local currencies as of September, as well as 17% for Indonesia and 23.3% for China.
During the interview, which covered various topics including foreign policy, the prime minister also talked about foreign investment in his country, one of the key manufacturing hubs in Asia.
Anwar said he is seeing foreign investors’ confidence in Malaysia, including those from China, the U.S., Japan, South Korea and Europe, despite the economic challenges, including weak export demand. “In the last six months, huge investments are coming in, like [German chipmaker] Infineon, for example,” he said.
“What is to me particularly satisfying is because [Malaysia] is no longer in the back-end of the [semiconductor] industry,” he said, referring to the assembly process of the industry. “The chips have gone to the front-end [wafer fabrication process], so the confidence is there. The trust in our professional capability is there.”
He also said that there is strong demand for the expansion of data centers in Malaysia and that the government is encouraging companies to upscale further in a more advanced utilization, such as the building of an artificial intelligence data center in the southern state of Johor by U.S. chipmaker Nvidia and local conglomerate YTL Power International.
Touching on the recent cabinet reshuffle, Anwar explained that the launch of new ministries on energy and digital was to focus on “high-value, high-growth” projects, such as a floating solar plant.
Anwar reiterated the importance of “ensuring good governance, pushing the ease of doing businesses and getting the right infrastructure” in place to attract foreign investments, adding that the “poor governance and corruption” had undermined the country’s potential.
“I believe we are in a stronger position to try and implement and effect change,” he stressed.
