Chief Minister Lim Guan Eng said the move would hurt the investment climate and badly affect foreign investors’ confidence in Malaysia.
Saying the move might even reduce foreign investments in the country next year, he urged the central bank and the federal government to cancel the ruling which was implemented last week.
Under the new ruling, exporters can only retain up to 25% of export proceeds in a foreign currency, while the remainder must be converted into ringgit. Higher balances will need Bank Negara approval.
“We have been getting complaints from multinational corporations. If they need to implement this, do it in stages.
“To do it at 75% and tell companies they have six months to do it is too harsh. If they must, 25% is more reasonable,” he told reporters at Komtar today, following a discussion by the state exco on the matter.
It was reported that as a measure to increase demand for the ringgit and reduce its volatility against the US dollar, Bank Negara is compelling exporters to convert 75% of their earnings into ringgit.
Before this, they were allowed to hold their proceeds in foreign currencies. Most are holding their export proceeds in US dollars with local banks. Based on reports, it is estimated that close to RM90 billion is being held in foreign currencies by exporters.
“I understand that the move is to help the ringgit, but this measure is not the medicine to cure the illness. Bank Negara is only tackling the symptom.
“The fall of the ringgit is not because exporters hold their proceeds in foreign currencies or people spending overseas. It is because of the 1MDB scandal,” Lim said, referring to the 1Malaysia Development Berhad controversy.
“To ensure the ringgit recovers, settle the 1MDB and donation scandals,” he said.
He said he would be writing to Bank Negara, the Finance, and International Trade and Industry ministries to reconsider the ruling.
“I am sure all companies that export overseas are affected… their proceeds will be subject to fluctuations and they will have to do a lot of hedging when they do the currency conversions to ensure they don’t make losses.
“There will also be transaction costs to bear. It will be expensive and inconvenient for the businesses.
“A foreign company has other options but not local companies. Let’s not come to the stage where even local companies want to move out of the country,” he said.
Lim also commented on a report that the Education Ministry did not have enough funds for Chinese primary schools this year.
Lim said it was “shameful” that the federal government did not have money.
“It is serious if the federal government says it does not have RM50 million. It is not even RM50 billion. What kind of government is that?”
It was reported yesterday that budget cuts at the Education Ministry had limited access to the RM50 million fund for the maintenance and development of Chinese primary schools, but minister Mahdzir Khalid said the issue might be resolved by the final week of this month.