Its true level, they assert, is 3.5 to the dollar rather than 3.8, but say they will keep it at 3.8 to make Malaysia's exports competitive. Perhaps the key point of consensus is that, while necessary, capital and currency controls have to be temporary, to gain a breathing space during which reforms can be implemented. Deficit spending, coupled with the return of significant amounts of ringgit from overseas and the push on banks to increase their lending by eight per cent by the end of 1998, is introducing a lot of liquidity into the economy. The government's focusing on infrastructure spending, on the grounds that this has a multiplier effect on the rest of the economy, draws little opposition. It is the accompanying measure of jump-starting the stagnant property sector by pushing banks to raise their lending while eliminating the rule limiting their proportion of their portfolio in real estate loans to 20 per cent that is drawing fire.
Banks are calling up developers and asking if they want a loan , says one analyst.
Sure, construction on real estate projects will resume, but who will buy them once they are completed in two to three years' time. You're simply postponing the day of reckoning . There is also fear that while the stimulus package will place ringgit in the hands of local consumers, they may decide, like Japanese consumers, not to spend it, saving it instead owing to fears for the future. This would defeat the purpose of the economic package and lead to a descent back to stagnation after a brief recovery. Where objections are greatest though are in the bailouts of the banks and key corporations.