Soros, Malaysia Slug It Out Over Currencies

Financier George Soros hit out yesterday at accusations that he was involved in Southeast Asias recent currency turmoil and said Malaysian Prime Minister Mahathir Mohamad was only using him as a scapegoat.

However, he acknowledged that further liberalising financial markets might not be the answer to economic instability and said that, instead efforts to strengthen regional cooperation among central banks of affected countries would be an appropriate response.

Soros told an audience on the fringes of the World Bank-IMF annual meetings: Mahathirs suggestion to ban currency trading is so inappropriate that it does not deserve serious consideration. Interfering with the convertibility of capital at a moment like this is a recipe for disaster, Soros said.

 

He is using me as scapegoat to cover up his own failure, he said later in his speech.

In a speech on Saturday in Hong Kong, Mahathir accused currency traders of being immoral and said their activities should be made illegal. The local Sunday Morning The Post quoted him as saying he would ban speculative currency trading. Malaysian officials later backtracked, saying the premier was talking only in the context of negotiations for rules on financial services under the World Trade Organisation.

There is absolutely no change in the practice of currency trading at present, finance minister Anwar Ibrahim told reporters during the annual meetings.

Mahathir has repeatedly blamed buccaneer fund managers - and particularly Soros - for deliberately undermining the Malaysian economy in part because the West cannot bear to see his and other emerging countries in Asia become so successful.

Soros denied Mahathirs accusations that he had been behind speculative attacks on regional currencies, saying he had bought and held such currencies throughout the crisis.

If anything our transactions were purchases, he said adding that the allegations are totally unfounded and imaginary.

Anwar fought back against Soross broadside elsewhere in the convention centre housing this weeks meetings, telling reporters that Soros was missing the point.

Because notwithstanding some of the critical or personal remarks made by George Soros, what cannot be denied is that we are facing a major problem and challenge from unscrupulous speculators in the currency markets and the share markets.

Soros told a news conference he believed Southeast Asia would bounce back from the currency crisis if regional problems, which he listed as weak banking supervision, lenient credit policies and a lack of information, were addressed.

I think that it will lead to reforms and I am sure that the region will recover because it has tremendous energy. This will be only a temporary setback with hopefully some positive structural changes, he told a news conference.

But, he said, moves to further open financial sectors to foreign involvement may be misguided, given what he called the fickleness of international capital, and instead suggested greater mobilisation of domestic savings to finance growth.

More broadly, he welcomed regional efforts to limit the impact of speculative currency attacks, saying the most important factor in the near term was Thailands efforts to reform its banking sector.

Cooperation between central banks is always worthwhile and I think it is feasible and if rules are changed then I think most respectable people will abide by the rules, he said.