Premium
FINANCIAL REFORMS IN AN EMERGING ECONOMY: THE CASE OF MALAYSIA
Author(s) -
SIVALINGAM G.
Publication year - 2008
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/j.1759-3441.2008.tb01052.x
Subject(s) - financial crisis , merge (version control) , corporate governance , financial system , balance sheet , business , capital market , financial institution , context (archaeology) , government (linguistics) , economics , exchange rate , economic policy , finance , market economy , macroeconomics , paleontology , linguistics , computer science , philosophy , information retrieval , biology
This paper traces the financial reforms that were introduced to stabilise and strengthen the financial system in Malaysia after the 1997 East Asian Financial crisis. It begins with a discussion of the causes of the crisis and the subsequent institution of capital controls and a fixed exchange rate regime and the efforts to introduce reforms behind the shelter of controls. Reform measures to reduce the ratio of non‐performing loans, to improve the balance sheet of banks and corporations, and to protect depositors are then evaluated, together with attempts to merge banks and strengthen the prudential regulation, corporate governance, and the risk management of financial institutions. The discussion is in the context of two forward‐looking master plans to reform and strengthen Malaysia's financial sector and the capital market. The paper ends with a discussion of the positive effects of the reform on economic recovery after the crisis. However, it is noted that the financial system persists as a relationship‐based system rather than a market‐based system in view of the Government's insistence on directed lending and the continued implementation of the New Economic Policy.