KUALA LUMPUR (March 25): Bank Negara Malaysia (BNM) is not undertaking any form of capital control when it "coordinates" with government-linked companies (GLCs), government-linked investment companies (GLICs) and exporters to repatriate foreign proceeds back to the nation, said its deputy governor Datuk Marzunisham Omar.

“Yes, we have talked to the GLCs and GLICs, and let me stress again that these [repatriations] are what they have already realised, their income from the investment. So, what we ask them, and they agreed, is that this realised income, they will bring it back,” he said at panel discussion hosted by the Malaysian Economic Association.

“It is not about asking them to sell off their investment, we are not asking them to liquidate their investment abroad. As part of their investment strategy, they do what they want, and whenever they do. They will realise those investments, and we are asking them to bring back that investment at this time and convert.

“Similarly, when we talk to the exporters, these are already funds that they are already bringing back to the country. We are encouraging them to take the opportunity now to convert those funds into ringgit. So, it's nothing to do with capital flow management, nothing to do with restricting flows of capital into or going out of the country,” he said.

Marzunisham said these are short-term measures to address the recent undervaluation of the ringgit, which was driven by interest rates differential and the safe haven status of the US dollar amid geopolitical tensions.

He said these are short-term factors that affect the ringgit movement and, hence, it is important for BNM to work with the government to intervene and encourage GLCs and GLICs to repatriate their realised investment income.

“We are now urging, strongly urging corporates to do the same, especially those that have a relatively high foreign currency balance.

“We continue to monitor the conversion behaviour of domestic exporters and importers, and engage them on any unusual trends that we observe,” he added.

Apart from exporters, Marzunisham said BNM also noticed that certain importers front-loaded the purchase of foreign currency while some corporates are not converting their overseas investment income.

“We believe that this behaviour has somewhat contributed to some imbalances in the foreign exchange market. So, for these exporters, importers and corporates, we met with them individually and tried to understand their reasons for their behaviour,” he said.

“As we insist, the ringgit is undervalued. We have in BNM… models that we use to estimate the fair value of the ringgit. All our models consistently show that ringgit is undervalued.

“It is mainly driven by sentiment, which we believe ignores the fact that Malaysia has a positive growth prospect, moderate inflation, and with the reforms that we are going to implement, our competitiveness of our economy will improve. All these are real economic factors that should and will support the strengthening of the ringgit,” he added. 

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