If the yen credit is given as a soft loan, it will help us deal with our big debt problem, says PM
Prime Minister (PM) Tun Dr Mahathir Mohamad said yesterday he has asked Japan to extend a yen credit to Malaysia, to which his counterpart Japan PM Shinzo Abe said he would consider the request.
Briefing Malaysian journalists on the outcome of his three-day working visit to Japan, Dr Mahathir said he mentioned to Abe at their meeting earlier about the soft loan extended by Japan when he (Dr Mahathir) was the PM previously, with an interest rate of just 0.7% repayable over 40 years.
“At that time, Japan’s financial position was very good. But, this time, we also asked him to consider providing the yen credit to Malaysia and he agreed to consider,” he said.
“The credit that they (Japan) will provide us is to be used for what we promise them, perhaps we will retire some of the high-cost borrowings that we have and replace them with the yen credit.
“Then the interest rate will be cheaper and we don’t have to bear the interest for many, many years to come,” said Dr Mahathir.
The new government under Dr Mahathir, who was sworn in as the country’s seventh PM last month, discovered that the federal debt had reached RM1 trillion and it is finding ways to bring the debt level down.
“If the yen credit is given as a soft loan, it will help us to deal with our big debt problem. We do not necessarily have to retire the old loans, but this cheap loan can contribute to the recovery of our debt situation,” he explained.
Dr Mahathir drew attention to the fact that Malaysia had previously obtained loans at a very high interest rate of up to 6%, and the people who managed the credit had obtained a commission of up to 10%.
“When we give a commission of 10%, it means that if we take a loan of 100 million (in any currency), we get only 90 million, but we still have to repay with interest for 100 million.
“So, if we take 90 million, but repay for 100 million, it means the interest increases from 6%-7% or 7.5%. This causes our cost of borrowing to be too high.
“If we can reduce that cost by borrowing from other sources with a lower interest rate, we can retire the old loans,” he said.
He said no amount of the yen credit request was dis- cussed with Abe.
Dr Mahathir was also queried on a report that the Kuala Lumpur-Singapore high-speed rail project had not been scrapped, but postponed.
“In a way, it is postponed, but at this moment we need to restudy; and if we are short of funds, we can delay the implementation of the project or reduce the scope of the project,” he said.
Separately, Bernama reported that Malaysia and Japan have agreed to keep the Strait of Melaka and the South China Sea free for navigation for all countries.
Abe said the Indo-Pacific region including the South China Sea should be free and open based on the rule of law, and is to be maintained as a global public route for regional peace and prosperity.
“Japan is willing to cooperate with any country to support this concept with Malaysia. I am resolved to further strengthening cooperation for regional peace and stability, including in the maritime safety area,” he said at a joint press conference with Dr Mahathir.
After the event, Abe presented Dr Mahathir with a Japan World Cup team jersey with Dr Mahathir’s name and the number 7 printed on it to symbolise him being the seventh PM of Malaysia.
Abe said the gift also marked the wish for further friendship between the two nations.
Dr Mahathir presented Abe with a book on himself, and said it would enable Abe to know him better. — Bernama