In an interview with StarBiz, CIMB Group Holdings Bhd chairman Datuk Seri Nazir Razak said this involved having to make several important decisions, including the appointment of good leadership at Bank Negara following the retirement of ougoing governor Tan Sri Dr Zeti Akhtar Aziz next month.

“Businesses want to see a strong and credible appointment at the central bank and other important institutions,” he said.

Drawing comparisons, Nazir said Indonesia and Thailand appeared to be serious and focused on pumping their respective economies amid the soft global economic environment.

“But in Malaysia, we’re a little distracted and I don’t just mean the Government, the private sector also seems to be holding back investment. There seems to be a sentiment issue that we have to get over,” he said.

“In 1999, we had this theme ‘Malaysia: Bullish on Bouncing Back’ where both the Government and private sectors came together and went out to market Malaysia.

“This cohesion and partnership is what is needed again,” he said.

Speaking on the economy, he said with the changing dynamics of growth trends in the US and China which now incorporate slower exports, the decline in the ringgit in recent times had not quite translated into the sharp increase in local exports like what the market would have expected.

“Similiarly oil prices don’t look like they are going to jump to levels that we have been accustomed to in recent times,” he said.

“I think it’s going to be US$30 to US$40 roughly for a while.”

Having said that, he noted that the Malaysian economy was well diversified and that a projected 4% to 4.5% growth for this year was “decent”. “We should take the opportunity and focus on the right sectors that can propel Malaysia forward.”

Earlier, at a question-and-answer session at the Star Media Group’s PowerTalk: Business Series held at Menara Star, Nazir said a negative interest rate environment was unnatural and “extremely” dangerous as banks could go bust as a result.

He said the likely reason some countries had adopted it was because they felt this was one way to “force money into activity”.

“I’m not a fan of negative interest rate, it’s an unnatural act to go into. Certainly I don’t see Malaysia going there, it’s not a good policy,” Nazir added.

Zero or negative interest rates, which Japan and the eurozone have adopted coming out of recessions, are suppose to boost economic recovery by encouraging banks to lend more cheaply which, in turn, boosts consumer spending and overall growth.

However, critics like Nazir point out that what they also do is erode the margins of banks, which make money from charging interest. This basically goes against the original objectives of central banks, whose jobs are to ensure that banks remain financially sound and stable.

On the ringgit, Nazir said when the ringgit had hit 4.30 to 4.40 to US$1 sometime last year, no financial assessment could justify that.

“It was very sentiment driven, it definitely overshot … externally, if you can tell me where US interest rates and the yuan are going to go, then I can tell you where the ringgit is going to go.”

But the prognosis was that US interest rates would go up at some point and the yuan would continue to weaken, in which case, there was a probability that the ringgit would continue to weaken, Nazir said.

“I dont think there’s too much weakening to go but as I said, it really depends … if you ask me today would I bet if the ringgit will go back to 3.60 or going to go above 4.50, I don’t think so.

“If you look at the world today, it has a problem. Going into the global financial crisis in 2008, total banking debt all around the world to gross domestic product (GDP) was 130% but fast forward today, total debt to GDP is over 200%. So, rather than dealing with debt back then, debt was increased, and so now it has spread more across the world,” Nazir said.

“The world has a debt problem that is going to take some time to get through, so the world environment is going to be difficult.”