Malaysian exporters respond to Bank Negara’s ringgit move

Malaysia’s petrochemical markets were shook up by Bank Negara’s recent measures on the ringgit this week since many exporters reported taking a cautious stance. Although the Bank’s purpose was to strengthen the ringgit against the US dollar, exporters expressed their concerns regarding their businesses.

According to the new measures, exporters have to convert 75% of their earnings into ringgit after they bring their money to the country as of Monday. That is to say, companies will not be allowed to hold their export income in US dollars at local banks. In an attempt to provide some incentives as compensation, the Bank also reported that these companies will earn a special deposit rate of 3.25% annually in return. This conversion is expected to increase Bank Negara’s reserves by more than $18 billion.

A masterbatch producer commented, “With the new policy, we feel less confident about our exporting activities as we now have to make currency conversions two times, which will increase the risk of losing profit. We believe that small and medium scale companies will not be able to cope with the new measures while larger ones may do fine. In the long run, players might try keeping their money in overseas banks in order to avoid the currency losses.”

A source from a local PVC producer stated, “We think that exporters’ profits will be hurt every time they convert the US dollar to the ringgit or vice versa when they sell or buy. As the number of conversions will increase, much money will be lost during the process.”

A bottle manufacturer also said, “The new regulations will have a significant impact on our business since 75% is a very high rate.”