7 Nov 2009 The Star BizWeek, P.Gunasegaram wrote this on the view point. "The first step to move toward higher income is to let the currency rise". The title of this article is " An easy way to richness".
A naive view. I think none of the economist will agree with him. If by raising currency can make the country rich, who don't Indonesia, and other poor nation let their currency rise. The question is, how? When investor have no confident about your government, the investing environment is not clear, the factory output is not competitive enough, who will willing to bring their money to invest in the country. Without people bring in the money, how can your currency rise? The government bought it itself?
P.Guna was saying this statement because, Najib claimed that, in order for Malaysia to become as rich nation by 2020, we need annual growth of 7%. So P.Guna suggested, why not we let the Ringgit to rise 7% annually, it brings the same result. Yes, a simple calculation, but the problem is, how to let our currency rise, it can't be done by saying, "Let's Ringgit rise 7% today".
The currency rise must come together with the nation growth, just like China and Singapore. With the GDP growth 10% annually, plus the Yen rise more than 7% last year, actually China citizens become 17% richer than previous year. We wished to be same as them too.
But by rising the currency, the company's export will be affected. The goods is no longer cheap, unless your productivity and quality rise together with the currency, else your goods will soon become very expensive, and lost competency. I am not sure did P.Guna thought about this, before he published the article.
If the nation with highest currency is richer, than we are richer than Japan, and Taiwan, Korea etc.
