Standard and Poor's raises Malaysia's credit ratings outlook
International ratings agency Standard and Poor's said today it had revised upwards Malaysia's credit rating outlook on expectations of an improved government fiscal position and progress in corporate restructuring.
S and P raised Malaysia's long-term ratings outlook to positive from stable, and affirmed all sovereign ratings including its long-term BBB foreign currency and A local currency ratings.
"The outlook revision reflects the expectation that the government's fiscal position will improve as the global economic recovery takes hold, which in turn will ease pressure on the country's fixed-rate foreign exchange regime," the agency said in a statement.
"The revision of the outlook to positive also reflects the progress made in restructuring the corporate sector and in strengthening of the country's external position."
Corporate restructuring
S and P noted that the country had maintained a robust international liquidity position while external debt remained at less than five percent of current account receipts.
With economic conditions improving, it expected the general government accounts to return to balance by 2004 with the net debt position remaining below 25 percent of gross domestic product.
It said the pace of corporate restructuring picked up in the second half of last year and noted the accelerated resolution of outstanding cases by the Corporate Debt Restructuring Committee.
"At the same time, a number of large and previously politically well-connected corporations were renationalised to replace existing management-owners, to quicken debt restructuring and to dispose of non-core assets," it said.
"The renewed commitment of the government to push through difficult corporate restructuring is a positive for the economy."
Moral hazard
But the agency said it was still unclear if the government was becoming less willing to assist key private companies, a "tendency that has raised moral hazard in the past and damaged the government's financial position."
A "less interventionist approach" would strengthen Malaysia's credit standing, it added.
Analysts and business leaders have said there appeared to be a policy shift towards better corporate governance since Prime Minister Mahathir Mohamad took over the finance portfolio when Daim Zainuddin resigned last June.
The premier has broken up several Daim-linked companies including the country's most indebted conglomerate, Renong, and accelerated revamps in troubled concerns such as Malaysian Resources Corp and Malaysia Airlines.
The government took over Renong in July and removed its controlling shareholder and chairman Halim Saad, who was a close associate of Daim.
The loss-making flag carrier last month said it had sought police help to probe irregular deals under former chairman Tajudin Ramli, another Daim protege. (AFP)
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