Bank Negara's Failure To Detect Illicit Outflows.

Malaysia is on the precipice of a great fall. Looking at it one could surmise that it is almost beyond redemption. I say almost because there is still a flicker of hope. It will be a long journey but it must inevitably begin with a first step.

The shattering report by financial watchdog Global financial Integrity ( GFI) had shown that money flowing out of the country had triple from 2000 to 2008.In 2000, the report stated that rm$67.7 billion had exited the country and eight years later the figure had escalated to a massive rm $208 billion.
According to the report ,' significant governance issues affecting both the public and and private sectors have been playing a key role in the cross-border transfer of illicit capital from the country'
The above comments by GFI clearly depicts a very sombre situation face by the country's financial system. But what is even odd and surprising is the dormant and incompetent state of our central bank manned by a supposedly illustrous Governor in the guise of Zeti.Surely over a period of eight years the magnitude of such money outflow from the country would not have escape the attention of Bank Negara. One can only conclude that such massive outflow was done with Bank Negara's knowledge and that at some point in time they were complicit in the transfer of the funds. Otherwise it would be impossible for the central bank not to notice the movement of such substantial cross-border transfer of funds.
You dont have to be an economist to conclude that any massive transfer of funds out of the country would weaken the host country's currency because the funds exiting the country would have to be converted to another currency where it is destined. A cursory study of currency fluctuation would immediately indicate that substantial outflows would be to U.K, Australia and Singapore. That perhaps explain the perpetual strength of the Sing , the pounds and Australian dollars.

The continuation of such illicit outflows will have a severe impact on Malaysian's economy. In the long run, precious capital needed for investment will be suffocated by the illicit transfer of capital to develop countries. The net result is that the country's currency will be weakened and it's economy will remain perpetually trapped in a cycle of gradual decline.

In a nut shell, our country is facing a defining moment where its present course could be disatrous. Outflows in 2008 of $208 billion is a huge sum in any monetary terms when you compare Penang merely attracted only $12.2 billion to top the destination with the most foreign direct investment in 2009.What is there to celeberate when our top state merely attracted $12.2 billion in foreign investment but lost $208 billion in illicit outflows in 2008.

Whatever reason proffered by Bank Negara's reason for the illicit outflow, one thing remain certain. It has failed dismally in its job of monitoring the illicit outflow. Otherwise why was such massive outflows not mentioned and strategy deviced to tackle the outflow? And why was revelation of such outflows published and widely mentioned by a foreign financial watch dog (GFI)when it should have been our own central Bank making the disclosures?.

Bank Negara has always being a very poorly managed Instituition. Not only has it failed its duty to be the local watchdog for our local banks but in its survellance of monetary mangement in our econmy it has failed dismally.

It would therefore not be a surprise if illicit transfer are allowed to continue unabated, Malaysia's financial structure would collapse in the not too distant future.