Queues formed outside money-changing offices in this border town adjoining Singapore yesterday as people scrambled to change the falling Malaysian ringgits into foreign currencies as it crashed yesterday to three to one against the US dollar, an all-time low.
The gloom in Johor Bahru's streets reflected a sense of helplessness throughout south-east Asia where a debilitating monetary crisis has entered its third month with no end in sight.
The Philippine peso sank to fresh lows yesterday and the Thailand baht continued its spiral downwards.
Late yesterday Malaysia was forced to react to pressure on its finances by delaying a range of major capital projects, including the building of the controversial $6 billion (£4.78 billion) Bakun dam in the Borneo rainforest. Many Malaysians interviewed in Johor Bahru blamed international investors for the financial crisis but hesitated to express the extreme views of the Prime Minister, Mr Mahathir bin Mohamad, who has angrily blamed foreign investors for the market and currency slide.
"I say openly, these people are racists," Mr Mahathir said on Wednesday when he accused "rogue speculators" of causing Malaysians to be poorer by 20 per cent in two weeks.
"They are not happy to see us prosper. They say we are growing too fast. They plan to make us poor." "There is a real exodus of dollars out of Malaysia," said a banker in Johor Bahru who noted that many local people were trying to stockpile Singapore dollars which have remained strong and are linked to the US dollar. "In Kuala Lumpur stock exchange, foreigners are taking their money out of Malaysian stocks as fast as they can." After weeks of threatening speculators, Mr Mahathir on Wednesday announced that the government would inject 60 billion ringgit ($20 billion) into the market to support share prices.
"We don't depend on anyone. We will settle this problem on our own." But the market remained highly nervous and the Kuala Lumpur Stock Exchange Composite Index fell by as much as 10 per cent early yesterday, before recovering to end down over 2 per cent.
An atmosphere of paranoia affected analysts and dealers in Malaysia after the Finance Minister, Mr Anwar Ibrahim, said yesterday the Malaysian government could use the draconian Internal Security Act which allows imprisonment without trial against citizens found supporting foreign investors selling down local shares. "If they continue to break the rules and sabotage the economy, of course, we do not preclude that possibility," he told reporters. The anti-foreign sentiment in the Malaysian leadership could, however, damage efforts to make a recovery, analysts said. "I think the view towards Malaysia is very, very damaged," the head of research at a foreign brokerage firm told Reuter. An equity analyst at Morgan Stanley called the restrictions on foreign investors "xenophobic". Malaysia has no history of xenophobia and has welcomed foreign capital and labour in its plans for economic development.
