THE NEW ECONOMIC POLICY AND FINANCIAL REFORMS IN MALAYSIA, 1997-2009

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Abstract

The focus of this paper is on the effect of the New Economic Policy on the reforms to the financial system in Malaysia that have taken place since the 1997 East Asian Financial Crisis. The paper discusses the reforms that were introduced to stabilize and strengthen the financial system and the institution of capital controls and a fixed exchange rate to stabilize the exchange rate in the context of the New Economic Policy. The paper discusses the reform measures that were taken to improve the balance sheet of banks and corporations and to protect depositors. The reforms were efficiently executed and the banking system and financial system are stable and banks have increased their lending over time. However, the financial system still remains susceptible to a terms of trade shock because the financial system persists as a relationship based system rather than a market based system although efforts have been made to strengthen the corporate governance of the financial institutions. However, corporate governance reforms are consistent with the objectives of the New Economic Policy and there is resistance to introducing reforms that converge with Anglo-Saxon norms of corporate governance.

Keywords: Financial Reform, Malaysia, Financial System

How to cite this paper: Sivalingam, V. (2009). The new economic policy and financial reforms in Malaysia, 1997-2009. Corporate Ownership & Control, 6(4-4), 450-458. https://doi.org/10.22495/cocv6i4c4p3