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By: Ng Tak Wa

Bank Pertanian Malaysia



Prior to the financial crisis in July 1997, Malaysia was experiencing a period of growth and economic stability.  Malaysia’s GDP was growing at a rate 8% plus since 1990. Inflation, interest rates and unemployment rate were low. The exchange rate for ringgit was stable at around RM2.50 to USD1. The fundamentals appeared sound and the economy was expected to continue its growth into the future.  

Then came the crisis in July 1997, triggered by currency speculation and depreciation of the ringgit. The economy started to collapse with the sudden loss of confidence in the economy. Within a short span of time, the stock market collapsed, inflation and interest rates went up, businesses started to fail and unemployment increased. In 1998, Malaysia experienced negative growth for the first time in 13 years when it recorded a contraction of 7.5% in her GDP. 

So what were the causes of the economic crisis, the impact of the crisis on the economy, the financial reforms implemented and their impact on agricultural finance in Malaysia?  



The Malaysian economy was fundamentally strong just prior to the start of the crisis.  In the first two quarters of 1997, real GDP continued to grow at about 8%. The Government continued to record fiscal surplus and, very importantly, the level of external debt was low at 43.2% of GNP. Measures to address the supply constraints in the economy had been taken earlier since 1995 and were beginning to show positive results. The current account deficit was reduced to 5% of GNP in 1996 from 10% in 1995 and was expected to improve further. Inflation had moderated to its lowest level, 2.1%, in July 1997. Measures to slow down the pace of bank lending were directed towards making domestic demand more compatible with the level of output, as well as to contain the development of any asset bubble. Therefore, as at end-June 1997, the fundamentals of the economy had strengthened further. Economic growth was being achieved against a background of lower inflation and an improved balance of payments position. 

In the banking sector, the structural reforms that had been undertaken since the mid-1980s had strengthened the banking system.  By international standards, the banking system was already subject to stringent prudential standards since the late 1980s. Stringent guidelines were implemented on single customer limits, large loan limits and a prohibition on connected lending (i.e. loans to directors and staff as well as loans in which the banks had other interests in). At the end of June 1997, just before the start of the financial crisis, the average risk-weighted capital ratio of the banking system was at 12%, higher than the internationally recommended minimum level of 8% as laid down in the Basle Accord. Net non-performing loans (NPLs) were only 2.2% of total loans and the ratio of loan provisions to NPLs was close to 100%. At the same time, the approval process for external loans was stringent. Corporations and banks, therefore, did not have unhedged exposures to foreign currency borrowing.

In spite of the sound macroeconomic and institutional fundamentals, there were weaknesses in current account deficit, asset inflation and high credit growth. Policies were already in place to address these weaknesses and positive results had already begun to emerge prior to the crisis.



Depreciation of Ringgit

Despite its relatively sound economic fundamentals prior to the financial crisis, Malaysia was not spared from the crisis. Following the sharp depreciation of the Thai bath on 2 July 1997, the ringgit began to experience waves of speculative pressure. By the end of August 1998, a year later, the ringgit had depreciated by 40% against the United States dollar relative to its level at the end of June 1997.

Decline in the Stock Market

The equity market was also affected. The Kuala Lumpur Stock Exchange Composite Index (KLSE CI) fell by 79.3% from a high of 1271.57 points in February 1997 to a low of 262.70 points on 1 September 1998. 

State of the Banking System

The sharp depreciation of the ringgit combined with the fall in share prices had a negative effect on earnings and overall performance of the banking sector. Nevertheless, throughout the crisis, the payment systems and the intermediation process continued without disruption.

Due to economic contraction, the debt-servicing capacity of borrowers declined, resulting in the deterioration in asset quality of banking institutions. The pre-occupation with managing their existing asset portfolio together with the pessimistic outlook of the economy caused the banking institutions to be overly cautious in extending new loans. The reluctance of the banking institutions to lend combined with higher interest rates led to severe difficulties for individuals and businesses, including viable businesses in productive economic activities, to obtain financing. These developments caused loan growth to slow down from a high of 26.5% at end-1997 to 1.3% at end-1998.

The net NPL/total loans ratio rose to 9% at the end of 1998.  This led to a loss of RM2.3 billion and the erosion of the capital base of the banking institutions.   While the RWCR for the banking system as a whole remained well above the minimum 8% requirement, some banking institutions required recapitalization.

It should be emphasized that the financial system was not directly affected by the depreciation of the ringgit as the banking system did not rely on foreign funds to finance their activities and hence the exposure to the ringgit depreciation was small. Position taking activities in the foreign exchange market were mainly to hedge their forward contracts and was restricted by prudential guidelines governing the banks’ operating framework. The net open position guideline, which limits foreign currency exposure for Malaysian banks effectively restricted any possible leveraging on their part in transacting currency trading activities. Rather, the currency impact was transmitted to the financial sector via the contraction in economic activities and decline in the stock market, which in turn affected the banking system asset quality. The deterioration in asset quality and subsequent erosion of the capital base had adversely affected banks’ lending activities. As banks focused more on the management of their rising NPLs, their over-reaction further reinforced the negative impact of the crisis by slowing credit growth, and added greater friction in economic activities.


Price pressures arising from the depreciation of the ringgit became apparent towards the end of 1997.  Inflation, in terms of CPI, peaked at 6.2% on an annual basis in June 1998, and deteriorated thereafter. For 1998 as a whole, the CPI rose by 5.3%, the highest since 1982.  The PPI increased by 10.7% in 1998 (2.7% in 1997).  The rather “mild” inflation despite the severe depreciation was due mainly to the contraction of domestic demand.


Unemployment rose from 2.6% in 1997 to 3.9% in 1998. The number of retrenched workers peaked at 12,335 workers in July 1998 before easing in the fourth quarter of 1998.  The number of foreign workers reduced from 1.2 million workers in 1997 to 781,548 workers in 1998.

Impact on the Corporate Sector

The crisis and the contraction of the economy caused a number of Malaysian companies to experience severe financial difficulties. The difficulties were exacerbated by a number of factors, including excessive investment in certain sectors (including the broad property sector), weakening export prices in US dollar terms, lower regional export demand and high ringgit denominated debt. There was an increase in the number of business closures and cases of companies filing for court-sanction restraining orders from their creditors.

Improved Balance of Payments Position.

The trade account turned around to record a surplus within two months of the onset of the crisis, primarily due to a curtailment of imports.  In US dollar terms, imports declined by 26.2% in 1998, primarily due to a decline in import volume  (-19.9%).  The current account balance turned around to register an unprecedented large surplus of RM36.8 billion (US$9.4 billion) in 1998 (1997: deficit of RM15.8 billion or US$5.6 billion). This reflected the large surplus in the merchandise account, which more than offset the services account deficit and large outflows of transfers. The net outflow in the transfer account rose sharply to US$2.5 billion in 1998 (1997: US$1.2 billion) due mainly to a one-off repatriation by about half a million foreign workers returning to their home countries.

Declining Private Investment

In US dollar terms, foreign direct investments (FDI) declined from US$6.5 billion in 1997 to US$2.7 billion in 1998. The applications received for investment in manufacturing projects declined moderately to RM4.4 billion in the second half of 1997 compared to RM5.2 billion in the first half of 1997.  The actual net inflows of FDI for the whole year in 1997 remained high at the same level as in 1996 at RM18.3 billion because of the exceptionally large approvals of manufacturing projects in the 1994-96 period. However, the net inflow of FDI declined to RM10.6 billion in 1998 due in part to the domestic problems in certain of the major investing countries, as well as the global excess capacity and continued uncertainty in the region. This was also reflected in the lower applications received in 1998 which amounted to RM12.6 billion in 1998. Overall, net FDI, although low at 6% of GNP (from 10% before the crisis) still continues and, in particular, into new growth areas.

Deterioration of External Debt

The depreciation of ringgit had an immediate negative impact on the nation’s external debt position. Reflecting the large exchange revaluation loss, Malaysia’s external debt in ringgit terms increased by 48% to RM171 billion or 64% of GNP at the end of 1997, compared with the pre-crisis debt level of RM115.3 billion or 43% of GNP as at June 1997. Nevertheless, Malaysia remained in the category of a moderately indebted country (debt to GNP ratio falling between 48% and 80%). In particular, reliance on short-term borrowing was low, at 17% of total external debt and 24% of internal reserves. The policy of limiting private sector external borrowing to corporations and individuals with foreign exchange earning capacity has enabled Malaysia to withstand the adverse effects of the depreciation.

Contraction of the Economy

In 1998, GDP of Malaysia fell by 7.5%, the first decline since 1985. Both consumption and investment declined significantly in 1998. Economic uncertainty, reduced employment prospects, deferment of high import content projects and negative wealth effects led to a significant reduction in private sector spending. In real terms, private sector expenditure declined by 32.2% compared to a 6.6% decline in public expenditure. The decline in consumption and investment, coupled with lower export demand, contributed to a build-up in stocks and excess capacity.



Prior to the crisis, policies were focused on addressing key areas of vulnerabilities, in particular, containing inflation and excess domestic demand, and reducing the current account deficit. At the same time, attention was accorded towards maintaining the standard of living and export competitiveness as well as strengthening the financial sector.

The policy of monetary restraint in place before the onset of the crisis was continued. High interest rates to contain speculation against the ringgit was adopted only for a brief period. When it proved ineffective, interest rates were restored to pre-crisis levels and maintained till September 1997. Thereafter, interest rates were adjusted to reflect higher rates of inflation to ensure a positive rate of return to savers.

As higher interest rates were considered detrimental to the real sector, a credit plan was introduced in September 1997 to moderate loan growth. The target loan growth rate was set at 25% by end 1997 (from 29% at end September 1997) and 15% by the end of 1998.  In addition, more stringent guidelines were imposed on hire purchase loans for non-commercial passenger vehicles.

In early 1998, various measures were taken to improve liquidity and reduce the cost to funds to banks. Higher interest rates were offset by lowering the SRR (statutory reserve ratio) from 13.5% to 10% on 16 February 1998. This led in a downward adjustment in lending rates from 21.5% to 16.3%.  In addition, RM34 billion was placed in the money market and banks were given greater flexibility in managing liquidity through the introduction of a new liquidity framework.  To address the issue of “flight to quality”, a blanket guarantee on all deposits in Malaysia licensed banks was announced.  Transparency in liquidity operations was improved through making information of Bank Negara Malaysia’s (Central Bank of Malaysia) operations in the market through daily forecasts of the cash flows of the banking system as well as the major factors that were expected to influence liquidity.

With respect to fiscal policy, the Government reduced its expenditure and deferred implementation of selected infrastructure projects. The Government, however, ensured that budget allocations with respect to health, education and the provision of other basic amenities were maintained. However, in April-May 1998, this policy was reversed when it was clear that the economy was contracting. An additional RM3 billion  was allocated for fiscal expenditures. 

In the financial sector, prudential regulations of the financial sector were adjusted further to be consistent with international standards. This included reclassification of loans as non-performing which had been in arrears for three months (instead of six months previously), increasing the rate for general provisioning and requiring greater financial disclosure by banking institutions. On the institutional front, priority was given to rationalize and consolidate banking institutions into fewer but stronger financial institutions. On the corporate front, there was a push for greater transparency and disclosure.



In spite of the various policy measures taken so far, volatility in the ringgit continued and the economy was contracting. Beginning mid-1998, the policy focus shifted towards reviving the economy.  A set of expansionary monetary and fiscal policy measure were put in motion to stimulate economy recovery.

Fiscal Policy

With respect to fiscal policy, the Government introduced a stimulus package worth RM7 billion to boost economy recovery, with a fiscal deficit targeted at 3.7% of GNP. The package focused on selected projects with strong linkages to ensure maximum stimulus to economic growth and short gestation periods while meeting socio-economic objectives. Measures were also put in place to promote foreign direct investment.

Monetary Policy

Since early August 1998, monetary policy has become accommodative by reducing interest rates and the SRR to reinforce expansionary fiscal policy and reviving the economy.  The 3-month intervention rate of BNM was reduced in three consecutive steps, from 11% to 9.5% during the month of August. The SRR was reduced from 8% to 6% in 1 September and further to 4% on 16 September in order to ensure adequate liquidity in the banking system and to reduce their cost of funds.

The importance of the efficient functioning of the intermediation role of the banking institutions came to the forefront during the crisis period. In an environment of uncertainty, banking institutions had become excessively cautious in their lending decisions, causing a sharp slowdown in credit. To avoid a credit crunch situation, banking institutions with sufficient capacity were encouraged to achieve a minimum loan growth rate of 8% for 1998.  The motivation for the 8% credit floor was to free the banking institutions from the self-imposed credit freeze. Prudential considerations, however, were not sacrificed as banks were required to exercise financial discipline in making lending decisions.

Special Funds

Apart from efforts to lower the cost of funds to banks, the Government recognized the adverse implications of excessively high interest rates on small businesses. A number of funds were established and existing funds expanded so that the banking institutions could provide credit to priority sectors at reasonable rates. These funds included the Fund For Food (RM1 billion); Fund for Small  and Medium Industries (RM1.5 billion); Fund for Rehabilitating Small and Medium Industries (RM0.75 billion); Export Credit Refinancing Facility (RM3 billion) and Special Scheme for Low and Medium Cost Houses (RM2 billion).

Strengthening the Banking System

Pre-emptive measures were introduced to strengthen the resilience of the financial sector to avoid systemic risks and to ensure the continued efficient functioning of the banking sector and promote market confidence in the face of deteriorating economic conditions. The measures were multi-pronged - aimed at strengthening all aspects of the banking system. The measures included the consolidation of banking institutions and the establishment of Danaharta (the national asset management company to address the rise in NPLs), Danamodal (a special purpose vehicle to address the erosion of capital in some banking institutions) and the Corporate Debt Restructuring Committee (CDRC) to resolve the debt problems of larger corporations.

The merger and consolidation programme is a necessary pre-condition to create strong, efficient and competitive domestic banking institutions.  The exercise involves the merger and consolidation of 54 financial institutions into 10 banking groups. The anchor banks of these banking groups are Malayan Banking Berhad, Bumiputra-Commerce Bank Berhad, RHB Bank Berhad, Public Bank Berhad, Arab Malaysian Bank Berhad, Hong Leong Bank Berhad, Perwira Affin Bank Berhad, Multi-Purpose Bank Berhad, Southern Bank Berhad and EON Bank Berhad.  Upon completion of the merger programme (expected to complete by end-December 2000), each banking group will attain a minimum shareholders’ funds of RM2 billion and an asset base of at least RM25 billion.

Pengurusan Danaharta Nasional Berhad (Danaharta), the national asset management company, was established in June 1998 to purchase NPLs from banking institutions and manage these NPLs in order to maximize their recovery value. Danaharta, like other asset management companies in the world, operated within the broad concepts of rehabilitation, restructuring and maximizing the recovery value of the assets. While Danaharta would not purchase the entire NPL portfolio from the banking system, it would ensure the residual NPLs in the banking sector remains at manageable levels at all times.

Danaharta would assist in the restructuring of the corporate sector.  Once banking institutions have sold their NPLs to Danaharta, Danaharta would be able to impose conditions on the borrowers which may include, amongst other things, the reconstruction or rehabilitation of the underlying assets and identified cash flows. To carry out its functions effectively, Danaharta was empowered to appoint Special Administrators for viable companies that faced temporary cash flow problems.  

To fully address the issue of improving the balance sheets of the banking institutions, recapitalization became necessary for certain banks that faced an erosion of their capital base. Recognizing the constraint on shareholders to raise capital in the prevailing uncertain environment, Danamodal was established in August 1998 to facilitate the recapitalization of banking institutions. Danamodal would only inject capital into viable banking institutions on commercially viable terms and market principles.  Once the capital injection was carried out, Danamodal would institute micro reforms through its nominees appointed to the respective Boards of these banking institutions.

In addition, the Corporate Debt Restructuring Committee (CDRC) was set up in July 1998 to deal with the larger corporate sector debts of some banking institutions.  The CDRC provided a platform for both the borrowers and the creditors to work out feasible debt restructuring schemes without having to resort to legal proceedings. These restructuring efforts would be conducted on a voluntary basis, based on market-driven principles, to ensure a win-win situation for both the borrowers and the creditor banking institutions.

The operation of Danaharta, Danamodal and the CDRC were interdependent and complementary in nature. Together, they represented a comprehensive and coherent plan towards strengthening the banking sector.  By the end of October 1999, Danamodal had completed its recapitalization exercise while Danaharta had completed a significant proportion of its exercise, hence enabling banks to focus on their intermediation role.

Classification of NPLs

In order to enable banking institutions to concentrate more on their credit operations rather than being overly preoccupied with managing the deterioration of their asset quality, BNM redefined the NPL classification period to reflect loans that were in default for six months compared with three months previously. This was intended to ensure that the real sector of the economy continued to receive financing and to provide borrowers with the opportunity to regularize their accounts. The change in the NPL classification period, however, did not preclude banking institutions from retaining shorter NPL classification periods based on their individual internal policies.

Improving the Capital Market

A series of measures were implemented with respect to operations in the capital market in order to improve market transparency and corporate governance, including removing restrictions on submissions for new listings while strengthening rules, securities laws and procedures of the KLSE (Kuala Lumpur Stock Exchange). Besides, the measures aimed to protect the local stock market from the adverse effects of the trading of Malaysian shares is a stock market that is not a recognized stock exchange. In essence, the regulatory supervision by domestic regulators was strengthened, including enhancing the operational ability to curb market abuses and boost enforcement powers of the Securities Commission and the exchange and clearing house.

Selective Exchange Controls

Malaysia’s policy response to the crisis included the introduction of selective exchange controls. They were necessary as the instability of the ringgit persisted more than a year into the crisis.  The instability of the ringgit had affected Malaysia’s ability to conduct an independent monetary policy based on domestic considerations.  It limited the scope for monetary policy to be eased further to avoid a more severe economic contraction. Any rapid easing of monetary policy would only be met by further depreciation in the ringgit exchange rate.  External pressures dictated that interest rates had to remain high to support the exchange rate. This dilemma (of a trade-off between an accommodative monetary policy to avoid a contraction in the economy and the need to check further deterioration in the ringgit exchange rate) threatened to erode the economic gains achieved over the last decade. For the adjustment policies and financial reforms to yield the desired results, it was important to achieve a stable environment.

Although the Government had been proactive in managing the negative impact of the crisis on the economy and in containing the ringgit’s depreciation, its efforts were constrained by the vulnerability of the ringgit to sustained speculative activity, especially in the offshore markets. To stabilize the exchange rate, the initiative was taken on 1 September to impose selective exchange controls and to fix the exchange rate at RM3.80 to the US dollar on 2 September 1998. This represent a 34% depreciation from the level prevailing prior to the crisis. 

The selective exchange control measures implemented were designed to achieve specific objectives. The controls were aimed specifically at eliminating access to ringgit by speculators by reducing the offshore market in ringgit and limiting the supply of ringgit to speculators. In addition, the measures were aimed at stabilizing short-term capital flows. They were carefully designed to have minimal impact on economic activities. Hence, the rules that governed trade transactions and foreign direct investment were left unchanged.  Current account convertibility continued to be maintained. The only requirement was for trade settlements to be carried out in foreign currencies. The exchange controls affect only short-term flows of foreign funds. Medium and long-term flows of foreign funds into the country continue to be unaffected by the controls.

The selective exchange controls provided an environment of stability and thereby facilitated the implementation of growth oriented policies and financial and economic restructuring. The exchange controls, although limited in scope, were sufficient to provide a greater degree of independence for the conduct of monetary policy to support the recovery process.



The result of the various policy measures have been positive. Recovery can now be seen across the various sectors of the economy. Of importance is that the recovery has been achieved at  minimal social and economic costs. Recovery was achieved without massive debt, thus reducing the burden to future generations. Malaysia did not face high rates of inflation and suffer massive unemployment and social dislocation.

Some key macroeconomic and financial indicators of Malaysia are given in Table 1.

Table 1

Malaysia: Key Macroeconomic and Financial Indicators














Real GDP growth (annual, %)







Gross national savings (% of GNP)  






CPI growth (%)







Unemployment rate (quarterly, %)  






Federal Government overall balance






     (% of GNP)







Current account balance (% of GNP)







External debt (% of GNP)







Net international reserves






     RM billion






     US billion






     Months of retained imports







M3 growth (%)







3-month interbank rate (%)







BLR (commercial banks,%)







Banking system loans (annual growth, %)







RWCR of banking system







Net NPL of banking system (% of total loans, 6-month classification)


















*  Refers to 2nd quarter






** Refers to 4th quarter






#  3-month classification







The restructuring and recovery package in Malaysia was financed mainly from domestic sources - mainly from EPF (Employees Provident Fund), other provident, pension and insurance funds as well as the banking system.  Some financing was obtained from external sources, mainly from multilateral institutions such as World Bank, Asian Development Bank and Islamic Development Bank.  In addition, the Government secured bilateral loans such as those under the New Miyazawa Initiative - mainly from Overseas Economic Co-operation Fund (OECF) and The Export Import Bank of Japan (JEXIM). At end-May 1999, the Government successfully raised a global bond issue of US$1 billion, which was well received by the international capital markets. Nevertheless, financing from external sources continues to remain low as part of the policy to reduce Malaysia exposure and vulnerability to external developments.




The growth in agricultural production at constant prices declined to 0.7% in 1997, as compared to 4.5% in 1996.  As the crisis deepened, the sector registered a decline of 3.3% in 1998.  On the contrary, agricultural production at current prices increased by 5.6% in 1997 and 20.6% in 1998, compared to 2.9% in 1996.   The increase was due mainly to the high palm oil prices during the crisis and the increase in export earnings due to the depreciation in ringgit - since most exports of agricultural commodities are denominated in US dollar.  

The impact of the crisis was more severe in the food sector, as Malaysia is a net importer of most food items and the depreciation of ringgit had led to an increase in the cost of production and the prices of food.  In 1999, total imports of food in Malaysia amounted to RM10.5 billion compared to total exports of food of RM6.0 billion.   

The institutions providing agricultural credit in Malaysia are commercial banks, finance companies, merchant banks, FELDA (Federal Land Development Authority), Sabah Development Bank, Bank Pertanian Malaysia (Agricultural Bank of Malaysia), Bank Rakyat and farmers’ organizations and cooperatives.  Of the total amount of credit (RM13.3 billion) extended to the agricultural sector at the end of 1999, the commercial banks, finance companies and merchant banks as a group accounted for  65.4% (RM9.2 billion) of the total credit extended.  FELDA, a development agency set up by the Government to open new lands for agricultural development, accounted for 19.2% (RM2.7 billion).  Bank Pertanian Malaysia accounted for 13.8% (RM1.9 billion).  The contribution of the remaining institutions is small, accounting for 1.6% (RM235 million) of the total.

The focus of commercial banks, finance companies and merchants is on the financing of larger projects and industrial crops such as oil palm, rubber and cocoa.  BPM, however, focuses on the financing of smaller projects and food production.  Though its contribution to agricultural credit is substantial, FELDA is not a banking institution. It is a land development agency set up by the Government to develop land schemes mainly for the planting of oil palm and rubber. The costs of development incurred are charged as loans in the respective accounts of the settlers in the land schemes.    

This section will focus on the impact of the crisis and the financial reforms of Bank Pertanian Malaysia.  Commercial banks, finance companies and merchant banks will not be discussed here as they have been covered in the earlier sections of this paper.  FELDA is excluded as it is not a banking institution.  The remaining institutions are not covered as their contribution to agricultural credit is marginal.      

Bank Pertanian Malaysia

BPM or Agricultural Bank of Malaysia was set up by the Government in 1969 to promote agricultural development in Malaysia. Generally, the problems encountered by BPM were more or less similar to the problems encountered by commercial banks.  Due to the crisis, its loan quality deteriorated and its bottom line suffered.  At a result, it was more concerned in managing bad loans and more stringent in the selection of loans for financing. 

Various measures were implemented to promote agricultural development and improve its management of loans and investments. Priority was given to the provision of loans from special funds designed to stimulate growth in the agricultural sector - namely Fund For Food, Fund for Small and Medium Industries, Fund for Rehabilitating Small and Medium Industries, Mechanization and Automation Loan Scheme, Bumiputra Business and Industrial Community Loan Scheme. Loan selection was more stringent to improve loan quality. Whenever possible, problem loans were rescheduled and, if necessary, additional loans given to rehabilitate the projects. The bank’s exposure to long term investment in the capital market was gradually reduced to minimize its vulnerability to interest rate risk.

To strengthen its financial position, the Government converted its loans of RM555 million to the bank into equity at the end of 1998. In addition, the Government has agreed to corporatise BPM.  This will further strengthen its financial position and improve its capability and competitiveness.  Under the new entity, the bank’s scope of financing will be broadened and range of banking instruments increased to include checking accounts, dealing in gold and foreign exchange and foreign trade financing.  It will be in a position to play a more effective role in the development of agriculture in the new millennium.  

BPM made a loss of RM46 million in 1997 and RM150 million in 1998, compared to a profit of RM23 million in 1996. In 1999, due to the improved business environment and the various measures taken, it recovered and made a profit of RM5 million. In August 2000, its profit increased to RM19 million.



The crisis has awaken the vulnerability of the agricultural sector to the needs to increase food production and self-sufficiency, stabilize food prices and reduce the food import bills of Malaysia.  The Third National Agricultural Policy (1998-2010) has been formulated to meet these challenges and the banking institutions, particularly Bank Pertanian Malaysia, are expected to play an important role in the development of the food sector. There is a need for banking institutions to look beyond collateral for new ways of financing to promote private investment, innovation and technology transfer in agricultural food production.  To carry out their roles effectively in the new millennium, banking institutions have to be strong, resilient and innovative in financing.


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