| Summary: | 1.The introduction of Danaharta Since Malaysia gained independence from the British in 1957, it has slowly developed from being a third world country into a developing country, with government emphasis on becoming an industrialized nation by the year 2020.In pursuit of this vision the country has achieved notable economic success evidenced by economic growth of more than 8% between 1986 and 1996.By 1997 Malaysia was the 18th biggest exporting and the 17th biggest importing nation in the world.But in mid-1997, the country was hit by the Asian financial crisis, which is still the worst financial crisis Malaysia has experienced since independence.As a result the country was put on the edge of recession, and the whole of the Malaysian economy registered a negative growth rate of 7.5% in 1998, the per capita income contracted by more than 1.8% in 1998, and the Kuala Lumpur Stock Exchange ('KLSE') composite index dropped by 44.9% during the period from 1 July 1997 to 31 December 1997.The composite index was at a low of 262.70 on 1 September 1998 and the KLSE market capitalization dropped by about 76% to MYR 181. billion between 1 July 1997 and 1 September 1998. Interest on non-performing loans ('NPLs') increased, and the cost of funds rose to a high of 20% in early 1998. The impact of the financial crisis left numerous companies fighting for their survival.The serious financial problems faced by many companies led lenders to record high levels of NPLs, causing banks and financial institutions to tighten their lending and switch their attention to rehabilitating the NPLs on their books.As a result viable businesses were prevented from getting funds to generate economic activities which drove the Malaysian Government to address and considerably improve rescue mechanisms by targeting the rising numbers of NPLs and other effects of the crisis.In 1998, the Government created the National Economic Action Council ('NEAC') to form 'concrete recommendations to the Government to arrest the worsening economic situation and revitalise the economy'.The NEAC launched the National Economic Recovery Plan ('NERP') to provide a comprehensive framework for economic recovery and to counter the negative impact of the Malaysian Ringgit ('MYR') depreciation and the decline of the stock market. The NERP contained more than 580 detailed recommendations including wide-ranging proposals for economic stabilisation and structural reforms while addressing socio-economic priorities and sectors affected by the financial crisis. Under the NERP recommendations, strengthening financial markets and economic fundamentals were high on its priority list.
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