Malaysia has asked Japan to extend it yen credit in the form of soft loans, some of which may be used to retire old loans to offset high borrowing costs.
This is among several proposals, including the setting up of a branch of a Japanese university, put forward by Prime Minister Tun Dr Mahathir Mohamad to his Japanese counterpart Shinzo Abe during a courtesy call at his office.
Speaking to Malaysian media, Dr Mahathir said the suggestion is one way of resolving the country's high debt.
He said the soft loans extended to Malaysia by Japan when he was Prime Minister in the 1980s were only at 0.7 per cent.
“However, at that time, the Japanese economy and financial standing was very strong.
"The Prime Minister (Abe) agreed to study the request," he said yesterday.
These soft loans, he added, could be used to retire some old ones whose interest rate could be as high as 6 per cent.
"Some of these loans also come with a 10 per cent commission for the person facilitating the credit. This means that if the loan is RM100mil, we are only getting RM90mil but servicing the loan at 6 per cent.
"This means that we are effectively paying 7 per cent or even 7.5 per cent," Dr Mahathir pointed out.
"If it is possible, we can reduce the costs of borrowing by taking loans from another source.
"This will help our huge national debt," he said, adding that obtaining the yen credit would also mean not having to bear interests for many years.
Besides retiring old loans, Dr Mahathir said the yen credit could also be used for any development plan that Malaysia had already agreed to with Japan.
Asked on the old loans that would be "retired", he said: "I can't tell you that now. We are still considering."
Dr Mahathir recently complained about the onerous terms in some of the loans undertaken by the previous administration for various projects.
Asked to clarify a Nikkei Asian Review report that the Malaysia-Singapore High Speed Rail was not scrapped but only deferred, he said the project had been put on hold for the moment while it was being re-studied.
"And if we are short of funds, we can delay the implementation or reduce its scale," he said.
On the setting up of the branch of a Japanese university in Malaysia, he said this was one of the proposals to expand co-operation under the Look East policy.
Dr Mahathir said there were already four British universities in Malaysia, a few belonging to Australian varsities and even a branch campus of China with 20,000 students.
"Unfortunately, the Japanese are being constrained by their own policies and funding. So, we hope that the government will consider," he said.
Other areas that would see enhanced co-operation between Malaysia and Japan include investments and infrastructure development, such as its efficient rail management systems.
Earlier at a joint press conference, Abe had said the Look East policy would be "rejuvenated" and "upgraded".
Dr Mahathir, who was on his first working trip abroad in his second tenure as Malaysia chief commander, was accorded a guard of honour upon his arrival at the Prime Minister's Office in Chiyoda Ward.
Abe later presented his guest with a Japanese World Cup football team jersey printed with "Mahathir 7" - to denote his status as the 7th prime minister - as a memento.