Asian states unlikely to follow Malaysia

Asian states unlikely to follow Malaysia

SINGAPORE (Reuters): Other Asian countries are not expected to copy Malaysia in imposing rigid exchange controls, economists and analysts said on Wednesday.

"We see the likelihood of the Malaysian measures being duplicated elsewhere in Asia as being extremely slim," economic consultants IDEA said in a commentary.

Analysts noted that three economies in Asia -- Thailand, Indonesia and South Korea -- are already effectively run by the International Monetary Fund anyway.

"The IMF is totally opposed to restrictions on capital flows. The IMF mandarins (in Bangkok, Jakarta and Seoul) aren't going to allow this sort of nonsense to happen while they're controlling the purse strings," the chief economist at a U.S. firm in Singapore said.

The IMF has brokered massive economic bail-out packages for Thailand, Indonesia and South Korea. Money loaned under the deals is lent with strict monetary and fiscal conditions -- such as foreign exchange and interest rate targets.

Overnight, the IMF signaled its disapproval of Malaysia's actions.

"In general, the IMF believes that any restriction imposed on the movement of capital is not conducive to building investor confidence," it said.

Thailand was quick to nail its colors to the IMF mast.

The country introduced strict capital controls in 1997 after the baht plunged against the U.S. dollar, but has gradually relaxed the bulk of them.

Thai central bank governor Chatu Mongol Sonakul said Thailand was not considering new capital restrictions.

"The situation in Thailand has improved. The interest rate...is coming down. The baht is stable. If we introduce any additional controls it will do more harm than good...," he told reporters.

In Seoul, Bank of Korea spokesman Park Jae-hwan noted that this week South Korea announced its foreign exchange reserves had hit an all-time high of $41 billion, exceeding its IMF target of $40 billion by year's end.

"There is little chance outside speculators would attack our currency," Park said.

The South Korean won is convertible only on the trade account, which makes it difficult to purchase the currency for speculative reasons.

"So I don't think there is any possibility that Korea would impose capital controls the way Malaysia has," Park told Reuters.

Elsewhere, the Hong Kong Monetary Authority (HKMA) said it would not impose exchange controls.

"We do not have any plans to change our present policy," a spokeswoman for the HKMA, Hong Kong's de facto central bank, said.

According to the territory's post-colonial constitution, the Basic Law, Hong Kong cannot impose exchange controls.

"No foreign exchange control policies shall be applied in the Hong Kong special Administrative Region. The Hong Kong dollar shall be freely convertible. Markets for foreign exchange, gold, securities, futures and the like shall continue," it said.

Hong Kong, a British colony for 156 years, returned to Chinese rule on July 1 last year.

China's central bank, the People's Bank of China, the central bank, declined any comment on its future policies.