IMF visits Malaysia for first time since crisis

IMF visits Malaysia for first time since crisis

Sean Yoong, Associated Press, Putrajaya, Malaysia

International Monetary Fund (IMF) chief Horst Koehler said on
Wednesday that - with hindsight - Malaysia's maverick path in
dealing with the Asian financial crisis helped it recover faster
than some of its neighbors who received IMF help.

On the first visit by an IMF chief to Malaysia since the
crisis, Koehler told finance editors of local media that Prime
Minister Mahathir Mohamad's decision to impose capital controls
at the height of the crisis had turned out well, the national
news agency Bernama reported.

"With hindsight, we have to recognize the good performance of
the economy," Koehler was quoted as saying. "Therefore, the
decisions had not been wrong. "

Koehler said, however, that the Malaysian currency's peg to
the U.S. dollar - among the last of the controls still in place -
should not be kept forever.

"I do think that Malaysia, in maturing further, needs to think
how flexibility can be built into the system because it will not
be able - and for that matter nobody will be able - to define
policy systems which are totally free of shocks," Koehler said.

He added: "I am not advising Malaysia to give up your peg,
this should be a decision for your country."

Mahathir cemented his international reputation as a maverick
in the late 1990s when, amid plummeting stock markets and
currencies across Asia, he rejected the thinking of the IMF and
other economists and imposed sweeping capital controls and pegged
the currency to the U.S. dollar.

The measures helped keep Malaysia's recession shallower and
make its recovery faster than other hard-hit countries that
accepted bailout packages from the Washington-based IMF.

Mahathir has consistently criticized foreign market
speculators and Western financiers, accusing them of wanting to
keep developing nations poor.

Koehler, in his first visit to Malaysia since taking over as
IMF head in 2000, met top Malaysian finance officials during a
stopover on Wednesday on his way to a meeting of finance
ministers from Asia Pacific Economic Cooperation Forum countries
in Phuket, Thailand. Koehler visited China on Tuesday.

He was due to hold talks with Mahathir later Wednesday.

The IMF said the central purpose of Koehler's trip is to
"exchange perspectives on critical issues facing the global
economy, discuss challenges confronting the region and reinforce
the IMF's continued engagement with Asia."

Mahathir, who is due to retire later this year after longer
than 22 years in power, has been a fiery critic of globalization
and Western international financiers. He claims wealthier Western
countries are manipulating global trade and finance to keep
developing countries poor for their own benefit.

In a recent speech, Mahathir said Malaysia's homegrown way of
dealing with financial and other problems had been proved right,
and Malaysia would not follow conventional thinking blindly.

"The fruits that we have reaped proves that our way is not by
any means inferior compared to the ways of others and is perhaps
even better," Mahathir said in the speech, to mark Malaysia's
46th National Day.