Malaysia Prime Minister says forex controls to stay

Malaysia Prime Minister says forex controls to stay

PARIS (Reuters): Malaysian Prime Minister Mahathir Mohammed reiterated on Saturday that he had no intention of lifting a package of controls on cross-border capital flows of in the near future.

He also indicated that, while Southeast Asian countries are moving towards a regional common market, a single currency was something which would need a great deal of thought and planning.

"The Malaysian economy is recovering but it is recovering because we have certain controls in place. We are not certain that if we lifted those controls attacks on the currency would not be mounted again," Mahathir told reporters following talks with French President Jacques Chirac.

"Today people don't look at currency as a means of exchange, they see it as a commodity you can buy or sell to make money and it doesn't matter if you destroy it in the process," he said.

Asked whether the euro could be an inspiration or a deterrent to creating a single currency for the Association of South East Asian Nations (ASEAN), Mahathir said the European currency's slide to 16 percent below its launch value showed it was vital to get the mechanism of a single currency right.

"We are studying the euro. At first it looked very good but it has shifted much more than expected," he said. "We don't really know what should be the mechanism of a single currency."

Mahathir again strove to quash rumors that ill health had sparked his pulling out of the World Economic Forum annual Davos meeting in Switzerland, saying he changed his mind about taking part after his speech was replaced by a panel discussion.

"I think Davos would have been a good forum for me to address with my views," Mahathir, whose stand against the effect of globalization on developing economies led to his fixing of a currency peg for the Malaysian ringgit in September 1998.

"Originally it would have been a keynote speech which would have given me 30 minutes, but there was a change of plan and I was to be a member of a panel of six or seven people," he said.

"I'm very healthy, as you can see," the 74-year-old prime minister beamed, adding that he was currently going jogging twice a day, in the morning and in the evening.

Mahathir, who has said the ringgit peg will remain until there is global accord on an international financial framework to prevent speculative attacks on currencies, repeated his fears about the threat he says globalization poses to poor economies.

But he said imposing strict controls on capital flows, which had worked for Malaysia because of its low foreign debt, would not necessarily work for its neighbors in south east Asia.

Mahathir said his talks with Chirac had covered bilateral cooperation and the transfer of technological knowhow as well as world trade and globalization.

The two leaders also discussed the possibility of Malaysian national carrier Malaysian Airline System (MAS) buying aircraft from European consortium Airbus Industrie.

MAS has said it plans to add four freighters to its fleet in the next two years, at least two from Boeing Co..

Chirac and Mahathir did not, however, discuss a project between Citroen and Malaysian automaker Proton to jointly produce a second car. The project was expected to have featured on the agenda following reports it is in difficulty.

"We did not speak about Citroen. I intend to speak to Citroen myself," Mahathir said.