Malaysian forex controls 'help neighbors'

Malaysian forex controls 'help neighbors'

KUALA LUMPUR (Reuters): Malaysia has long said currency
controls saved its economy from disaster.

Now a senior central bank official says the controversial
measures rescued neighboring Asian economies as well.

Bank Negara special adviser Nor Mohamed Yakcop said Malaysia's
neighbors owe their economic recovery to Kuala Lumpur's decision
in September to impose controls on foreign exchange flows.

"I may not be venturing too far if I were to say that the move
taken by Malaysia to control foreign exchange had not only
rescued Malaysia but also other countries in the region," the
Bernama news agency on Sunday quoted Nor Yakcop as saying.

In a related development, Standard & Poor's said on Monday it
imposed a triple-'B'-minus senior unsecured rating to Malaysia's
$1 billion global bond launched last week.

The successful issue, oversubscribed three times, was promoted
by Malaysia as a signal to the international financial community
that the country's economic restructuring program was working.

But S&P reiterated an earlier statement saying the country
remained over-leveraged and was lacking in its commitment to move
toward a more transparent corporate system.

Nor Yakcop joined Malaysia's central bank in September, days
after the government imposed the currency controls and pegged the
ringgit currency at 3.80 units per U.S. dollar.

He had quit Bank Negara in 1994 after it declared a loss of
more than 5.7 billion ringgit ($1.5 billion) due to errors in
foreign exchange transactions.

Nor Yakcop said in a newspaper article, excerpts of which were
published by Bernama, that several months before the exchange
controls were imposed, hedge funds managers and currency
speculators were planning to sell off the currencies of Thailand,
Indonesia, South Korea and Malaysia.

"They gradually put their plan in action. When Malaysia
suddenly imposed exchange control measures on Sept. 1, 1998, they
panicked and started buying back not only the ringgit but other
currencies in the region too," he said.

"The important thing was that they were forced to abort their
plan and to this day, they dare not make such a raid again," he
said.

Nor Yakcop said the International Monetary Fund and Western
nations did not want Malaysia's currency controls to succeed.

"For reasons we all know, the IMF and the West did not want
Malaysia's exchange control measures to succeed because that
would be undermining the credibility of the globalization policy
and free market which they championed," he said.

Last year Malaysia decided not to turn to the IMF for
assistance, saying the Fund's prescription would set back its
recovery hopes. Thailand, Indonesia and South Korea all adopted
IMF programs in exchange for emergency aid.