[ Laman Ehwal Semasa ReformIS ]
Date: 26 Aug 1999
Time: 03:51:22
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Malaysia's capital controls to stay: central bank official
KUALA LUMPUR, Aug 26 (AFP) - A senior central bank official Thursday ruled out any change in Malaysia's capital control policy, saying it would be preserved to help rebuild the economy.
Bank Negara Malaysia's exchange control director Bakarudin Ishak said the curbs, imposed last September during the country's first recession in 13 years, had "worked extremely well" to speed up a recovery.
Bank Negara Wednesday declared the recession over as the economy emerged from five consecutive quarters of contraction to expand 4.1 percent in the three months to June.
But there was "no guarantee that Asian currencies will not be hit again" amid uncertainties on growth prospects in some major countries and a possible realignment of key regional currencies, Bakarudin said.
"The policy on the elimination of offshore trading of the ringgit and the fixed exchange rate against the US dollar will be retained to ensure financial stability in the country," he told an economic seminar.
"We will continue to implement the controls flexibly in response to changing economic conditions as well as to prevent inconvenience to trade and investments."
While Malaysia remained committed to financial liberalisation and globalisation, it would only lift the controls when global financial reforms were implemented to ensure stability, Bakarudin said.
The curbs had given Malaysia a breathing space to accelerate financial reform and banking restructuring, he said, adding that the economy was now in a "position of strength."
"We are confident that the worst is over and foreign funds will continue to be driven into the country by the currently favourable economic fundamentals," he said.
The impending inclusion of Malaysia into the widely followed Morgan Stanley Capital International portfolio indices also "added another degree of confidence," he added.
Morgan Stanley recently said it would reinstate Malaysia in its emerging market and all-country indices from next February as long as there was no reversal in the country's financial liberalisation.
Bakarudin also shrugged off fears of a mass capital flight when a one-year lock-in period for foreign holders of local stocks and bonds expires Wednesday.
"With the vastly improved economic conditions and return of confidence in the economy, the date '1 September 1999' is a non-issue," he said, adding that foreign investments were "well safeguarded" in the country.
The one-year lock-in period, part of capital controls aimed at countering the impact of Asia's financial turmoil, was eased in February to allow such investments to be cashed out in exchange for an exit tax.
But on Wednesday foreign investors can repatriate an estimated 10 billion dollars without any exit tax, although profits will be subject to a capital gains tax.