The Australian, 21 Sep 98UN lends support to Malaysia controls
By FLORENCE CHONG Asia business correspondentGENEVA: Malaysia is justified in imposing controls on foreign exchange in today's "extreme" conditions, according to Rubens Ricupero, secretary general of the United Nations Conference on Trade and Development.
In an interview with The Australian, Mr Ricupero said other countries in the region should perhaps look at what Malaysia was doing to solve its problems.
"What is being tried in Malaysia is an interesting experiment to try to insulate its currency from global volatility," he said.
The move would enable Malaysia to lower interest rates.
Organisations such as the International Chamber of Commerce had given guarded approval to Malaysia's action. Such groups would normally not agree with controls but, in extreme conditions such as this one, controls were justified, he said.
He added that exchange and capital controls were not illegal. For most of the century, countries had used them to solve their economic problems.
According to Mr Ricupero, the US under president Lyndon Johnson in the 1960s imposed controls and did "unthinkable" things, including prohibiting the transfer of funds to European affiliates of US companies. The controls were lifted in 1974.
In the 1980s, he said, with the exception of the UK and Switzerland, countries in western Europe also had controls. Japan lifted its controls in 1984. France and Italy removed theirs in the early 1990s.
He said controls were therefore not "devils". History had shown they had a role in solving problems.
Mr Ricupero stressed that a country would not do much on its own. What it could do would be mere damage control, he said. A solution to its problems beyond the short term must lie in a concerted policy from the world economy to restore growth.
"It is necessary for the large economies – the US, the European Union and Japan – to take reflationary measures to help the affected economies in Asia," he said.
That meant Japan must do all it could to turn around its economy because the ability of the US and EU to keep on taking exports from Asia was limited and they were now reaching saturation point.
Mr Ricupero called for fresh ideas to deal with the widening and deepening problem because the conventional approach of the International Monetary Fund had failed.
In its Trade and Development Report 1998, released last week, UNCTAD estimates that the East Asian financial crisis cost the global economy 1 per cent of its output, valued at $US260 billion ($440 billion).
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