Malaysia's use of capital controls to recover from the
      regional financial crisis without adverse effects has prompted the World Bank to study
      more closely the consequences of using such measures.

      World Bank senior vice-president Joseph Stiglitz said Malaysia's economy was now
      recovering robustly and described the move to use controls as "not an unreasonable
      experiment" given the uncertainty of the global economic climate a year ago.

      "It was not an anti-foreign capital move, it was an anti-speculative hot money capital
      move. In a world in which it was very clear that those kinds of money moving in and out
      of a country can give rise to enormous economic cost to the society, it seems to me,
      not an unreasonable experiment.

      "We will be doing research to try to ascertain more fully, exactly the full range of the
      consequences. Some people say it will scare off investors but from what we have seen
      so far, there is very little evidence of that," he said at the World Economic Forum's East
      Asia Economic Summit here today.

      Malaysia had announced selective capital controls in September last year to insulate
      the country from currency speculators instead of turning to the International Monetary
      Fund (IMF) during the crisis.

      Stiglitz said the World Bank had worked with Malaysia to revert the capital controls into
      a market-based exit tax.

      He also repeated his remarks, made in Washington recently, that the capital controls
      did not have the adverse effects said by people "who wished Malaysia so ill" when the
      controls were imposed.

      He also disputed comments that Malaysia would recover anyway without using controls.
 

      IMF first deputy managing director Stanley Fischer said yesterday that the real results
      of the controls were hard to tell as they were not subject to downward pressures
      because capital flows were beginning to strengthen when the measures were imposed.

      Said Stiglitz: "At the time the controls were put into place, it was not clear where the
      global financial crisis was going. Remember a year ago, people were very worried about
      a global meltdown."

      Likening Malaysia's use of the controls to purchasing insurance and to reducing the risk
      they would face, Stiglitz said Malaysia had used the time well.

      "They were able to keep interest at lower levels. The lower interest rates meant less
      corporates were distressed compared to countries that followed high interest rates
      policies," he added.

      He also said that Malaysia was very careful in making sure that the controls would not
      have adverse effects on foreign direct investment.

      "They were very attentive to the broader context of the problems which it would set," he
      said.