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Thai Capital Controls Will Stay: New Finance Minister


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Thai capital controls will stay: new finance minister

BANGKOK: -- New finance minister Chalongphob Sussangkarn said Friday he would keep controversial currency rules, dashing market speculation that the government would soon lift the measures aimed at curbing the Thai baht's rise.

The controversial capital rules required 30 per cent of all incoming investment to be held by financial institutions for up to one year.

Many exemptions have since been made to the controls but the general policy remains in place with the military-installed government.

The appointment of Chalongphob as the new finance minister earlier this week raised hopes that the government would end the stringent rules as the former World Bank economist had previously come out against them.

But Chalongphob said the capital rules were needed to control the Thai unit, which has risen nearly 12 per cent against the dollar over the past year.

"Regarding the 30 per cent reserve rules, I personally think that Thailand still needs measures to manage capital flows in and out of the country," he told reporters.

"At the moment, appropriate measures (to replace the capital rules) have not been found and any policy changes must be made appropriately and gradually to minimise impacts on the stock market," he said.

When the government introduced the capital measures in December, investors panicked, causing the biggest one-day drop in the Thai stock market with losses worth a staggering 23 billion dollars.

The Thai baht, which on Thursday hit a new nine-year high of 35.10 against the dollar on hopes for an end to the measures, fell to 35.30-36 following Chalongphob's remarks before picking up again to 35.20 levels.

"Investors were cleary disappointed by his comments," said a Bangkok Bank dealer.

The December market plunge forced the Bank of Thailand to quickly ease the regulations, allowing money to come in for stock investment, an embarrassing U-turn that damaged the government's credibility in the eyes of investors.

-- AFP 2007-03-09

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