He told Emerging Markets yesterday that he
discussed the fading stigma attached to capital controls with
the countrys new central bank governor.
Its an observation that I made to the central
bank governor, Korn said. Circumstances are
different and the stigma issue is certainly also different
compared to just two or three years ago.
Citing the example of Brazil, which doubled a tax on foreign
bond investors this Monday, Korn said there had been no
impact on Brazils reputation as a solid investment
If similar actions were taken by other countries in
different times the reaction would then have been very
different, he added. We need to tread
Asked to comment on expectations in financial markets that
Thailand is soon due to introduce capital controls, the former
investment banker responded wryly: Because I had a nice
cup of coffee with my central bank governor here in
The Minister of Finance does not decide on capital controls,
which are within the remit of the governor, Prasarn
Thailand last introduced capital controls in 2006. These
were reversed rapidly when the equity market slumped 15% the
day after the military-led government introduced a rule that
effectively taxed short-term foreign investment. The government
had been hoping to stem the rapid appreciation of the baht,
which had risen 16% that year.
The baht is one of the best-performing currencies this year.
A gain of 11% year-to-date makes the baht the biggest advance
of any of the major traded Asian currencies with the exception
of Japan. On Wednesday it burst through the critical level of
30 against the dollar for the first time since 1997.
The central bank has been one of several in the region
buying US dollars in an attempt to curb rises in their
We are not going to do anything silly, Korn
said. We are aware of the fact that Thailand has a long
term need for foreign capital. We fully understand the fact
that foreign investors do not want or deserve nasty
Everything that we do will be based on reason which
protects the countrys interests in the long
The currencys unstinting rise has fuelled concerns
among the countrys crucial export industries that demand
for Thai goods will be damaged.
While Korn has adopted measures to help shift Thailand away
from an export-led strategy, by spurring domestic demand and
improving access for the poor to financial services, he has
acknowledged previously that it will take time to achieve his