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 destination.
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 warily.
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 Washington.
The Minister of Finance does not decide on capital controls, which are within the remit of the governor, Prasarn Trairatvorakul.
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 currencies.
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 surprises.
Everything that we do will be based on reason which protects the countrys interests in the long term.
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 goals.