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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: m.philli who wrote (6784)	7/16/1999 1:48:00 PM
From: m.philli	Respond to of 81164

JUL 16 1999 'Capital controls one way to defend currencies' SM ON STOPPING TYRANNY OF HEDGE FUNDS By KWAN WENG KIN JAPAN CORRESPONDENT TOKYO -- The temporary closing of their financial markets is one option available to small countries as a means of preventing hedge funds from attacking their currencies, Senior Minister Mr Lee Kuan Yew told a Japanese business magazine. In an interview published in the latest edition of the Japanese-language weekly, Nikkei Business, he agreed that giant hedge funds, such as that headed by American investor George Soros, which challenged a country's sovereignty or foreign policy, were a threat. But he said that it was possible to shut out such funds by stopping foreign exchange transactions, which was what Malaysian Prime Minister Mahathir Mohamad had done to prevent those funds from intervening in the ringgit. While such a measure could have a negative impact, Mr Lee noted that Dr Mahathir was still in power and the Malaysian economy had not gone bankrupt. Although there were warnings that foreign capital flows to Malaysia would dry up, he said that the move was a temporary measure to deal with a particular crisis. He said that he did not know if foreign investments in Malaysia would decrease in the long term, but acknowledged that what the country did was one way of stopping the funds' tyranny. It was hard to imagine a major country like Japan doing the same as this would hurt its relations with other industrialised nations and damage its trade and investments seriously, he said. But for smaller countries, capital controls could be one method of protection. In the lengthy interview, which appeared in a question-and-answer format, Mr Lee also refuted the Western view that globalisation had destroyed Asian values. What was destroyed, he said, were weak Asian systems. The importance of the Confucianist values, common to China, Japan, Singapore and South Korea, had not been lessened. He cited Asian nations' ability to recover more quickly from the regional crisis than Latin American states because of their high savings rates as an example. In some countries, savings amounted to 40 to 50 per cent of gross domestic product. Economic recovery was quick in these places as their large savings provided banks with liquidity and kept interest rates low, he said. He added that thriftiness was one value which Asians should be proud of. He said that he always defended Confucianism wherever he went, and added that no leading-edge technologies could replace the human relationships that were central to Confucianism. The best computer could not bring up a child, who could learn what was right and what was wrong only from his parents, he said. On the long Japanese recession, he said that one lesson Asian countries had learnt from Japan was not to misallocate their economic resources. He blamed Japan's economic woes on its not being open fully to international markets. As a result, the Japanese economy had not been able to respond to market signals, leading to the wrong allocation of resources, he said. But the traditional Japanese strategy of securing market share and ignoring profits was not viable in the long run. He said that Japan should not miss market signals and should respond swiftly to technological and other changes with a flexible workforce. The interview took place in Tokyo in early June when Mr Lee was here to take part in an international conference organised by leading business daily Nihon Keizai Shimbun.