Thursday, February 7, 2008

Thailand to reconsider currency controls: finance minister

BANGKOK (AFP) — Thailand's new finance minister, Surapong Suebwonglee, said Thursday he would meet with the central bank next week to consider lifting currency controls, as he prepares a plan to boost the economy.

The review of the controls, imposed by the previous military regime in a bid to halt the baht's rapid rise against the dollar, would be included in an overall review of the nation's exchange rate policies, he said.

"However, if any measures are not working, they must be cancelled," he told reporters on his first day in the job.

The military junta that ousted prime minister Thaksin Shinawatra imposed tough currency controls in December 2006 in a bid to a rein in the strengthening baht.

The controls spooked foreign investors and caused the biggest one-day drop in the Thai stock market in late 2006, with losses worth 23 billion dollars.

Many exemptions have since been made to the currency rules, including some just this week, but the general policy remains in place.

Along with the capital controls, the junta's proposed changes to a controversial law aimed at tightening foreign investment also left foreign investors jittery over making new business plans in Thailand.

But Foreign Minister Noppadon Pattama said his first priorities in office would be to rebuild investor confidence and reassure business leaders at home and abroad that Thailand's politics and economy would remain stable.

"My first job is to restore the country's image and to make investors confident, particularly about the stability of Thailand's politics and economy," Noppadon, a former lawyer for Thaksin, told a news conference.

Surapong said the finance ministry would unveil its plan to revive the economy before February 20, the deadline for the government to present its policies to parliament.

The plan would include tax measures as well as schemes to stimulate the economy at the grassroots level, including an expansion of popular rural development programmes, he said.

"I want everyone to feel confident in the economy," he said, predicting that growth would pick up within six months.

The new finance minister predicted that the economy would grow by up to 5.5 percent this year, as previously forecast by the ministry.

In a January meeting with reporters, Surapong said he would revive Thaksin's populist economic policy if he became the finance minister.

Thaksin injected money into the rural economy through measures including debt relief, investment funds and cheap medical care and boosted incomes of farmers, who make up the majority of Thailand's population of 64 million.

The kingdom's top business leaders also urged Surapong to introduce an economic stimulus package to shore up the economy, which grew just 4.8 percent in 2007, ranking among the lowest in Southeast Asia.

Adisak Rohitasune, vice chairman of the Federation of Thai Industries, the kingdom's largest business group, said Surapong should keep the capital controls to rein in the baht, which stood at 10-year-highs against the dollar.

The strong baht makes Thai exports less competitive abroad and cuts the value of repatriated profits.

Thailand is the world's biggest exporter of rice and also a major producer of cars, textiles, electrical appliances, fruit and shrimp. Exports alone account for more than 60 percent of the economy.

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