Thailand's Finance Minister Pridiyathorn Devakula has called for China to allow its currency to rise against the US dollar, and defended foreign currency controls that he said were imposed to save the country's export-dependent economy.
"If currencies of our [export] competitors appreciate more or less at the same level as ours, I don't think we would need this measure any more," he said.
``It would help a lot [if China revalued the yuan], but it would depend on the degree of revaluation,'' he said.
Pridiyathorn, the former central bank governor and US-trained economist, said he watched with alarm as foreign investors poured three times more cash into the country in the first week of this month than they a typical week last month, sending the baht to a nine-year high against the US dollar.
"A small nation like ourselves -- if we don't protect ourselves, who else will protect us?" he said.
With exporters complaining about the strengthening baht, he said something had to be done to rein in speculators who were behind the surge and protect the economy.
"We have to save our country. We have to save one of the growth engines, which is exports," he said.
While the measures imposed last Monday inflicted pain on investors, failing to stem the baht's rise would have had even worse negative long-term consequences for economic growth and the stock market, he said.
"If we didn't do anything, the stock exchange would have plunged further and the catastrophe would have been more severe," he said.
Still, Pridiyathorn -- who until now has courted little controversy -- and the central bank have faced a barrage of criticism from investors inside and outside the country who endured a wild financial ride since the controls were first announced Monday night.
Thai shares plunged nearly 15 percent last Tuesday but then bounced back 11 percent on Wednesday after officials rescinded the curbs on foreign stock investing while retaining them on bonds and other debt instruments. The market flattened out the rest of the week.
The baht, meanwhile, weakened more than 3 percent over the course of the week since hitting a nine-year high last Monday of 35.09 per US dollar. Pridiayathorn pronounced himself satisfied on Friday that the measures had achieved their desired effect on the currency.
Pridiyathorn is one of the most respected members of the interim Cabinet appointed by the military after the September coup that ousted elected prime minister Thaksin Shinawatra. After getting an MBA from Wharton School of Business at the University of Pennsylvania, he spent the next three decades in the commercial banking sector including the Thai Farmer Bank, Export-Import Bank of Thailand before becoming central bank chief in 2001.
But last week's events -- particularly the policy flip-flop -- have tarnished Pridiyathorn's reputation a bit.
"The measures were too strong and beyond the comprehension of investors," said Teerana Bhongmakapat, an economist of Bangkok's Chulalongkorn University. "It shows that the policy was made without thorough consideration. Foreign investors may think the authorities in this country will just do whatever they want."
Thitinan Pongsudhirak, political scientist at the university, said he expected strong pressure to replace Pridiyathorn.
"The mistake has seriously undermined the government's credibility," he said. "The pressure will keep increasing and Pridiyathorn will be a liability that continues to undermine the government's credibility."
But for now, that appears unlikely with markets stabilizing and Prime Minister Surayud Chulanont on Thursday expressed full support for his economic team, including Bank of Thailand Governor Tarisa Watanagase.
Pridiayathorn also said that the capital curbs were temporary, but gave no time frame for when they would all be lifted.
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