Malaysia surprised many, particularly the International Monetary Fund, by imposing
                       selective capital controls a year ago. But with its success, the IMF may be convinced to push
                       neighbouring countries to follow a similar path in insulating their economies, consumerist Martin
                       Khor said.

                       If capital controls prove successful in the long run, then Malaysia would be free to further expand
                       its fiscal policy by way of an expansionary budget with lower interest rates without fear of any
                       change in the exchange rates, he added.

                       Malaysia pegged its ringgit at RM3.80 to the dollar, as part of the selective exchange controls
                       imposed more than a year ago, to protect itself from the destructive short-term capital flows.

                       Khor, who is the director of the Third World Network, when unveiling the United Nations
                       Conference on Trade and Development's (Unctad) Trade and Development Report 1999, said it
                       however, did not discuss in detail Malaysia's capital controls.

                       "However, I think Malaysia's selective exchange controls is a unique one."

                       On the timing of pegging the ringgit, he said, he was aware that few people including Paul
                       Krugman who was here recently, mentioned that Malaysia had been a little late.

                       "But for me, it is better to be late than never."

                       Soon after the introduction of the selective exchange controls, he said, there had been great
                       improvement in the Malaysian economy and this appeared to spill over to other economies.

                       However, he cautioned that instability has not paired off, which means economic recovery was
                       still in a fragile state.

                       "For example, we can still see high volatility in the movements of the yen. A year ago this
                       currency was weaker at around 150 to a dollar, but now just in a year, it has become stronger at
                       around 100 again," he said, adding that with the currency peg, Malaysia had been somewhat less
                       affected by this external trend.

                       Khor said that in view of the uncertainty of the US economy, the possibility of another round of
                       instability must not be overruled.