Observers also say that Mahathir's proposal to eliminate the currency markets is impractical. Then the currency license must be issued, then the currency must be sold. Capital controls like these would increase the cost of doing business in more than one way, Mr. Kenen adds. Business leaders at the meeting echoed his concerns. Jes Villa, who manages a stock fund in the Philippines, said that if he could no longer use currency deals to hedge the risks of international investing, he would go out of business.
Multinational companies have to buy local currency to finance their projects.
But they often purchase contracts for US dollars at a fixed price in advance to guard against currency fluctuations. Anwar Ibrahim, Malaysia's finance minister, called Sept. 23 for the IMF to lead the way in implementing new protections against the manipulation of Asian economies by hedge funds. Ironically, Malaysia's call for more restrictions on international finance comes as the IMF considers a proposal to open up the capital markets even further for its 181 IMF member countries - including Malaysia. Mr. Ibrahim has tried to assuage investors, saying that Malaysia has no intention of implementing regulations like those proposed by his boss - unless the international community agrees. Investors were not quickly reassured, though.