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Thailand's central bank removes capital control

Thailand's central bank removes capital control

The governor of the Bank of Thailand said Friday the central bank will remove effective March 3 the controversial capital controls it imposed to restrain the country's currency from getting too strong.
Removal of the controls is justified by several factors, including a strengthening economy and a greater balance of inflows and outflows in the foreign exchange market, Bank of Thailand Gov. Tarisa Watanagase told a press conference.
The central bank implemented a one-year, 30 percent withholding requirement on many types of capital inflows in December 2006, in part to help maintain the competitiveness of Thai exports by restraining the value of the baht.
But the immediate effect of the measure was to trigger a massive one-day sell-off on the Thai stock market and damage the country's reputation with foreign investors.
Widespread expectations that the controls would be removed had "eroded the effectiveness" of the measure, Tarisa told reporters.
Other measures will be implemented to support removal of the controls, she said, adding that a managed float of the baht remains an appropriate policy.
The bank imposed the controls while Thailand was under the administration of a military-installed government that took over after former Prime Minister Thaksin Shinawatra was deposed by a coup.
The decision by the central bank came after the country's newly elected government, led by Prime Minister Samak Sundaravej, pushed for the controls to be removed.
Samak's party, the People's Power Party, is led by Thaksin's loyalists, and is widely seen as a replacement for the ousted premier's Thai Rak Thai Party, which was dissolved for election law violations.
The People's Power Party had already announced its intention to ax the controls after winning the most number of parliamentary seats in a general election last December.