Before the Asian currency crisis, the Malaysian ringgit (RM) traded at 
about RM2.5000/$. In the initial months of the crisis, the ringgit depreciated 
to above RM4.000/$. On September 1, 1998, 14 months after the crisis began, 
the Malaysian government introduced exchange controls intended to reduce 
the internationalization of the ringgit. These included:

·	Requiring governmental approval for ringgit-denominated transactions 
with nonresidents.
·	Requiring short-term inflows of capital to remain in the country for 
a minimum period of one year. Such funds could, however, be actively 
managed in terms of ringgit assets.
·	Restricting travelers from bringing into the country or taking out 
of the country more than RM1,000 - approximately $263 at the new pegged 
exchange rate of RM3.8000/$.
·	Limiting foreign investments abroad of more than RM10,000.
·	Limiting Malaysians who are traveling abroad from carrying more that 
RM10,000 without prior approval. 

The exchange controls did not:

·	Limit the repatriation of profits, dividends, interest, fees, commissions, 
and rental income from portfolio investments.
·	Limit direct investment inflows and outflows.

The essence of these controls was to restrict the inflow of short-term 
portfolio flows, sometimes called "hot money," while continuing 
to attract long-term foreign direct investment. At the time the controls 
were imposed, the international investment community generally reacted 
with dismay and predicted that the ringgit would soon fall to RM8.00 or 
RM10.00 per dollar.

1.	Do you think it is possible to block short-term portfolio money
flows while still making a country attractive to long-term direct
investors? Explain. (Be sure to include a discussion of Malaysia in
your response.)


Post your 2-3 paragraph response