MALAYSIAN Prime Minister Mahathir Mohamad may have been ostracised internationally for introducing capital controls, but there is a chance they could work. His new isolationist recipe can be seen as unorthodox, but these are unorthodox times. The Great Asian Recession is showing signs of becoming the Great Asian Depression, and if the United States, Western Europe and/or China stumble and fall, there is still potential for the situation to get worse. With no big buyers, there's little hope for the export-led East Asia recovery upon which the International Monetary Fund's formula is hinged. No one imagined East Asia's currencies and stocks would tumble this far or for so long. And with many of the world's other financial markets now toying with idea of potential self destruction, Malaysia has effectively turned around and said it no longer wants to be a part of that international equation. It will still have to rely on the outside world for imports and exports, but its currency and stock market are now sealed from any further direct contagion. If the Hong Kong dollar or mainland yuan devalue, the Malaysian ringgit should escape scot-free, no longer being a floating international currency. Malaysia's new economy chief, Special Functions Minister Daim Zainuddin says that without a stable currency, an economic recovery cannot begin. If currency stability cannot be achieved through natural means because of external forces, then it needs to be imposed. Whether this ultimately proves to be the right move for Malaysia, depends on where he and Dr Mahathir go from here. Interest rates are being sharply lowered and ringgit savings held abroad are being forced back home. Both measures should stimulate liquidity and spending which, in turn, should boost asset prices. In the meantime, state-linked funds are being called on to help give the stock market an additional boost. With no need to worry about countering international hedge funds any more, they are finding a little bit of intervention goes a long way. Kuala Lumpur benchmark stocks rocketed 16.09 per cent on Friday, for instance, while the rest of the region plunged - and with only a minimal amount of state-linked money in stark contrast to the Hong Kong Monetary Authority's recent experiences. Foreign money has effectively been locked into the Malaysian bourse for 12 months under new regulations, and local retail investors are flocking back given the diminishing returns from bank savings and the seemingly lower risk. With asset prices hopefully rising and borrowing rates coming down, this should hopefully ease the burden of bad debts. In the meantime, a state bridge bank is being set up to take over non-performing loans, plus a separate body to recapitalise banks. Rather than letting firms go to the wall, seeing more people unemployed and the country's downward economic spiral worsen, Dr Mahathir is trying to mastermind an artificial halt. But where he differs from others starting to sympathise with this new school of thought is that he does seem prepared to carry out simultaneous reform, to end cronyism and separate the wheat from the chaff. If banks set off on a new lending spree to unproductive sectors, Malaysia will not have learnt from its excesses of the past. Capital controls will no doubt scare off many foreign investors. Then again, if Dr Mahathir's policies do show signs of working, then perhaps in six or 12 months' time the foreign money may start trickling back. Foreign investors tend to have short memories.