Deputy Prime Minister and Finance Minister MR  Pridiyathorn Devakula is gambling to save his political life. Can he survive what other politicians normally wouldn't after a one-day stock market collapse of almost 15 per cent?

Pridiyathorn has agreed to go along with the Bank of Thailand's desperate measure to impose capital controls to defend the baht. This is a decision that an elected politician would not risk doing in normal circumstances.

But Pridiyathorn has political clout. He has the backing of the Council for National Security and the interim government. Still, his political muscle is being put to a big test.

The capital controls designed to tackle the rising baht has spooked the stock market and scared away foreign investors.

Right after the September 19 military coup, foreign investors snapped up Thai stocks and pushed the baht stronger. They did not care much about the Thai Constitution.

Yet when it comes to capital controls, an issue that directly hits their pockets, it is another story. Thai stocks were severely punished, falling by more than 100 points yesterday alone.

Pridiyathorn kept it cool yesterday saying the stock-market collapse merely represented a short-term impact. Overall, things should improve once investors regain their nerve.

For between the stock market and the export sector, Pridiyathorn has picked the latter. He has decided to save Thai exports rather than worry about the pockets of the stock investors.

Dr Kosit Pampiemras, the deputy prime minister and industry minister, has also backed Pridiyathorn's position. He, too, is a conservative economist, who cares about the real sector more than the financial sector.

The central bank has repeatedly warned it would introduce tough measures to prevent hot money from speculating the baht, which has risen by 16 per cent - the highest of all currencies in Asia - since the beginning of this year.

If nothing had been done, the baht would certainly have risen to Bt32-Bt31 to destroy Thai exports. Some exporters have complained their margins have already been wiped out by the strong baht.

The export sector is now equivalent to 60 per cent of Thailand's gross domestic product.

Tarisa Watanagase, the central bank's first female governor, has also gambled her office. She and her staff have studied the capital control package for quite some time before finally introducing it on Monday.

Pridiyathorn has handpicked Tarisa to succeed him at the central bank, so they have confidence in each other.

On Monday, the baht was hovering at Bt35.06 against the US dollar, compared with Bt41 at the beginning of the year. If the capital control measures were not announced, the baht would have broken into the Bt34 territory.

Thai exporters prefer the baht to stay at Bt38. But this is a daydream as all the regional currencies have risen sharply since the beginning of the year as foreign funds have moved away from dollar assets.

Under the capital controls, a foreign investor bringing their money, say US$100, into Thailand must deposit US$30 into a non-interest bearing account at the Bank of Thailand.

The foreign investor will have only $70 at his disposal to invest in Thailand. If he decides to take the money out of Thailand within one year, the Bank of Thailand will return only $20 to the foreign investor. By doing so, the central bank will charge $10 as withholding tax.

With this tough measure, the baht yesterday fell to Bt35.90.

Over the past three months, Thailand has shocked the whole world by having a military coup and imposing capital controls. Both events show that it cares more about its national interest than about international image.

But why did Pridiyathorn and Tarisa not impose capital controls on hot money directed at only speculating against the baht in the money or the FX market? They could have differentiated between the money market and the stock market.

Without discriminating measures, stock investors and other normal investors also get hurt from the capital controls. However, remnants of the Thaksin regime, who have tied their wealth to the stock market, will also get hurt from the collapse of stock prices.

Pridiyathorn has created a whole lot more enemies from this episode to impose capital controls, about which nobody is certain whether they will really help to ease the baht from rising sky-high. His enemies are now picking up their knives.

Thanong Khanthong

The Nation