"Outside investors are going to be very wary of going into Malaysia," Ronald Stride, senior vice president of Booz-Allen & Hamilton, told Reuters in an interview.

Malaysia, in a desperate move to revive its economy, announced a slate of foreign exchange and capital controls on Tuesday, including a fixed exchange rate and effectively making offshore ringgit worthless unless repatriated by October 1.

"Now we have got an incubator called Malaysia to see whether that solution is going to be less painful than the solution that is being applied in other countries," Stride said.

Last year, the International Monetary Fund assembled a $41-billion bailout for Indonesia after its financial markets collapsed and Thailand accepted a $17.2 billion package for its debt-ridden economy.

Malaysiarefused to go to the IMF for help.

For Malaysia's new policy to work, it was necessary to cut off all avenues of capital flight, Stride said.

"Its sounds like a very well-crafted package in the sense that it is trying to avoid some of the pitfalls that people had raised around doing this," he said.

"But the point is what investors will think and what the risks to invest are as a result of this," he said.

Stride said Booz was advising clients to choose investments in Asia very carefully because of a lack of transparency and difficulties in assessing true value.

"Another factor in that is what degree of control and how you want to join up with that company," he said.

Issues like management control and technical transfer were especially important when many local companies had never had a foreign partner, Stride said.

"If you look across the region, you probably see not too many strategic partnerships have pulled out," he said. "They are here for the long-term ... and here to participate in localmarkets."

"Investments will continue to come into the region because I think the region long term has a lot of potential," Stride said. "Asia is unpenetrated in general except for the very mature markets."

Infrastructure projects, including power, telecommunications, oil and gas, had great investment potential because of liberalisation under World Trade Organisation agreements, he said.

Many people thought exports would fuel Asia's recovery but they have not because the value-added was not great, he said.

"The industries that are prosperous ... have been those industries where most of the value-added is being added in the country and then exported," he said, citing wood products and furniture as examples.