Since the unprecedented sell-offs in May, there have been some recent corrections to the initial overreactions. Nevertheless, capital movements and asset prices continue to be volatile and pose headwinds to growth and financial stability. The summer period provided a brief respite and provided investors with more time to be selective, not treating all EMEs as one single asset class. Economic fundamentals became a primary consideration for assessing in which market to remain invested. We trust that Thailand will continue to receive the attention of foreign investors because of our sound fundamentals and attractive prospects. These, notwithstanding the current soft patches as the economy consolidates and work on its long term competitiveness agenda. Role of monetary and financial policies in safeguarding stability Long before the Subprime and the Eurozone crises, Thailand had our own economic crisis of 1997. We experienced a setback that took us more than half a decade to recover. Since then we learnt the virtue of moderation and prudence. Firms had to deleverage, banks recapitalized, regulatory standards, governance reforms and bank lending practices have improved markedly. The government’s fiscal framework was also strengthened following the fiscalization of the costs of financial sector restructuring. Years of hard work and reform efforts paid off and laid the foundation for a more diversified and competitive economy. The availability of policy space both in the fiscal, monetary and financial policies, helped ensure a much needed domestic source of growth when global trade collapsed in 2008. Timely government stimulus helped shore up domestic demand.
This is a good occasion for our foreign participants to share in the opportunity and prosperity of the region. Foreign investors can participate as co-financing and co-investment partner e.g. through becoming Public-Private Partnership (PPP), Joint venture (JV) or by investing in infrastructure bonds or primary shares. In the area of banking and finance, the country will shortly be welcoming new foreign participants, both as a strategic partner to an established Thai bank, as well as new entrants in the form of subsidiaries. In addition to tackling the infrastructure constraints, the government has articulated an ambitious goal of pushing Thailand towards an innovative economy. The Government raised  BIS central bankers’ speeches  3  the goal of R&D expenditures as share of GDP from 0.2 to 1% by 2016, and moved to establish IT parks. This is still small in comparison to our neighbours such as Singapore and Korea, but is a step in the right direction. The challenge, of course, remains in the implementation and execution phase. Given that our long-term growth strategy hinge largely on the infrastructure and human capital investment which takes time to bear fruit, the urgency to start now is all the more important. Postponing such reforms to a future date may risk running up to a scenario like Europe where the economic engine is being put through a major overhaul and restructuring, at the same time while the plane is still flying through a turbulent storm at 30,000 feet!