Enterprises are increasingly becoming price-takers, and thus even in a situation of rising costs of manufacturing, they are unable to lift prices and shift the growing costs onto the customer. Similar is true for wages, whose level is determined on the increasingly global labour market. Research on the manufacturing sector in EU Members States (for the years 1988 - 2000) has shown that the increase in the openness of that sector (growing import) caused a fall of prices by 2.3%, a growth in productivity by 11% and a drop in margins by 1.6%. Altogether, it may explain the inflation fall by 0.14% in annual terms over that period 11 . When looking at the price processes from the microeconomic perspective, vital structural changes can be observed, which bring about lower inflation. Table 3.
Pillar II is based on five key principles. The first principle is to ensure a robust banking system that is resilient, committed and able to provide a strong foundation to support the Thai economy at all times. In the second principle, banks will be encouraged to reap the economy of scale by promoting voluntary consolidation to promote competitiveness. At the same time, proper competition policy will also be put in place to ensure fair consumer treatment. The third principle aims to promote competition via the liberalization of branch network and business scope and to enhance the roles of existing players, including banks and niche banks, while the fourth principle will consider new entries based on the value added to the economy. Lastly, the fifth principle will focus on enhancing the role of specialised financial institutions in providing increasing access to financial  BIS Review 133/2008  5  services for the low-income and small business groups and reducing the role of the state in commercial banking. Pillar III, on the other hand, will focus on laying down the foundation for a strong and supportive infrastructure for the medium term development of the financial system. This will be done through further enhancing the market and products which will facilitate banks, own risk management, promoting an effective information system and pushing for the amendments of necessary laws to facilitate risk management. Ladies and Gentlemen, The Thai banking system will continue to face new challenges going forward, both from external developments and domestic factors.