Unemployment is likely to become entrenched – particularly in Europe where the labour market is less fluid and the ability to adapt weaker. This can be illustrated by comparing unemployment developments in the 1980s with current developments. Unemployment fell back fairly quickly in the US, while it remained high in the  BIS Review 15/2010  3  UK and other European countries through the decade. Entire youth cohorts did not achieve labour force attachment. Small countries such as Norway are dependent on a growing global economy with free trade and free capital movements. There is a risk of a renewed weakening in financial markets. Some countries may be caught in a continuous downward spiral. But so far the IMF has been able to provide support. There is also a risk that countries experiencing deficits and substantial unemployment resort to protectionism when their businesses are not sufficiently competitive. However, the rules of the World Trade Organisation, the WTO, have generally been respected so far. Mercantilist attitudes may also gain ground in surplus countries. Investment behaviour in these countries may be motivated by broader strategic considerations, which may prompt retaliatory measures and result in restrictions on cross-border capital flows. The Norwegian economy – two golden decades The downturn in Norway has proven to be mild.
The EMEAP Group believes that ABF2 will promote the development of index bond funds in the regional markets. We are also working with our ASEAN counterpart on an investors seminar to take place later in the year to raise global awareness of our capital markets. The treasury industry continued to grow robustly. Foreign exchange and credit trading activities were underpinned by market volatility and a slew of bond issuance in Asia. To support the broad-based growth in the financial services sector, much attention was placed over the past year on manpower and skills development. The Financial Sector Manpower Conversion scheme, launched recently, will contribute to ensuring a ready supply of skilled manpower in relevant growth areas. V  Playing a more active role in the international arena  Over the last year, we have continued our active role in regional cooperation, formulation of international regulatory standards, and active dialogue with our regional and international counterparts. This reflects our recognition of the importance of closer cooperation in a highly interconnected global market. These efforts are also in keeping with Singapore’s role as an international financial centre. 2  BIS Review 43/2004  We work closely with our ASEAN counterparts to speed up financial sector liberalisation in the region. Beyond ASEAN, we are actively involved in EMEAP. Last week, we successfully hosted the EMEAP Governors’ Meeting as well as the first EMEAP-Eurosystem high-level seminar.