They also pay little attention to the traumatic experience of the Asian financial crisis of 1997-98 and the natural inclination to build up ammunition, in the form of foreign currency reserves, ever since. After all, most of us are small, in terms of our economies and our political influence, and the reality of this world is that, when you are small, you are more likely to be tossed around. So we need to be more cautious in our finances. 6. We find ourselves being held, at least partly, responsible for the dilemma currently surrounding the global imbalance, which has been interestingly described as a "stable disequilibrium". The description begs the questions as to how long the disequilibrium will remain stable and whether the eventual adjustment path to equilibrium is likely to be an unstable one. The answers to these questions remain elusive. 7. This obviously is not a very comfortable position that we find ourselves in. One solution to this structural problem in Asian finance, at least to us in the HKMA, is greater Asian financial integration to promote the stability, integrity, diversity and efficiency of financial intermediation across jurisdictions in Asia. At the micro level, an obvious, non-controversial initiative that Asian jurisdictions support, although not necessarily for the same macro reasons that I have described, is the development of the domestic and the Asian bond markets, hence the EMEAP ABF initiative. BIS Review 79/2005  1  Asian Bond Fund 8.
The trust deed and prospectus of the PAIF, which comply with laws and regulations of Hong Kong and Singapore and are in line with international standards, served as a model for the drafting of fund documents for the ABF2 Single-Market Funds. This has helped to promote the adoption of international best practices among EMEAP economies. 2  BIS Review 79/2005  ABF and financial stability 15. Let me turn to the other question that I have been asked specifically to address, and this is how the ABF initiative can contribute to financial stability in the region. I must confess that, even though the central banks in the region have been enthusiastic in the development of the project, the benefits of ABF to financial stability in the region have not been clearly articulated in our deliberations. I can assure you, however, that this is not a reflection of any lack of brains on the part of Asian central bankers or because the objectives have not been clearly defined, although there may be a lack of a clear road map. But it should be all right, as Deng Xiaoping pointed out, to cross the river by feeling the stones. The lack of a clear linkage between ABF or indeed debt market development generally and financial stability is more a reflection of the difficulty of defining what financial stability is. 16.