I am convinced that a flexible mix between monetary and fiscal policies, plus the diversified structure of production and exports, did allow the economy to avoid contraction and build on greater external stability. With the improved environment for growth that I have just noted, I am more comfortable today than last year to talk about an economic recovery. My optimism, however, remains guarded. Because on this road to recovery, there are still many risks. Such risks, if not managed well, could undermine the sustainability of the recovery process. Let me first talk about the macroeconomy and our view for 2002. Then I will describe the challenges ahead as well as our thoughts on how to manage them. First, the economic recovery. What do the recent economic numbers tell us? In January, the economy showed signs of continued expansion despite the sluggish global conditions, thanks largely to the momentum in domestic demand. A number of indicators suggested that the economic conditions had improved somewhat from the recent months. For instance, –  Consumption and investment continued to improve in January. In particular, the Private Investment Index (PII) continued to increase. A significant expansion was seen in construction, following the spur in housing demand and construction activities. BIS Review 16/2002  1  –  It looks like this good news on the domestic demand front warrants a significant increase in the January Business Sentiment Index (BSI) and the index looking 3 months ahead.
If we could not resolve the debt problem in a timely manner and adopt new work practices, it will be next to impossible to compete successfully in the world market. The Bank of Thailand and the Government are alert to this challenge. And the Government has already initiated the process of overhaul. One notable attempt at debt restructuring is the establishment of the Thai Asset Management Corporation (TAMC). The entity was set up to reduce distressed assets in the banking system through centralization of NPLs' management. This should allow banks to resume their normal function and new lending. New lending is needed to provide the working capital to support corporate restructuring as well as business expansion. This way, our energy will be channeled toward more productive enterprises. And, with the authority to liquidate and rehabilitate businesses through swift legal procedures, the TAMC is unique in its unprecedented power. Next, given that a substantial share of distressed assets remains outside the purview of the TAMC, I see the need to expedite the process of corporate debt restructuring which requires a speedy passage of the reformed bankruptcy law. This action will be testimony to the sincere effort that we in the authorities can make for the benefit of our future generations. Insofar as the banking sector is concerned, the Bank of Thailand regards better enforcement of the banking and financial institution regulations as a priority. This is an area that the Bank of Thailand takes leadership role to strengthen the soundness and efficiency of the financial institutions.