Emerging markets, in particular in Asia, are learning to live with heightened uncertainty in the world where the extent and the whereabouts of benefits from financial globalization to promote growth and development while ensuring our economic and financial stability. This, of course, necessitates that we have to be very focused on risk management. Ladies and Gentlemen, Asian economies have come a long way since 1997 in promoting economic and financial resiliency. We see a region-wide move toward a more flexible exchange rate regime, with a disciplined framework in the conduct of monetary and fiscal policies. As for the financial sector, the framework of policy has moved toward risk-based supervision, to an adherence to international standards, and to the undertakings of formal financial sector assessments under Financial Sector Assessment Program of FSAP. The macroeconomic policies also become more flexible, yet proactive, in dealing with changes in the market conditions and practices. When necessary, a tradition fiscal-monetary policy mix has been augmented by appropriate prudential measures of financial institutions. More importantly, legal and information infrastructure, including credit bureaus, has also been put in place to strengthen the foundation for financial system capacity for crisis prevention and resolution. These intensive reforms and institution building during the past decade may make it less likely that financial turbulence will trigger a sharp and broad-based dent to real economic outcomes, especially, since there is no significant build-up of sectoral imbalances in the region.
But, challenges remain as we have learnt that the key pressure points that can lead to difficulties for small-open economies can be externally-induced, particularly when we do  BIS Review 163/2008  1  not know if we are still caught in the eye of the financial storm or whether the turbulence has ceased. Let me now turn the focus of my discussion to the need for closer cooperation as we all face challenges on how to combat the global financial crisis. The ongoing global financial crisis is not dissimilar to other crises as it is and will be followed by intensive reforms at international level. It also highlights that international cooperation remains important and necessary in maintaining global financial stability. In fact, it has become more and more important given globalization process, which makes us better interconnected. However, we might have taken it for granted that international cooperation is the first best solution and could solve global crisis. We have all learnt that in a number of occasions, when a solution is needed, good implementation comes too little too late. Taking the International Monetary Fund’s or the (IMF) Short-term Liquidity Facility as an example, this new facility is somewhat similar to the swap lines extended among central banks to fellow members that do not call for typical IMF-supported adjustment programs. Emerging markets have been proponents of this facility for several years, but the IMF has previously been reluctant to endorse it due to fear of moral hazard.