That we live in an increasingly connected world is well known and understood. I will not bore you with statistics on the growing linkages in trade and finance that bind our countries together. Economic and financial integration in Asia has produced significant benefits for our economies. But increased connectedness also means greater potential for contagion – for the transmission of economic and financial shocks across countries within the region. 9. This does not mean we should roll back the tide and become more insular. But it does mean that we have to watch closely developments in one another’s economies, assess potential spillover effects, exchange views on policy responses, and, at times of stress, pool our resources to restore confidence in our markets. 10. In an environment of increased uncertainty and volatility, it is incumbent on each of our economies to build strong buffers. This includes financial buffers in the form of a healthy foreign reserve position and a well-capitalised banking sector. It also includes policy buffers in the form of prudent monetary and fiscal stance in good times that gives scope for a more accommodative posture during times of slack or crisis. 11. But sometimes we cannot do it alone, despite having good fundamentals. At times of crisis, markets may be slow in discerning progress made in national policies. This is where external validation and resources can help build credibility and restore confidence. While the role of the IMF and multilateral organisations remains critical in this regard, regional arrangements can be a useful complement. 12.
Ravi Menon: Regional safety nets to complement global safety nets Welcome remarks by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the opening ceremony of the ASEAN+3 Macroeconomic Research Office (AMRO), Monetary Authority of Singapore, Singapore, 31 January 2012. *  *  *  Director, AMRO, Wei Benhua, Counselor, AMRO, Yoichi Nemoto, Head, Civil Service and Permanent Secretary (Finance) Peter Ong, Distinguished guests, ladies and gentlemen. Good morning. Genesis of the Chiang Mai Initiative 1. Twelve years ago, we took the first steps in a momentous journey that has led us here today. 2. It was the aftermath of the Asian Financial Crisis. The Crisis had ravaged several economies in the region and was a wake-up call to all of us. Rapid economic growth was not enough. To sustain growth and foster stability, sound macroeconomics and strong financial supervision mattered. Asian economies had to get their domestic acts together. And they did, with painstaking reforms over the last 15 years. So, when the Global Financial Crisis hit Asia in 2008/2009, Asian economies were shaken, but did not keel over. 3. The Crisis taught us another lesson: had the region better harnessed the resources it had available, it might have been in a stronger position to deal with the crisis. It was this conviction that provided the impetus for the first proposals for a regional financing arrangement. 4.