Experience has shown that the timing for opening up of the financial system will need to be sequenced and guided by the objectives to develop a more diversified economy where the respective sub-sectors and segments of society have access to adequate financial services; and to ensure the enhanced and meaningful contribution by domestic financial institutions to the economic growth and transformation process through capacity building. In achieving these objectives, a key trade off is between the need to enhance institutional capacity and the need to phase in competitive forces through the appropriate sequencing of market liberalisation. It is therefore, important that the liberalisation process is sequenced and managed effectively, according to the stages of development of the domestic financial system, the inherent risks and the strength of the social safety net as well as the tolerance level of the financial system. Successful implementation of this process, including evaluation of the trade-offs involved, will at the same time enable the emerging economies to achieve the overall national objectives. It must be emphasised that the tolerance level for the system as a whole will only be as strong as the strength of its components. Having robust financial institutions that are able to withstand any potential shocks and that have the agility and adaptability to embrace the future challenges are key to ensuring long-term sustainability and survival in the competitive future as well as the maintenance of financial stability. One of the most important aspects in enhancing the tolerance level involves building the capacity and institutional development.
The new trends emerging in Asia point to significant transformation taking place in the economies in Asia. These trends have contributed toward increasing the growth prospects for the region. Today, my remarks will focus on these fundamental trends that have emerged in Asia and the promise that they hold for the prospects for this region. I would also like to take this opportunity to share with you the implications of these trends for Malaysia and the strategies and responses that we have adopted in addressing the challenges that we are faced with in this more difficult environment. Emerging trends in Asia: Economic transformation in Asia Asia’s resilience can be traced to several important trends which have contributed to the economic and financial transformation of the region. The dynamic transformations taking place in our region are significant and varied. The region accounts for more than half the world’s population and 23% of the world economy. The growth for the region as a whole is forecast to be one and half times higher than the global average. Of significance, is the trend towards greater integration in the region on several fronts. Intra-regional trade in Asia has increased significantly in recent years. Intra-regional exports account for about one third of total exports of the region. Intra-regional trade within ASEAN has increased significantly to account for about 24% of the region’s total trade, exceeding ASEAN’s trade with the United States. Trade with China, India and Korea has increased dramatically.