By the time Malta was about to join the EU, the economy was emerging from a period of stagnation, with a widening output gap, a slow pace of productivity growth and a large current account deficit. In addition, while the Government planned to reduce the budget deficit from almost 10% of GDP in 2003 to below 3% by 2006, an adjustment of that  1  Regional economic integration: the options for Malta, speech delivered at the Annual Dinner of the Malta Institute of Financial Services on 7 November 2002. BIS Review 60/2009  1  magnitude clearly presented considerable risks, not least because some fiscal tightening was already under way. The unemployment rate, for example, was edging upwards, partly in response to the ongoing restructuring process and the further liberalization of markets ahead of EU accession. In these circumstances it soon became evident that the advantages of the single market needed to be complemented by those of monetary union. The Central Bank of Malta was an early advocate of this objective, particularly because of the greater stability and policy credibility that it promised. From the Bank’s perspective a key advantage was the elimination of the risks inherent in managing a small, vulnerable currency. The irrevocable fixing of the exchange rate and the macroeconomic policy discipline of EMU, moreover, promised to offer a congenial environment for implementing the structural changes necessary for a lasting improvement in the country’s international competitiveness. This belief was shared by the Government and the rest is history.
In-principle support has been received from the Asian Infrastructure Investment Bank, the Asian Development Bank, and the International Finance Corporation under the World Bank Group. And others have also indicated an interest. IFFO will be launched in July and we look forward to sharing with you more information about its work. Corporate Treasury Management 10. I would now like to turn to issues of more immediate concern to you in your treasury management roles, and to share a few factors which I believe are shaping your business:  11. First, the continuing liberalisation of the Mainland’s capital account. As I mentioned earlier, the Mainland authorities have continued to implement measures to liberalise cross-border fund flows. I am sure many of you are familiar with the progress, but let me just quickly name a few key measures introduced in recent years:  2  BIS central bankers’ speeches  •  The Shanghai-Hong Kong Stock Connect has been in place and operating smoothly since November 2014, allowing international investors access to the A-shares listed in Shanghai through the stock exchange in Hong Kong, and vice versa. •  The Mainland-Hong Kong Mutual Recognition of Funds scheme was implemented in July 2015, allowing Mainland and Hong Kong funds to be distributed in each other’s markets through a streamlined approval process. •  The QFII arrangement was refined in February this year by relaxing individual quotas and shortening the investment lock-up period, among other improvements.