The risks the world economy faces in the medium term - associated to an abrupt resolution of global imbalances, a commodity price downturn, a slowdown of global growth, or an abrupt shift in risk perception and valuation by global investors - require that the agenda on international financial architecture be focused more on preventing, rather than resolving crises ex post. As countries are progressively more integrated into a more global financial system, new challenges emerge for economic authorities. The increased mobility of international capital flows - beyond their potential benefits - entails the risks of sudden and unexpected reversal of capital flows that could be further worsened by the contagion associated to the financial market reaction. Also, in the current market-driven international environment, characterized by increasing access of emerging economies to private funding, and by a more complex international financial system, externalities, market failures and perverse incentive effects are still in place and impede private financial flows to become a permanent and stable source of financing. Therefore, strengthening countries’ resilience is not only about developing and improving appropriate and consistent policies and institutions, but also about providing countries with access to emergency liquidity and the possibility to obtain short-term liquidity by private financial instruments. The Fund should therefore play a leading role in facilitating the development of more complete global financial markets, which will ultimately help emerging economies to protect themselves against external reversals while complementing authorities’ efforts in building up a sound policy framework.
I hope that we will continue to build on this great relationship. Ladies and gentlemen, Tomorrow, March the first, the Bank of Thailand will implement a final review of the reserve requirement measure to give more flexibility to investors. Fully hedged capital inflows for the purchases of bonds, mutual fund shares, and property fund shares will be exempted from the reserve requirement. In essence, all investment flows that are until today subject to the reserve  4  BIS Review 20/2007  requirement will be given a full-hedging option. With this announcement, let me conclude my talk this evening. Thank you for your kind attention. BIS Review 20/2007  5