Our accession to the Basel II accord will upgrade the risk management of banks to the best standard and will further enhance financial sector stability Distinguished Guests, I believe that the continued growth momentum for 2008 and strengthening resiliency, which I have mentioned, will create a favourable environment to enhance trade and investment dynamics between Thailand and the United States and Canada. Till this day, the US still tops in terms of market shares for Thai exports, though the market share has been declining as Thai exporters have benefited from new market penetration and the growth of intra-regional trade. Since 2000, the US ranks fourth in terms of the size of foreign direct investment into Thailand. Your investment participation has been mostly through holding companies, trade, as well as real estate. Indeed, US FDI has maintained the momentum, accounting for about 12 percent of total inflows of foreign direct investment annually. Looking forward, the American business community will continue to be an important player in our economy. You can help us build the real sector that adapts to the shifting winds of global competition. And, this cannot happen without the investment in the best technology and capacity to use that technology efficiently. To support real sector development, you also have a role as investors in our financial and capital markets, who provide different views and risk appetites to ensure that our markets and financial system will expand while preserving their health through constant self-correction.
This balanced approach seeks to optimize synergies between monetary policy, foreign exchange intervention, and capital account policy. Allow me to elaborate. Our monetary policy, under the current inflation targeting framework, can take care of exchange rate as long as there is no conflict with inflation. And, foreign exchange market intervention is conducted only to smooth excessive volatility in the market. As for the capital account policy, I firmly believe that key is the right pacing and sequencing of capital account liberalization, with a view to ensuring a more balanced structure of capital flows into and out of Thailand. On the capital inflow side, we are still maintaining the URR or unremunerated reserve requirement for the time being. This capital control measure has proven a useful tool for reducing the chance of prolonged financial misalignment with economic fundamentals, especially on occasions when most market participants are offside in the same direction. As for the outflow side, we have further liberalized our capital account during the last two months. These measures included the relaxation of FX holdings by juristic persons and individuals. In fact, at the beginning of this year, we also expanded the limits of Thai direct investment and portfolio investment abroad. Even though we all agree that financial openness is needed for long-term economic efficiency, going forward, the appropriate degree of opening or pacing through time will remain an issue for controversial debate. Ladies and Gentlemen, The third part of my talk today focuses on “international rules of the game”.