The current account deficit can now be financed through foreign direct investments (FDI) and long-term capital inflows. The FDI inflows were in excess of USD 20 billion in each of the last two years, putting Turkey among the top 5 developing countries in FDI inflows. Fourth, Turkey is one of the few countries with a “convergence story”. Negotiations with the European Union over the full membership status provide a major stimulus to policy makers to put Turkey’s huge potential into life and complete the reform agenda. This agenda consists of next generation policies and reforms that focus on removing structural bottlenecks and improving the economy’s capacity for labor absorption, innovation, and competitiveness. Dear Guests, Turkey has had a heavy structural reform agenda since 2001. However, continuation of structural reforms is of vital importance for the sustainability of economic gains achieved in recent years and for the resilience of the economy to further shocks in the future. The most important structural reform in the pipeline is the social security reform that is expected to significantly improve Turkey’s fiscal balances in the medium and long term. It is also expected to contribute to our domestic savings rate.
From my discussions with my supervisory colleagues in the region I know that they are serious in their efforts and I wish them every success. The lessons for Hong Kong 16. This sentiment recognizes that it is also in Hong Kong’s interest that financial stability returns to the region. As I have already indicated, one of the special features of the Asian disease is that it has been extremely contagious. And although the Hong Kong economy and financial system have remained in pretty good health, they have not been totally immune. This suggests that we too have lessons to learn from the crisis. 17. Hong Kong’s supervisory system does indeed compare well with international standards. A review which we conducted last year showed that we had addressed all the areas covered by the Basle Committee’s Core Principles and that we fully complied with all but a few of them. In the latter cases, we are in partial compliance. This does not however mean that we can be complacent for the following reasons: • First, the Basle Core Principles are, as I have indicated, minimum standards and we should where possible be aiming for best practice • Second, the environment being faced by banks is changing at an accelerating rate and we need to be sure that our supervisory system keeps pace with this • Third, even our robust monetary system can be subject to external shocks and the banks need to take this into account in the way in which they manage their business.