But there is a need also to reduce vulnerability by building bigger, deeper, more robust and diversified capital markets. While the interesting subject of monetary integration, which would provide a long-term solution, has been receiving some nascent attention, efforts to enhance the efficiency of financial intermediation within the region should be stepped up. Asia as a whole is one of the largest exporters of capital and, at the same time, also one of the largest recipients of foreign direct investment and foreign portfolio investment. The underlying process of capital flows associated with this roundabout phenomenon involves much greater financial volatility and instability for the region than the situation where a greater proportion of savings in the region could more readily find their way into investments in the region. This underscores the importance of greater efforts to enhance the efficiency of financial intermediation within the region. Indeed, capital market reform is high on the agenda of most Asian economies. There has also been considerable progress in the diversification of financial intermediation channels, specifically in the development of the bond market. At the end of last year, the amount of domestic bonds outstanding in eight economies1 that we have surveyed was equivalent to 47 percent of the combined GDP, more  1  Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. BIS Review 30/2004  1  than double the 20 percent at the end of 1995. Over that eight-year period, the bond market’s share in total financing grew from 11 percent to 19 percent.
Joseph Yam: Asia’s ability to cope with the continuing challenges of globalisation Statement by Mr Joseph Yam, Chief Executive of the Hong Kong Monetary Authority and Alternate Governor on the Board of Directors of the Asian Development Bank, at the 37th Asian Development Bank Annual Meeting, Jeju Island, Korea, 15-17 May 2004. *  *  *  Mr President, I join other Governors in: first, thanking the Government and the people of the Republic of Korea for their warm hospitality in hosting this year’s Annual Meeting; secondly, thanking the Bank’s management and staff for the excellent arrangements made; and thirdly, welcoming our two new members - Luxembourg and Palau. Mr President, on the governance of the Bank, I would like to commend the Bank for adopting a number of reform initiatives in the past year to enhance accountability and efficacy of operations. Greater transparency and accountability in all aspects of the Bank’s operation is to be welcomed. Measuring, monitoring and managing development results are essential. The creation of the independent Operations Evaluation Department will enhance the credibility of the Bank’s achievements. These initiatives will put the Bank in a stronger position in meeting the many tasks ahead. On the region, Mr President, I would like to focus just on the continuing challenges arising from globalisation and the ability, or rather the lack of ability, of Asia in coping with them. The Asian financial turmoil of 1997-98 demonstrated this vehemently.