Thailand is somewhat in an awkward position currently, being left behind by the NICs, and being caught up by countries like China and Vietnam, to name a few. It is therefore important to extend efforts beyond market diversification to promoting higher value along the production chain, a task that both the private sector and the Government have a role to play. Especially with the rising FTAs as well as other regional integration and cooperation, notably among ASEAN, we must work to make sure that Thai producers and exporters can fully utilize the benefits from these arrangements. Fourth, prudent policy has obviously shielded us from the contagion of external developments so far. In addition to the importance of fiscal discipline and debt sustainability which I have already highlighted, I would like to stress that monetary policy has not and should not be used as an instrument to boost short-term growth. However, it can help cushion the economy against growth contraction in the short run, while ensuring stability in the long run. In this past crisis, the adverse effect led us to a series of aggressive rate cuts during December 2008 to April 2009 in order to help shore up the economy. The rate cuts were timely and turned out to be effective, in view of the momentum of economic recovery achieved. Regarding the framework of monetary policy, I should stress that the Bank of Thailand’s policy framework has always emphasized, not only monetary stability, but also financial stability.
The Financial Policy Committee of the Bank of England, the FPC, has the task of identifying, monitoring and taking action to remove or reduce risks with a view to protecting and enhancing the resilience of the financial system in the UK. These risks at the level of the system can include those arising from structural features of financial markets, from the distribution of risk within the financial system, and from unsustainable levels of leverage, debt or credit growth. The emphasis here is very clearly on ensuring the resilience of the financial system. But our objective is not to achieve resilience at any cost – our actions must not have a significant adverse effect on the capacity of the financial sector to contribute to the growth of the UK economy in the medium or long term. Moreover, and here you will recognise the symmetry with the objectives of the MPC, the legislation provides that, subject to achieving our primary objective for financial stability – resilience – the FPC must also support “the economic policy of Her Majesty’s Government, including its objectives for growth and employment”. The reforms have also created the new Prudential Regulation Authority as part of the Bank of England. Here, the statutory objective of the microprudential regulator is the safety and soundness of the firms which we prudentially regulate – banks, insurers and major investment firms. Moreover, our objective of safety and soundness sits in the context of the stability of the financial system. What does that mean?