Zeti Akhtar Aziz: Emerging trends in Asia and their implications for Malaysia Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the The Asian Banker Summit 2003, “Post-Asian Financial Crisis: Securing Financial Stability”, Kuala Lumpur, 16 September 2003. *  *  *  Ladies and gentlemen As we advance into the 21st Century, sustainable performance demands resilience to the economic cycle, resilience to unstable market conditions and overall resilience in an environment of rapid change. To prosper in this new environment, we need to have the capacity to withstand the entire business cycle, to survive the increased volatility in the financial markets and to have the capacity and agility to adjust to the changes taking place. Sustainable performance is key in achieving long-term relevance and success. To achieve this, it is important to look beyond the short-term perspective and build the capacity and the resilience to meet the new challenges that are emerging in this new environment. It is my honour and pleasure to be invited to this Asian Banker’s Summit 2003. Let me join the organisers in welcoming you to Kuala Lumpur. It was exactly five years since the countries in East Asia have emerged from the financial crisis, when stability in the financial markets was restored and the economic recovery resumed. Asia has now emerged as the fastest growing region. Despite a more difficult external environment, the Asian region has demonstrated resilience.
I am doubtful whether a further easing of monetary policy in this group of countries would be able to help move the yield curve in the desired direction. It could actually have the opposite effect - if investors perceived it as heralding a weak euro. In any event, given the current level of short-term interest rates, monetary policy’s margin for manoeuvre is extremely limited. It is possible that the level of real long-term interest rates in Europe reflects, partially at least, that of real interest rates worldwide. Europe has no influence over that effect. BIS Review 67/1997  -3-  Europe can, however, have an influence on the effect which comes from the constant increase in public sector indebtedness in our countries. As a reminder, between the end of 1991 and the end of 1996 the general government debt rose from around 56 to above 73% of GDP for the European Union as a whole. This development, together with the worry that it might not yet have run its course, are not likely - to say the least - to lead to a fall in real interest rates. Nor do they create the climate of confidence necessary for consumers and investors to modify their current prudent behaviour. On the other hand, the certainty that governments are tackling the underlying causes of the public deficits which are responsible for the constant increase in the debt burden could well bring about such a change in behaviour.