However, having witnessed the collapse of the Soviet Union and the revolutions of various colours in other communist countries, they will, like their elders, be extra careful in feeling the stones as they cross the river. They look at Singapore as one such stone in their river crossing. In 2004, I proposed to then-Prime Minister Phan Van Khai for Singapore and Vietnam to connect our economies. He took sometime to think over it before responding positively. Our two countries have since signed the Connectivity Agreement, which enables Vietnam to leverage on Singapore's strengths in sectors like finance, tourism, aviation, telecommunications and human resource development. Singapore is a base for MNCs and well-connected to other parts of the world through trade, communications and transportation. By connecting our economies, Vietnam plugs itself into the global grid. Indonesia Now, Indonesia. It has the potential to take off but more work needs to be done - on policies, institutions and implementation. Indonesia had enjoyed strong growth for three decades, from the 1970s to the mid-1990s. Unfortunately, the Asian Financial Crisis in 1997 grounded the Indonesian plane. But the engine is being overhauled and the plane refitted. Banks and firms have cleaned up their balance sheets. Macroeconomic indicators have improved. President Susilo Bambang Yudhoyono has gathered a competent crew under him. The Indonesian plane is now on the runway and lining up for take-off. President Yudhoyono has implemented some difficult but much-needed reforms.
As such, “Policy dilemma” in Emerging Market Economies is likely to become more pronounced, especially as policy rate hikes from external front are imminent. Along the way, clear and timely policy communications from Advanced Economies will be useful to prepare for any adverse side-effects going forward. Part III: Key policy takeaway and the importance of policy collaborations Ladies and Gentlemen, In preparation for upcoming challenges, policymakers wish to do better than passively “catching up” with the crisis, but to be actively “ahead of the crisis” in order to prevent, or at least, mitigate the impact should one occur. Against this backdrop, lines of policy defenses for each economy have to be strengthened. 2  BIS central bankers’ speeches  If we think of the economy as our own house, then keeping the house in order is always an effective first line of defense. Strong economic fundamentals and macroeconomic policy credibility would play a crucial role in ensuring confidence and the sustainable economic activities. Nonetheless, increasing interconnectedness has made housekeeping more difficult as it creates spillovers. To better deal with the shocks, broader set of policy tools are called for. In a nutshell, sound macroeconomic policy and flexible macro-prudential measures to target vulnerabilities have been employed to minimize unprecedented impact in an appropriate and timely manner. Nonetheless, these policies are reaching their limits, not only in terms of policy space but also effectiveness. For a better solution, reforms in both the financial and real sectors are essential.