The economies were affected by factors such as swings in commodity prices, significant oil price adjustments, and the slowdown in the major economies. While the impact of these trade - related shocks on the domestic economies of the East Asian countries involved costs, in terms of slower growth and dampened domestic economic activity, these economies were able to adjust to the sudden changes. In such an environment, there was also greater predictability in the direction of the economic trends, providing the basis on which appropriate policy responses were implemented to manage the economic adjustment process. Emerging economies in particular, in the East Asian region participated in this globalisation process and benefited from the enhanced trade activities. In the recent decade however, there has been a distinct change in the nature of the globalisation process. Globalisation is no longer confined to trade and direct investment, but increasingly involves large cross- border financial flows. Over the recent decade, these financial flows have dominated the global market place. An emerging concern is that this trend would result in a widening of the divide between the developed and emerging and developing economies. In a world in which the magnitude of the financial flows are significant, in which the financial transactions have instantaneous implications, in which the flows are unconstrained by any regulatory framework, then size, the degree of development and the degree of resilience of economies will matter.
Ladies and gentlemen, An important transformation in the international financial landscape is the introduction of the euro which has indeed been a defining event. The objective was clearly to facilitate trade and investment within the region by removing the distortions in economic relationships introduced by exchange rate volatility. As a result, where there were previously 12 currencies, there is now only one. Corporations dealing with the 12 euro countries are now able to keep their books in one set of accounts and make operating and investment decisions without having to be concerned about exchange rate changes. For the rest of the world, it has been described as “island of price stability” in addition to the dollar area, to which capital can flow. Four factors are important in determining a currency's international role: relative stability, which would reduce the risk of holding assets in that currency; a strong exchange rate; so that capital losses can be avoided; deep and liquid financial markets for that currency, to enable holders to diversify, liquidate and adjust their investment portfolios; and finally, a strong regulatory support to minimise the possibility of crises. Indeed, the international success of the euro in coming years would depend on the extent to which these criteria are met. The introduction of the euro has of course given impetus to other regional initiatives to pursue similar efforts to unify national currencies into a single regional currency. Such initiatives are being pursued in Latin America, Africa and the Middle East.