The future belongs to those countries which recognise and adapt quickly to these changes, so as to ride the new wave instead of being overwhelmed by it. The September 11th attacks in the US revealed another peril of globalisation - extremist terrorism. Soon after September 11th we discovered in Southeast Asia extremist groups, obtaining funding, training and support from Al Qaeda, and carrying out terrorist attacks in our own countries. The terrorist network is therefore a true MNC. Southeast Asian countries are mindful of the threat of terrorism to investors’ confidence, and are co-operating to battle against these extremist elements. This is a long-term, worldwide struggle. Despite these setbacks, Southeast Asian countries have not turned inwards, or tried to shut out the world. They continue to embrace globalisation as the best option for securing their future, and remain committed to plugging themselves into the global grid. Individually, they continue to promote FDI, encourage exports, and pursue linkages with the outside world. They know that to try to keep out new investments, technologies and competition and go it alone will condemn them to poverty and stagnation. As a group, ASEAN is strengthening economic cooperation among its members. Intra-ASEAN trade in manufactured goods is already practically tariff-free. Last October, ASEAN leaders went a step further, and committed to creating an ASEAN Economic Community by 2020. This will be a single market for goods, services, capital and professionals. Externally, ASEAN is negotiating an FTA with China, and is targeting to conclude the goods chapter by middle of this year.

With the completion of the merger programme in December 2000, the banking groups are at various stages in building up their management team and enhancing corporate governance. A number of measures have been implemented to ensure that banking institutions’ Boards and key committees have sufficient representation of independent directors and that the Boards are encouraged to appoint qualified professionals to run the banks. Towards this end, Bank Negara has liberalised the remuneration package of the chief executive officers of banking institutions and left it to the Boards to formulate appropriate packages to attract the necessary talent and determine their remuneration package. In the final analysis, a more competitive banking system should produce benefits to their customers and the business in terms of easy access, quality choices and competitive prices. An indicator of the improved level of competitiveness has been the narrowing of margins. During the year 2001, gross interest margins of banking institutions have narrowed to 3.86% for the commercial banks from 4.3%. This reflected the larger reduction in the average lending rate vis a vis the average cost of funds. Competitive interest rates were particularly evident for mortgage and hire purchase loans reflecting strong demand for credit for these sectors. The competitiveness of the domestic banks in terms of the gross interest margin has also improved. The gap between the domestic banks and foreign banks has narrowed from 0.92 percentage points as at the beginning of year 2000 to 0.69 percentage points as at the end of 2001.