samchain/econo-pairs-v1 huggingface dataset:
Ravi Menon: Seeking decent returns in an era of sub-par growth Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Sovereign Investor Institute Government Funds Roundtable, Singapore, 6 November 2014. *  *  *  Mr Scott Kalb, Executive Director, Sovereign Investor Institute Distinguished guests, ladies and gentlemen, good morning. The global conjuncture The major economies of the world are at an inflection point. In the US, the era of quantitative easing has come to an end. Next year, for the first time in eight years, we are likely to see a hike in the Fed funds rate. •  The good news is that monetary policy normalisation will occur in the context of a strengthening US economy. •  The bad news is that for financial markets conditioned by persistently easy monetary conditions over the last six years, there is considerable uncertainty over the pace and extent of interest rate normalisation. •  The Federal Reserve has done as best as it can in communicating its approach through forward guidance. But there is many a slip between cup and lip that could to lead to disorderly market adjustments. In the Eurozone, there is tension between restoring public debt to a sustainable trajectory and supporting a faltering economy. •  The ECB has committed to expand the size of its balance sheet by increasing asset purchases, while an active debate rages in Brussels on the appropriate balance between reducing fiscal deficits and supporting growth.

To sum up the impact of the four key drivers of growth, deleveraging and demographics are quite unambiguously a dampener while energy appears a benign force. The long term trend for productivity is hard to predict. But even assuming a generally optimistic prognosis for productivity, it is quite likely that global growth in the next 20 years is likely to be lower than in the last 20. This means that returns from financial investments are also likely to be lower in the next 20 than in the last 20. Safeguarding long-term returns The modest outlook for long-term economic growth presents a major challenge for government funds to close the widening gap between their financing needs and investment returns. •  On the liabilities side, population ageing in the advanced economies will increase pension claims and place a heavier burden on social services such as healthcare. •  On the assets side, slowing global economic growth will constrain investment returns. There are three ways to narrow this mismatch between trends in assets and liabilities: •  The first is to reduce financing needs by lowering social expenditures or increasing fiscal revenues. Both are politically difficult to do. •  The second is to reach for yield by taking on various combinations of higher leverage, longer duration, and greater credit and liquidity risks. But the public perception and character of government funds limit their scope for aggressive risktaking.
This has also enabled the region to better manage the large and volatile capital flows that we are experiencing, thereby mitigating its destabilising effects on economic activity. These strong foundations have supported ASEAN economies through the challenging external developments that have taken place and have well positioned the region to realise its full potential as a dynamic growth centre. It is my great pleasure to be here to speak at this 19th ASEAN Banking Conference, hosted this year by the Association of Banks in Malaysia (ABM) here in Kuala Lumpur. This Conference takes place at an important juncture for our region, as concrete plans are being advanced to achieve an ASEAN Economic Community (AEC) by 2015. The AEC Blueprint, adopted by ASEAN leaders in 2007, envisages ASEAN to become a single market and production base that is characterised by the free movement of goods, services, investment and skilled labour, and freer the flow of capital. Despite the recent global financial crisis, the drive for this vision to be realised remains resolute. This is well supported by the prevailing strong foundations and the tremendous growth prospects for ASEAN in the medium to longer term. My remarks today will focus on the elements of the prospects for the ASEAN economies, and the state of ASEAN financial integration and its importance in enhancing the regional growth potential. My remarks will conclude with some thoughts on imperatives for the banking sector going forward into the future.

Prospects for ASEAN economies ASEAN is currently one of the most dynamic and fastest-growing regions in the world economy. The region’s GDP is expected to triple to USD3 trillion by 2017 relative to a decade ago. Economic expansion is expected to be sustained at a rate of 5.8% in the next five years, significantly outpacing global growth. In tandem with this, is the notable rise of the middle class population. The Asian Development Bank estimates that the share of ASEAN’s middle class population is expected to increase to 65% by 2030, consequently contributing to altering the global consumer landscape. With a sizeable population of 600 million people, this underscores the evolving role of ASEAN as a significant consumer market base with distinct needs and increasing purchasing power. Given that the share of the working population in  BIS central bankers’ speeches  1  ASEAN is estimated to reach 58% by 2050, ASEAN will benefit from its demographic dividend and abundant workforce. An accompanying trend is the rise of entrepreneurship in the region. The emergence of home-grown businesses with prospects of becoming large national and multinational corporations has generated attention and priority to be accorded to supporting the development of small and medium scale enterprises (SMEs). Currently, SMEs account for 50%–85% of domestic employment in ASEAN economies and 30–50% to GDP. Given the substantial contribution to income and employment generated by this sector, its development will be vital in creating employment and sustainable long-term growth in the ASEAN economies.
Our experience tells us that financial reform takes time and determination, and the ability to bite the bullet and bear the short-term pain. It is also very much a continuous process, with financial innovation creating new circumstances and presenting new challenges all the time. 14. I believe that we have successfully achieved this, which is the important reason why we have stood out as an oasis of calm, at least relatively speaking, in the storm of financial turmoil that is currently sweeping through the region and beyond. Some say that we are sticking out like a sore thumb, referring particularly to our fixed exchange rate link with the US dollar. I can of course respond to that by pointing to how well our linked exchange rate system, a currency board system that functions on auto-pilot, has worked. I can point to the supervisory efforts which have put our banking system on a very sound footing, and to our advanced financial infrastructure which has helped tremendously to contain and manage risks of a systemic nature. But many of you are, I am sure, already sick of my talking all the time, and may even dismiss what I say as trumpeting. I do not blame you. I am well aware of the possibility that over ten years of direct involvement in monetary reform in Hong Kong may have introduced a degree of bias in my views on the subject, which I have tried consciously to avoid. 15.

And so when exchange rates move sharply, which they do, the currency mismatch results in large losses. 12. But I suppose we all learn from mistakes. We in Hong Kong did so the hard way in the early 1980s when the situation was compounded by uncertainties about the political future of BIS Review 115/1997  -3-  Hong Kong. We had our currency crisis in 1983, after nine years of operating with a floating exchange rate, against volatile capital flows, without any effective mechanism for monetary management or currency anchor. Our banks had been overly exposed to credit, maturity and currency risks, and a total of seven banks had to be rescued directly or indirectly through the use of public funds. In short, we had been complacent. 13. But, thankfully, never have we been in any doubt about the need to maintain free and open markets, and a liberal financial system. The correct response to financial turmoil is not to resort to controls or to apportion blame, but to put one’s own house in order, and ensure that one is in a position to cope. This we did through a series of reform measures to strengthen our monetary and financial systems implemented in the past ten years. This was, in part, also spurred by the desire to minimize the risk of possible financial disturbance ahead of and through political transition, and to provide the environment for Hong Kong’s continuing development as an international financial centre, as required under the Basic Law.
Too high inflation and great uncertainty about developments We have a year behind us in which inflation rose sharply around the world and central banks raised policy rates at a rapid pace. At the beginning of 2022, inflation was around 4 per cent in Sweden. The Riksbank and most forecasters assessed that inflation would fall during the year. As we know, it continued to rise instead. One reason was the rapid economic recovery from the coronavirus crisis, which pushed up prices on commodities, inputs and transport. Household demand was high, while it was difficult for businesses to adjust and increase production quickly enough. As a result, inflation received an unexpected boost when economies opened up. Another important reason was Russia's invasion of Ukraine, which drove up the prices of energy and grain, as well as other agricultural products. In addition, the high energy prices had indirect effects on inflation via, for instance, rising prices for transports and other input goods for companies. In the context of high demand following the pandemic, firms found it easier to pass on their increased costs to consumer prices than might have been expected from previous experience. One year later, at the beginning of 2023, we thus had both far too high inflation and the lesson from last year that it is very difficult to know how inflation will develop. There are many indications that inflation in Sweden, as well as abroad, will fall back in 2023.

Conclusion Singapore has not shied away from tough measures to remake our economy and maximise our chances in a difficult environment. These measures will enhance our competitiveness, strengthen our companies and consolidate our social cohesion. They will make our economy more flexible, resilient and able to adjust quickly to changing circumstances, and so help it to remain ahead in the race of nations. Although the media impression is that Southeast Asia has stagnated since the Asian Crisis, the reality is less gloomy. ASEAN economies have made progress in picking up the pieces and pursuing domestic reform and restructuring, albeit some more successfully than others. Between 1999-2001, ASEAN economies as a whole grew by about 4% per annum. Last year, an export-led slowdown on the back of a global electronics slump broke the recovery trend. But ASEAN economies weathered the downturn fairly well, with most still managing positive GDP growth. Most are running current account surpluses, in contrast to the large deficits that prevailed in 1997. From a macroeconomic standpoint, the countries have held up well and even shown a certain resilience. Reflecting this, ASEAN stockmarkets have generally performed better than their counterparts in the rest of the world thus far this year. Part of Southeast Asia’s negative image is attributable to political and security concerns, which are indeed real. A week or so after the Bali attack, these worries naturally loom large. Many observers, seized by the mood of the moment, are now forecasting the worst for the region.
There is also the question of what is the end-result of the merger in terms of market share. It may be necessary for more than two banks to get together in order to achieve a significant increase in scale. But the more banks that are involved in a merger, the greater the complexity of achieving strategic fit and cultural harmony. The attitude of the HKMA This reinforces the general point made earlier that successful execution of M&A is not an easy task. However, despite the potential pitfalls, the HKMA continues to believe that consolidation of the local banking sector is desirable and probably inevitable. This is for the reasons I have already mentioned. In general, it is difficult to see how a banking system like Hong Kong's, which is open to the forces of global competition, can resist the pressures that are leading to consolidation in other banking systems. In terms of Hong Kong's particular situation, while it is always dangerous to extrapolate current market conditions into the future, it does appear that organic growth is going to be more difficult to achieve than it was in the years before the Asian crisis. This lays greater stress on the need for smaller banks to find a strategy that will differentiate themselves from their competitors and enable them to earn an adequate return on capital. This will not be straightforward, particularly since a number of the potential business options such as wealth management involve heavy set-up costs that need scale to justify them.

That is a truly terrible choice and so the key thing is to find a new set of measures that can be deployed to give us a tolerable course. That set of measures is what constitutes a resolution regime. It is not about making things perfect. It is about coping. We can all learn from the US’s special resolution regimes in this respect, including the extensions in scope to bankholding companies and non-bank financial firms affected by the Dodd-Frank Act. But there are things being debated in Europe and in the international community that may even supplement the toolbox that exists already in the United States. One of them is the potential ability for the resolution authority to haircut creditors and partially convert debt into equity in what is otherwise a firm with a viable underlying franchise and so potentially a going concern. This would be an adaptation of Chapter 11 regime in the US rather than the standard special resolution toolkit for banks. This set of issues is, at its very core, a cross-border endeavour. We will not get far on this front without much more intimate and trusting co-operation between home country supervisors and resolution authorities and host country authorities. We should not exaggerate the extent to which this has worked well in the past. Supervisors even admit that behind closed doors.
While there are signs of effects on demand that might be explained in the same way as in the US economy, the supply-side effects via higher productivity growth are not yet as clear or as universal. It is conceivable that such effects on supply will materialise and the Riksbank must be alert to that possibility. But we cannot count on such hopes in advance, particularly as they have not yet left any mark on leading indicators, for instance in the form of rapidly rising investment. What is the level of unutilised resources? Another aspect of the speed limit to economic growth, at least in the short run, is the level of unutilised resources. An important component here is the extent of unutilised labour. Experience shows that the stability of inflation has to do with the level of unemployment. If unemployment falls below a certain level, a stronger stimulation of production and employment (by means of a more expansionary economic policy, for example) simply leads to bottlenecks, shortages and rising inflation. Instead of a permanently higher level of employment, the end result is a return to higher unemployment. This level of unemployment is not something that monetary policy can alter. It has to do with other factors, such as occupational and geographical mobility, the propensity to take the jobs that are available, and so on. Contributions in this field can be made with other components of economic policy but not, as I said, with monetary policy.

On other occasions there may be an obstacle in the form of a disruption, such as the Asian crisis the other year. In both cases, monetary policy must be adjusted to the economic laws but also to the conditions that apply for the current phase of the journey. What I mean is that interest rate hikes and cuts are a natural ingredient of a monetary policy for price stability - a policy that ultimately aims for a stable development of production and employment. The favourable economic trend in Sweden in recent years is in fact a good illustration of price stability’s affinity with a stable expansion of output and jobs. Since the upturn after the crisis in the early-1990s, the annual GDP growth rate has averaged around 3%, the number in employment has risen by almost 150,000 persons and the rate of inflation has been more or less around the target. This has called for repo rate increases on some occasions and cuts on others. 1  BIS Review 6/2000  Rapid GDP growth during 1999 So at what speed is the Swedish economy currently travelling? What are the speed limits? And what repo rate is appropriate for a safe journey? According to the latest national accounts, published just before Christmas, the GDP growth rate for the first three quarters of 1999 was over 3.5%. It is still difficult to tell just what happened in the fourth quarter but demand growth seems, if anything, to have accelerated.
The government has also identified the need to focus on developing regional infrastructure facilities in order to stimulate economic activities in the regions as well as to quickly distribute  BIS Review 88/2007  5  the gains of higher economic growth to the people who are living in remote areas. The ongoing “Maga Neguma”, “Gama Neguma” and “Neganahira Navodaya” programmes are particularly aimed at fulfilling this need. In the meantime, the Central Bank, in collaboration with the Finance Commission has initiated a new approach to examine new ways of maximizing the Provincial Councils’ contribution in the regional development process. We have observed that even after the existence of Provincial Councils for about two decades, the inequalities among the provinces still prevail and in fact have widened over the years. Hence, it is clear that we have to introduce a new and innovative strategy to develop our provinces. In line with this objective, as the first step of this new initiative, the Central Bank and Finance Commission, along with several other stakeholders, are in the process of identifying the issues, difficulties and potential of the respective Provincial Councils to improve the provincial contribution towards achieving balanced regional development. Finding ways and means to increase the private sector participation in the development process without solely depending on government funds is the key feature of this new approach. Not surprisingly, there will always be an intense debate about the trade-off between the growth momentum of an economy and the equitable distribution of benefits.

The per capita income is projected to increase further to around US dollars 1,500 by the end of this year and is expected to continue to increase during the coming years. So, there is a clear indication that we are growing amidst several challenges and that people are enjoying the gains of the growth although some may tend to down play or disregard these national gains for whatever reason. With increased personal incomes, we also observe that living conditions of the people are improving. I already spoke about it. But, at the same time, we would be the first to admit that a lot more needs to be done. We have to attempt to double our per capita income every 6-7 years from now onwards. We must also aim at increasing the per capita incomes in the provinces from the present levels of between US dollars 700-800 to at least US dollars 1500 in the next 6-7 years. That is not a dream. It can be done. Towards this objective, the government has clearly identified as a priority, the importance of having quality infrastructure facilities in the country. In that regard, mega infrastructure projects, particularly in the areas of power and energy, highways, rail roads, ports and aviation are currently being implemented. In fact, the government has given the highest priority in its public investment programme to complete these projects as early as possible so that development process would be accelerated.
Moreover, all windfalls from the high copper price have been saved in sovereign funds deposited abroad. BIS Review 39/2008  5  International changes in terms of trade (cumulated growth between 2003 and 2007, percent)  Venezuela Russia Chile Peru Norway Australia Colombia Mexico Argentina Canada South Africa New Zealand Thailand Brazil Poland United Kingdom China Malaysia Switzerland Turkey Israel Hungary Sweden United States Singapore South Korea Japan Philippines  -40  -20  0  20  40  60  80  100  Source: Institute of International Finance, International Monetary Fund. The downside of commodity price increases is inflation. The rise in the prices of specific goods leads to an increase in measured inflation. The effects of these external shocks on inflation will depend on a number of factors. First, on the weight each commodity has in total CPI. In general, in poorer countries commodities in general (foodstuff and energy in particular) have more weight, while in richer countries, services are more important. Also important is the level of price protection (tariffs, price bands and other mechanisms to isolate internal prices from international fluctuations), price controls or subsidies. In Chile, the shock to food prices has been further aggravated by weather problems.

Zeti Akhtar Aziz: Greater financial integration and financial stability Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the SEACEN 30th Anniversary Conference “Greater financial integration and financial stability”, Kuala Lumpur, 20 October 2013. *  *  *  Bank Negara Malaysia is honoured to welcome you to the SEACEN 30th Anniversary Conference on “Greater Financial Integration and Financial Stability”. We are especially honoured by the presence of Governors and senior officials who are here today, despite the pressing demands on our institutions during this period of persistent uncertainties in the global financial and economic environment. We continue to face challenging and often testing times. Over the recent five years, we have been confronted with recurring episodes of turbulence, followed by phases of transitory recoveries. We have seen, and have been part of, extensive collaborative measures and reforms pursued at both the regional and global level. Yet, the calm after the storm continues to evade us. The SEACEN and Asian economies have seen significant structural adjustments and wide ranging financial reforms in this decade. During this period intra-regional trade activity has rapidly increased, signifying the deepening of economic ties within the region. Intra-regional trade in East Asia has expanded from an average of 44% of total trade in 1995, to 50% in 2012. Intra-regional investment activity has also been on an uptrend.