However, in the dogmatic pursuit of inter-country convergence, intra-country disparities have become increasingly apparent. As nations across the globe were brought closer together, citizens within each nation were pulled further apart, separated by the rising inequality, the declining share of labour income versus capital, and the displacement of workers. The unfettered market openness by advanced economies had caused unintended consequences that have ignited the rise to populism, inward-looking tendencies and potentially protectionist policies. If left to run its course, this will be a setback to global prosperity. In ASEAN, we are no stranger to this perspective. Our own experience is highly relevant. We learnt from the Asian Financial Crisis, that pushing countries to adopt policies when readiness is suspect is a design for failure. Without the necessary preconditions of sound institutional frameworks, adequate safeguards and capacity and robust domestic financial markets, premature financial liberalisation will expose the economy to waves of destabilising short-term speculative flows. When these flows leave, a trail of destruction is left behind. We also learnt that proper sequencing and readiness of financial liberalisation is key. The criticism that ASEAN’s ‘steam engine’ may not be ‘full speed ahead’ does not capture the full picture. This view fails to consider and understand that quality, not the speed and quantum of integration, is what really matters. The focus of integration should not be on speed, but on building the collective capacity, readiness and resilience of member countries.

Given the divergence between offshore and onshore ringgit prices, arbitrage opportunities for non-resident investors persisted. To make things worse, even our own market players, began to consistently take the cue from the NDF market. This placed unwarranted downward pressure on the ringgit. Most unfortunate is the lack of concern by regulators where the NDF activities were thriving despite of the adverse impact on the affected currencies. With the extreme destabilising effects of the offshore ringgit NDF market on domestic ringgit pricing, we took a broad spectrum of measures to reduce the speculative and damaging influence of these activities. Part of this was our stricter enforcement of non-facilitation rules for offshore derivatives. The long-standing prohibition on domestic players to facilitate transactions of offshore markets was extended to non-resident financial institutions via a compulsory attestation requirement. We also facilitated and managed the exit of significant short-term positions related to the NDF market. Certainly, these aggravated the immediate pressures on the ringgit but were very necessary to any eventual stabilisation of the currency. I am pleased to share that a number of global financial institutions have complied with our requirements. But, there are still a few holdouts. We are perplexed as to how these financial institutions can continue to operate or facilitate an activity that clearly contravenes our rules and regulations. We will continue to enforce our measures and look at avenues to deal with those who facilitate the ringgit NDF activities. The destabilising implications arising from the offshore activities gave a bad name to the marketbased mechanism.