Ladies and Gentlemen, The theme for today's Public Lecture: "Monetary and Financial Policies in the Asian Network Economy" is indeed timely and highly relevant, in the current regional and global environment. The Asian economies have always been highly integrated into the global economic and financial network. Indeed, the success of the Asian economies lies essentially in its ability to be highly networked. The nature of these networks however, has evolved over time, heightening the complex nature of the interlinkages. In this recent decade, this trend is being reinforced by the intensification of regional integration. It is being facilitated by increased liberalisation and the increased potential for complementarities in the region. It is also driven by the conscious efforts by the authorities to facilitate the integration process. This is premised on the potential for increasingly mutually reinforcing positive outcomes. There is a growing recognition of the need for enhancements to the institutional arrangements and regulatory and legal framework to better manage the risks and vulnerabilities associated with the network economy. In this regard, an enhanced understanding of the changes in the way financial markets and payment systems operate in a more connected environment becomes important. As part of this process is the support provided by an enhanced surveillance mechanism. A further implication of a more networked economy is i n the area of payments, clearing and settlement systems, in which the benefits are derived from the economies of scale and the positive network externalities of increased participation.

Finally, Bank Negara Malaysia has also put in place business continuity plans as part of its contingency programme to deal with all eventualities and threats to financial stability, in particular, those emanating from a more networked financial system. Similar contingency plans have also been introduced in the domestic financial industry, where regular test-runs are conducted to ensure the integrity of all the back-up systems. Going forward, Central Bank cooperation continues to be enhanced to strengthen risk management capabilities in the Asian network economy. Measures to enhance national surveillance is complemented by cooperation on regional surveillance mechanisms to provide comprehensive oversight over the entire regional network. Closer cooperation with the respective regulators is also important to promote greater understanding of the nature of the risks involved and to facilitate the development of appropriate circuit breakers and mechanisms to contain the risks in the network. In addition to the establishment of Business Continuity Plans to help to mitigate risks arising from outside the financial network, the harmonisation of regulatory and financial standards would facilitate the containment process. These cooperative efforts to harmonise standards are to support financial infrastructure development in facilitating the flow of funds and settlement requirements across borders. Conclusion Datuk Seri Panglima Andrew Sheng's lecture today will explore the behaviour of markets as networks, and the implications of such network behavior on monetary and financial stability in the Asian network economy. Going forward, it can be expected that the Asian networked economy will become increasingly more entrenched.