Despite Asia’s diversity in people, culture and traditions, the region has been able to come together as a group to achieve greater integration in the areas of trade and investment. While trade remains an important contributor to growth in the region, of importance is that the pattern of trade of the Asian economies has changed significantly. This decade has seen the rise in intra-regional trade. Intra-regional trade in Asia has risen from 32% of total exports in 1995 to an average of 50% in 2008. Increasingly, as incomes rise in Asia, intra-regional trade will increase to meet the rising domestic demand of regional economies. More than half of the world’s population resides in Asia that has a favourable demographic structure that comprises of a significant young and dynamic segment. The growing middle class has altered the consumption and savings patterns in the region, providing the region cumulatively with a huge growing consumer market. Asia also has high savings which allows for higher consumption while still having surplus funds to finance regional investment activity. The rapid trade liberalisation across Asia has improved market access, creating a vast market for goods and services. In addition, bilateral and region-wide free trade agreements are set to expand further even as multilateral agreements continue to be pursued. The growing pace of intra-regional investment flows has also gained momentum to complement the region’s trade integration. Businesses in the region are leveraging on regional complementarities as well as taking the opportunity of the growing markets in the region.

In Malaysia, almost half of foreign direct investment into our country originate from the regional economies. In addition, Malaysian corporations have also in recent years increased substantially their presence in the region. The success of intra-regional investment reflects the competitiveness and dynamism of Asia. A more recent phenomenon is the increased financial integration. As this occurs, it will result in a more efficient recycling of Asian savings into investments within Asia. Given that Asia will need about USD8 trillion in infrastructure development over the next ten years, the effective channelling of Asia’s large pool of savings into productive uses within the region will be important to support growth and development in Asia. Deeper financial integration within Asia is already occurring as financial markets in Asia become more developed and mature. Regional efforts are being intensified to accelerate this process, including in developing the regional bond markets. Policymakers in Asia have also come together in ASEAN+3 and the Executive Meeting of East Asia Pacific (EMEAP) groupings to promote greater cooperation in maintaining regional macroeconomic and financial stability. The more volatile and unstable international financial and economic conditions have called for the need for greater regional surveillance for the early detection of risks to the region. These have now been put in place including mechanisms to enable the region to cope with rising uncertainties. Through EMEAP, regional collaboration on surveillance has been enhanced to strengthen the region’s vigilance and  2  BIS Review 43/2010  resilience against potential crises.