Thus, even if global growth were to be robust, it is unlikely that Emerging Market export growth would recover quite as strongly. I would certainly be remiss if I failed to mention another potential risk in Emerging Markets which could have impact on the real economy; that is a rapid buildup in Emerging Market corporate indebtedness. Ultra-loose global monetary policies have made it much easier for firms in Emerging Markets to raise funds – or borrow – especially from abroad. However, in the wake of tighter financial conditions, Emerging Market firms are facing greater difficulty to repay or roll over their debt. In summary, I have highlighted two key sources of volatility: first, continued excess liquidity amid diverging monetary policies, along with shifting market expectations about the future path of monetary policies; and second, the global economic transition to the “new normal” steady state. The process is ongoing, and will probably take some time – and it may not be smooth – before the new steady state is reached. 2  BIS central bankers’ speeches  Ladies and gentlemen, Against the backdrop of such a volatile “new normal” world, I will now turn to the implications for Thailand. The impact will be realized on both our financial markets and the real economy. However, as I shall elaborate, the Thai economy has strong buffers that will make it relatively resilient to external shocks. Let me start by looking at implications for the financial markets and the exchange rate.

Malaysia also made significant investments in talent development for the financial services sector. Given its significance in defining performance and resilience of the financial sector, comprehensive institutional arrangements have been put in place for all levels of the industry; at the entry point, at the working and specialist levels, at the professional level and at the leadership levels including for the boards of financial institutions. Finally, as the financial system became more regionally and internationally more integrated, regional financial stability arrangements have also been established. These included advancing collective initiatives in the areas of regional surveillance, the development of regional financial markets and payments infrastructure, and cross-border supervision. Forums for assessment of risks to regional financial stability have also been initiated, and work on establishing an integrated crisis management and resolution framework for the region is in progress. As part of these initiatives, a regional support mechanism has also been established. With these pre-conditions in place, Malaysia commenced initiatives to internationalise our financial system beginning 2003. The internationalisation of the financial sector entailed the advancement in two main areas; financial sector liberalisation and capital account liberalisation. In pursuing greater regional and international financial integration, the aim was to enhance the diversity of the financial system in terms of its product offerings, to improve further the competitiveness of the financial system and to strengthen our economic linkages with the region and other parts of the world. The financial sector liberalisation involved increased foreign entry and participation in our financial system.