Besides tackling the various issues, risks and challenges of navigating these uncertain and volatile times, the FMC has been mandated to formulate and propose strategies to take the financial market development forward. I would like to thank the members of the Financial Market Committee and industry association representatives for collaborating with us for the common and greater good of market development. The FMC and its subcommittees have met several times. Some of the initiatives have already been rolled out; such as the extending of trading hours for the FX market and the KL USD/MYR reference rate. Some are going through the woodworks of development. I would like to discuss a few here. 1. We are embarking on a progressive journey of a more liberalized and conducive financial market operating environment. As a concrete step, I would like to announce the introduction of a pilot program for the USD/MYR and CNH/MYR markets. Under this program, residents will be allowed to undertake hedging transaction for USD and CNH against ringgit without the need for sighting of the underlying documents. Subject to a position limit, only a declaration by the customers will be sufficient. Accordingly, cancellation of the hedging will also be freely allowed. 2. To further complement this, the Bank is also currently working with the Securities Commission and Bursa Malaysia to facilitate the introduction of USD and CNH against Ringgit futures for the onshore exchange. Similar to the interbank market, these will, for now, be subjected to position limits, and for now only applicable to residents.

The lack of a functioning government early this year also curtailed public finance capability, subjecting infrastructure investment to further delay and putting 2015 fiscal budget at risk. Tourism, a shining sector in 2013, was increasingly weighed by security concerns. A tepid recovery in exports offers only a partial offset to softening growth, and could not prevent the overall economy from contracting in the first quarter. It is under this backdrop that the end to political stalemate in May provided some cause for short-term optimism. The first relief comes from a resumption of government spending. The presence of a fully functioning government ensures that the budget for 2015 fiscal year could be prepared on time, eliminating the risk of a Thai-style “fiscal cliff”. An acceleration of public disbursement in the short-term is also providing a welcomed boost to the economy. Plan for public investment in infrastructure is now back on track, and there have been renewed efforts to maximize the efficiency of these projects. A resumption of effective fiscal policy, in turn, lends support to domestic demand recovery. Repayment of overdue debt to farmers, approvals of backlog projects by the BOI, and fresh loans to the SMEs provided quick relief in and of themselves, but the combined multiplier effects could also be meaningful. By shoring up income and improving overall sentiments, these measures constitute an important effort to revive private spending. Fast indicators already suggest that private consumption and investment are stabilizing, and private confidence improving.