Type of reforms Those short-term benefits can also be maximised, however, if the type of reforms is carefully chosen. How structural reforms affect the economy is of course complex, but the evidence suggests that the short run gains can be amplified if reforms are well designed, packaged and sequenced 19, with a focus on measures that minimise short-term costs. For example, the experience of Germany during the crisis suggests that reforms aimed at adjustment through the intensive margin – that is, working hours and wages – are less likely to have negative short-term effects than reforms that operate through the extensive margin – i.e. dismissals. 20 This is supported by new micro level research from the Eurosystem which shows that, for a larger sample of countries, firms with flexibility at the plant-level have reduced employment less during the crisis than those bound by centralised wage bargaining agreements, partly because they have been more able to adjust wages to economic conditions. 21 Moreover, if reforms are targeted specifically at frictions that hold back investment demand, their short-term effects should be largely positive, even at the bottom of the cycle. For instance, reforms directed at sectors with large pent-up demand, such as professional services and retail trade, could be expected to elicit a rapid investment response. 22 Indeed, our EAGLE simulations show that the short-term benefits from structural reform in the service sector arise mainly via a strong reaction of investment. adjust over time their knowledge of the favourable long-run effects.

Today's forum will be an opportunity for the sharing of views and experiences, with both local and global perspectives, on Malaysia's value propositions and competitive advantages as an ideal SSO destination. In developing Malaysia's competitive advantages, efforts to position Malaysia as an international Islamic financial centre under the MIFC initiative have propelled Malaysia's standing in the global Islamic finance sector. With a strong and comprehensive Islamic financial system supported by a robust regulatory regime and well established legal framework already in place, the envisioned landscape is that MIFC will be a centre for the offering of Islamic financial products and services in international currencies with a large pool of highly skilled Islamic finance expertise. Leveraging on the growing significance of Islamic  BIS Review 133/2007  1  finance in Malaysia as well as globally and Malaysia's international standing as an SSO destination, the development of Malaysia's SSO potential in Islamic finance would harness these two strengths in a meaningful manner. Today's forum will explore the possibility of the pooling of resources by various Islamic financial institutions in Malaysia to develop a shared platform for the outsourcing needs of these stakeholders. The benefits from such an initiative would be apparent in terms of achieving economies of scale and the avoidance of duplication of resources. Of course, establishing the necessary infrastructure for such an initiative would entail considerable commitment to address all the practical issues and avoiding the pitfalls.