Meeting the challenges of innovation and its diffusion as well as ensuring the labour force’s employability and flexibility, requires that human capital is continuously adjusted to labour market needs through improved education and training, as well as lifelong learning. The last decades have already brought about an enormous increase in the level of educational attainment. However, so far investment in human capital in Europe is still clearly inadequate for a “knowledge-intensive” economy. In 2003, the US annual expenditure on higher education institutions represented 2.9% of GDP, while in the euro area it only represented 1.2% 16 . The gap is mainly a result of greater private funding. European universities should be allowed and encouraged for instance to seek complementary private sources of funding and legal, and other barriers to public-private partnerships between universities and businesses should be removed. A better and more effective education system, as estimated by some research of the European Commission, might add as much as 0.3 to 0.5 percentage points to the annual EU GDP growth rate 17 . Macroeconomic stability to support higher and sustainable growth As mentioned earlier, the supply-side determinants of long-term growth that I have emphasised should not be understood as an exhaustive explanation for the growth performance of the European economy. We should also look beyond the microeconomics of the supply-side and ensure an appropriate macroeconomic framework in Europe. First of all, sound national fiscal policies in Europe are of the essence because they ultimately are supporting growth and stability.

The Risk-Based Capital Framework and Risk-Based Supervisory approach give room for institutions to innovate and take more risks as long as adequate controls and risk management practices are in place. BIS Review 103/2006  1  Liberalisation of the general insurance industry MAS will also continue to encourage greater participation from a wide range of global insurance players in our market. In 2000, we lifted the moratorium on admission of new direct general insurers and removed the 49% limit on foreign shareholding in locally-owned direct insurers. Since then, the industry landscape has evolved considerably. Today, we have a diverse network of 58 direct insurers, many of whom are specialist insurers, 27 professional reinsurers and 60 captives. Most of the top international insurance and reinsurance brokers are also here. We continue to see interest from more players seeking to establish a presence here. We will consider all applicants that are well-capitalised, have an acceptable rating, and are managed by experienced professionals with a good track record even if the company is newly established. Singapore as an insurance hub Singapore has achieved a critical mass of insurance players and activities, becoming an insurance hub. This critical mass means a wide range of insurance products and services are available. Singapore is a logical choice for those seeking to purchase insurance because they know that there are capacity and expertise here. Indeed, Singapore serves as an important regional reinsurance centre as well as the largest captive domicile in Asia. Asia holds many opportunities for insurance.