Gradually removing these restrictions to facilitate a greater presence of Asian financial institutions and investors in each other's economies would facilitate the integration process. Second, the policies of gradually liberalising the capital account of the balance of payments would facilitate greater cross-border investment and capital flows. This would enable firms and investors to better tap the regional financial markets to find the lowest cost of funding  BIS Review 130/2009  11  and highest risk-adjusted return. Equally important is the appropriate prudential safeguards to manage short-term flows and for the liberalisation process to be appropriately sequenced and based on a well-functioning, well-regulated and adequately developed domestic financial systems. Third, as payment and settlement systems are relatively well-developed in most of the Asian markets, the increased linkages of the national payments systems would enhance the efficiency and reduce the cost of financial transactions within the region. Several efforts have been initiated in this area. The Executive' Meeting of the East Asia and Pacific Central Banks (EMEAP) Working Group on Payment and Settlement Systems (WGPSS) - Working Group on Financial Markets (WGFM) Joint Taskforce has embarked on a cross-border collateral arrangement initiative to support and improve the liquidity management of internationally active financial institutions in the region. Second, the AseanPay Initiative of 2004 has led to a link-up of ATM networks across the region, allowing for convenient cash withdrawal to support Asia's increasing tourism activity.

The second salient feature is Asia's high rate of savings, exceeding 30% of gross national product (GNP) in most Asian economies, which have enabled the private and public sectors to fund capital accumulation from domestic sources. While the private sector focuses on investing in physical capital and adopting new technologies to raise productive efficiency, governments across Asia place commensurate emphasis on developing infrastructure, such as roads, ports and utilities, as well as on healthcare and education. The combination of efficient capital and productive labour in turn generates more higher-value-added activity, thereby accelerating economic growth. Third, the Asian economies have adopted an outward-oriented development path, rather than depended only on domestic demand, to expand industrial production. Just five decades ago, Asia was amongst the world's poorest regions. Asia recognised that its development process would be slow and marginal should low-income-driven domestic demand be relied upon to incrementally stimulate industrial activity. It accelerated the movement of resources from low-productivity traditional activity to high-productivity modern activity. Most of Asia, early among the developing economies, has been very open to international trade and foreign direct investment (FDI), resulting in Asia to be rapidly integrated with the global economy. The trade volume of Asia as a share of total world trade increased from 14% in 1970 to 22% in 1990, and subsequently to 28% in 2008. Furthermore, Asia has also been a major recipient of FDI, with FDI flows into Asia increasing from 7% of total global FDI to 20% in 2007.