Financial intermediaries are provided with sufficient incentives to improve their risk-management techniques. Therefore, the financial system is better able to absorb shocks without increasing the effects of such shocks on the economy. Broadly speaking, this seems correct to me. The financial system has coped with remarkable success and with few signs of instability with the various episodes of financial turmoil and shocks in recent years. Market-functioning difficulties were short-lived. The impact of these episodes on the real economies of industrialised countries was generally limited. However, we want to make sure that financial institutions and markets help to absorb and redistribute the shocks occurring in the real economy. We don't want them, in general, to be an additional source of shocks. In this regard, two specific questions come to the mind of policy makers. The first relates very simply to our ability to understand what is going on in the financial system when innovations permanently introduce additional layers of sophistication and complexity. As is often the case with  BIS Review 64/2006  3  financial innovations, evaluating the risk they entail requires the use of complex techniques that are not always sufficiently tried and tested 6 .The second issue, singled out by Rajan himself, is about incentives, an issue made especially important by the shift from depository intermediation to professional asset management. The system of incentives under which managers operate should be closely and permanently aligned with the interests of investors.

Public investment, together with the government’s strategy to attract investments in industries for the future, will step up Thailand’s competitiveness and lay a strong foundation for sustainable growth. Thailand’s external position remains strong with large current account surplus of around 11% of GDP1 and high level of international reserves, roughly more than 3.5 times of the short-term external debt. Financial conditions remain accommodative, and business financing through credit and capital market continues to expand. Furthermore, our capital account liberalisation and recent efforts to reform foreign exchange regulations will help create a 1 Source: Office of the National Economic and Social Development Board Gross Domestic Product: Q2/2017 Report (page 33) http://www.nesdb.go.th/ewt_dl_link.php?nid=5166&filename=QGDP_report  2  conducive environment for financial market development and financial connectivity in the region. Our regional efforts towards deeper economic integration provide immense opportunities for Thailand and the ASEAN region. ASEAN is projected to grow at 4.8% in 20172, and is home to more than 600 million people3. According to the Asian Development Bank, the share of ASEAN’s middle class is estimated to increase to 65% by 2030. The growing middle class with increased purchasing power inevitably serves to boost demand and productivity for the regional economies over the medium to long term. In addition, increased regional connectivity has led to expanding trade and investment prospects. Infrastructure investment is gaining momentum throughout the region. UNCTAD has estimated infrastructure investment needs in ASEAN at $ billion per year through to 20254.