Such an integrated, risk-focused approach should aim to inform timely policy interventions and limit contagion. In this context, we welcome both the spillover reports and the Consolidated Multilateral Surveillance Report presented at this meeting as steps in the right direction to understand and act on the implications of increasing interconnectedness among members. In addition, the Fund needs to have a broader, more balanced surveillance mandate that better reflects the major areas of risks confronting the global economy, including risks in sovereign balance sheets and the financial system. We call on the Fund to adopt a new Integrated Surveillance Decision that replaces the 2007 Decision, which focused too narrowly on exchange rates. International monetary system We encourage the Fund to continue its work to strengthen the international monetary system. The experience of countries in our constituency attests to the complex policy challenges posed to emerging market economies by volatile capital flows. We expect the Fund’s work in this area to continue to be even-handed, non-prescriptive and to take into account country specificities. Further, we look forward to the extension of staff analysis of capital flows and associated policies to cover both source and recipient countries. We also support the Fund’s work on examining the case for broadening the SDR basket. This could contribute towards the diversification of reserve holdings, thereby strengthening the stability of the international monetary system over the longer term. Governance reform Governance underpins the legitimacy and traction of the Fund’s activities and advice.

While Malaysia will always be affected by such external developments, the strategy has been to have the flexibility to absorb and adjust and the strength to rapidly rebound. While each crisis or setback has been different, there are several common features that have allowed Malaysia to rapidly recover from such shocks. For each respective major shock confronting our economy, Malaysia has registered V-shaped recoveries. This has essentially reflected the flexibility of the economy to adjust and the early and comprehensive policy response. The ensuing periods were often marked by structural reforms and institutional development that were designed to rebuild the fundamentals of the economy, address the weaknesses and vulnerabilities and to forge new areas of growth. This has, decade after decade, resulted in vital changes in our economic structure, from being export-led to now being predominantly domestic demand-driven, and from being over-reliant on specific sectors to having a more diversified economic structure with the manufacturing and services sectors having now transitioned to higher value added activities. In essence, the structure of the economy has now become significantly more diversified in terms of sources of growth. While the export sector remains an integral component of our economy, domestic demand has now become the key driver of growth, anchored by strong private sector activity that now accounts for 70% of GDP. Underpinning the robust domestic demand is the sustained consumption spending and the revival of investment activity by the private sector.