These initiatives are significant not only for their tangible economic benefits, but also as symbolic demonstrations of the collective interest in regional financial cooperation. Alliances among Asian exchanges Another area with potential for regional financial collaboration is in the securities and futures exchanges market. In US and especially in Europe, a wave of consolidation among leading exchanges has resulted in mega-exchanges that have the economies of scale to make investments in advanced infrastructure, offer competitive fees, and most importantly provide investors and issuers with the liquidity that they seek. Exchanges in Asia have thus far been largely insulated from the trends of consolidation. Asian stock markets are generally smaller in size and less liquid than those in more developed countries. To remain relevant to international investors in this changing landscape, regional exchanges should deepen their collaboration with one another. The decision of the recent ASEAN Finance Ministers’ meeting to explore alliances and linkages among ASEAN securities markets will catalyse and encourage this collaboration. Regional exchanges are already taking the first steps. The Singapore Exchange, SGX, for instance, established a co-trading linkage with the Australian Stock Exchange in 2001. It is in discussions with Tokyo Stock Exchange on a possible alliance, and has recently started talks with Bursa Malaysia, formerly the Kuala Lumpur Stock Exchange, on possible collaborations. Pressing on with reforms at the national level While pursuing regional initiatives, individual countries need to press on with reforms at the national level.

The complexity and multidimensional nature of US China relations requires both sides to balance and reconcile different perspectives to achieve equilibrium. Good US China relations will calm all of Asia. The major Asian powers are also striving to stabilise relations with one another, at least in part to better deal with post Cold War geopolitical realities. The most fundamental interest of all Asian countries is in development: in growth, trade and investments, not war. Three issues could disrupt Asia’s strategic stability. They are the India Pakistan conflict over Kashmir, the North Korean issue and Taiwan. All three have a potential nuclear dimension. Let me deal briefly with each one. The India Pakistan conflict is complex, mired in history and religion. It is difficult to envisage a definitive solution. But the conflict can and has been managed. In recent months, we have seen encouraging signs of a thaw. We should not underestimate the importance of these small but positive steps, given that only a few years ago India and Pakistan were on the brink of a nuclear war. Both countries know that a conflict over Kashmir would have disastrous consequences that far outweigh any possible gains. It would grievously disrupt India’s economic reforms and perhaps permanently  2  BIS Review 33/2004  relegate India behind China. For Pakistan, it could mean the end of the state as it presently exists. It is therefore a good sign that the new Indian Government has signalled that it wishes to continue dialogue and engagement with Pakistan.