Just imagine a company that has no long-term strategy and experiences management reshuffles every few years, including board members, department directors and often unit heads. Every department within this company has its own budget, sets its own priorities and pursues its own often obscure goals (so as to maximize the available budget), which are frequently inconsistent with the overall purpose of the company. Can such a company compete in the global economy against companies with clear and consistent vision and strategy, companies where all departments’ activities are subject to this vision? This is a rhetorical question, as after using up all simple reserves of growth, such company would be doomed to bankruptcy unless it changed. The same applies to entire countries. While others continue to paint and fulfil daring visions, for example 11 iN2015 (Intelligent Nation 2015) in Singapore, we are still unable to join our efforts and are stuck in a business model where each department silos keeps pursuing its own goals. The ability to capitalize on knowledge will be crucial to Poland’s success in the 21st century. The country’s economic strength will be built with the power of mind, not muscle or machinery. For the time being, we have lost a million of minds that have increased the growth potential of other  9  A Venables, Shifts in economic geography and their causes, paper presented at an annual symposium of Federal Reserve Bank of Kansas City in Jackson Hole on 25 August 2006.

Financial Globalisation Beyond international trade, financial globalisation has also expanded tremendously. Cumulative global bond and equity market flows are now more than 80 times larger than that in the year 2000 and far exceeded trade flows. There is no doubt that financial integration, if properly managed, can catalyse a more efficient allocation of productive capital and know-how transfers, with the intended benefits. However, financial globalisation has also been accompanied by highly-volatile short term portfolio flows, which frequently led to major disruptions to emerging economies’ financial markets. At the extreme, global financial flows can lead to the build-up of domestic vulnerabilities, such as currency mismatches, external indebtedness and broader financial imbalances. When financial globalisation becomes in itself a source of shock, financial markets can be easily overwhelmed. In Malaysia, two-way capital flows have increased by almost three-fold in the aftermath of the Global Financial Crisis. Similar to other emerging economies, we have also experienced several episodes of sharp capital flow reversals. Supported by firm macroeconomic fundamentals, our deep and broad financial markets were able to intermediate these flows in an orderly manner. The experience of emerging economies in dealing with capital flow volatility underscores the need to always keep our “own house in order”. While this is necessary, it is not sufficient. Often, we have seen how external developments that are beyond our control, such as the Taper Tantrum and trade tensions, could trigger periods of sharp capital flow volatility in emerging economies with severe consequences. There are “innocent bystanders”.