Investors are more likely to invest and trade on an exchange if they are confident that they can do so without being defrauded or without other investors having an unfair advantage. Exchanges that operate fair, efficient and transparent markets, where rules are enforced in an impartial way, will have a competitive advantage. MAS and SGX share a strong commitment to maintaining high standards of corporate governance. We take a collaborative approach in working together to continually keep abreast of best practices. No single model has gained universal acceptance, and no model is good for all time. We will continue to work closely together to further enhance the governance and regulatory arrangements relating to SGX where appropriate. Conclusion East Asian economies have seen robust growth in 2003. The ADB expects this momentum to continue in 2004.1 Capital has started to flow back into the region and stock markets have rebounded. Net capital inflows into emerging market portfolio equity investment reached a high of $ in 2003, almost double that seen before the internet bust in early 2000.2 This positive economic outlook, coupled with growing intra-regional trade and investment, augurs well for the region. Trade and investment links should however, be complemented by greater financial market cooperation and integration. The governments’ resolve to forge deeper collaboration will give an added boost to the region’s progress. The exchanges should however, also contemplate possible collaborative initiatives to create new value. Notwithstanding the competitive forces, regional exchanges have much to gain by working together. This is not a zero-sum game.

Analysts are of the view that the cost of competition will drive greater consolidation in the U.S. and Europe. Once this wave of growth opportunities mature, the mega-exchanges will look to Asia as the next frontier of growth. Regional exchanges need to gear up for the competition and find ways of staying relevant to the international network of traders and investors. Shutting out competition and maintaining the status quo is not a viable option. More companies will seek alternative pools of liquidity and investors if domestic exchanges cannot satisfy their need for greater liquidity and connectivity to a larger network of traders and investors. Investors will also bypass local exchanges to invest overseas. Engaging in deeper regional collaboration What can governments and exchanges do? There are several initiatives that we should consider. Capacity building Firstly, capacity building in the region. Regional capital markets, particularly Asian bond markets, have made significant progress in recent years. There is however, scope for us to continue to explore ways to further grow and develop our capital markets. Capacity building plays a critical role in this respect. Concerted efforts to enhance the skills and sophistication of market players and regulators will not only strengthen markets but also provide an essential pre-condition for closer collaboration amongst the regional capital markets. To this end, ASEAN finance officials have agreed to collaborate on a training initiative to enhance regional expertise in capital market development.