But there is a need also to reduce vulnerability by building bigger, deeper, more robust and diversified capital markets. While the interesting subject of monetary integration, which would provide a long-term solution, has been receiving some nascent attention, efforts to enhance the efficiency of financial intermediation within the region should be stepped up. Asia as a whole is one of the largest exporters of capital and, at the same time, also one of the largest recipients of foreign direct investment and foreign portfolio investment. The underlying process of capital flows associated with this roundabout phenomenon involves much greater financial volatility and instability for the region than the situation where a greater proportion of savings in the region could more readily find their way into investments in the region. This underscores the importance of greater efforts to enhance the efficiency of financial intermediation within the region. Indeed, capital market reform is high on the agenda of most Asian economies. There has also been considerable progress in the diversification of financial intermediation channels, specifically in the development of the bond market. At the end of last year, the amount of domestic bonds outstanding in eight economies1 that we have surveyed was equivalent to 47 percent of the combined GDP, more  1  Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. BIS Review 30/2004  1  than double the 20 percent at the end of 1995. Over that eight-year period, the bond market’s share in total financing grew from 11 percent to 19 percent.

These are all very positive developments and you will be joining a vibrant community of financial institutions here in Singapore. Japan and the region’s recovery and growth Daiwa’s increased focus in South Asia attests to the dynamism of the region. Not only has the region shown resilience, it is now powering ahead. Led by ASEAN economies such as Vietnam, which is surging ahead strongly, India, Pakistan and the Middle East too are beckoning out to investors with their growth prospects. Trade and investments within the Asian region, and between Asia and the Middle East continues to grow. Notably, Japanese foreign direct investments into ASEAN has been increasing steadily again since 2003. In fact, it has reached more than $ billion1 which even outpaced that into China in 2006. The Japanese economy too, continues to impress. Economic conditions in Japan have improved remarkably and the data released suggests a continued and sustained growth. Japanese corporates are raking in record profits and capital investments too are surging ahead. They have once again begun to spread their wings overseas. Supporting these corporates, financial institutions like Daiwa too have benefited from this increased business activities. 1  Sources: Prepared by JETRO from Ministry of Finance Balance of Payments Statistics and Bank of Japan foreign exchange rates. BIS Review 72/2007  1  Partner to growth Where does Singapore fit into this climate of abundant growth opportunities? Located right at the confluence of trade links and business opportunities, Singapore has become a valuable partner to corporates and financial institutions like Daiwa.