These efforts, however, need to be balanced by efforts to enhance the capacity of countries not only to manage the risks and vulnerabilities, but also to sustain their own capacity to support growth and development. Capacity building involves helping countries to help themselves. It requires enhancing the institutional capacity of the country. Support in putting in place the necessary institutional structures, arrangements and systems would increase the potential for the sustainability of the development process. Strengthening these foundations are vital to the deregulation and liberalisation process. They represent the pre-conditions to any reform agenda. In this regard, capital account liberalisation needs to be managed in accordance with the country's own institutional capabilities and implementation capacity. Supporting financial infrastructures, sound and strong financial institutions, developed financial markets, and a more market-driven environment are key to the success of the liberalisation process. On the support for the low-income and poorer countries, the uneven progress made in meeting the Millennium Development Goals is of deep concern. The debt relief proposal of the G-8 to assist the Heavily Indebted Poor Countries (HIPC) is a welcome step. Debt cancellation, however, addresses the symptoms and not the cause of poverty. Experience has shown only a few countries have graduated from the debt relief programme under the HIPC Initiative. Many still continue to be burdened with unsustainable levels of debt. It is important to recognise that the task of assisting the lower-income countries does not stop short at providing financial assistance.

It is the nature of the leadership that is exercised at the international level, and the actions initiated, that will determine the effectiveness and relevance of the role of the international financial institutions in the global economy. In Asia, significant progress has been made at the regional level in strengthening the underlying economic structures and fundamentals. The economies in Asia continue to be among the fastest growing in the world, and thus contributing to the rebalancing of global growth and stability. In addition to promoting domestic sources of growth, economies in Asia have also enhanced regional economic and financial cooperation, including measures to strengthen regional surveillance and financial support mechanisms, and to deepen the regional capital market. The greater economic and financial integration in Asia has been a mutually reinforcing force in strengthening growth in the regional economies. Intra-regional trade and investment flows in Asia have continued to increase significantly in recent years. Progress has also been made in the further deregulation and liberalisation of the economic and financial sector, thereby increasing the potential for the Asian economies to contribute to global growth and stability. Malaysia's own performance has been favourable, with continued steady growth being experienced. The Malaysian economy has continued to shift to new areas of comparative advantage, to new areas of growth, with the private sector being the main driver of growth. Resources have continued to shift towards the services sector, towards strengthening linkages in the manufacturing sector, and to the resource-based industries and the agricultural sector.