This will lower compliance costs for financial institutions, arising from having to satisfy different regulatory and legal regimes in different countries. Unfortunately such harmonisation is extremely difficult, even if we confine ourselves to a small subset of countries. The issues are far too intricate and complex to be resolved in a multilateral setting. Institutional structures, market practices and philosophical approaches differ from country to country. And each country guards its regulatory powers jealously, and wants the freedom to set and enforce its own rules. The multiple national regulators that exist in the European Union are a good example. Short of complete harmonisation of regulations, one practical approach to pursue is mutual recognition of regulatory regimes. Mutual recognition need not be all or nothing. It can be applied to specific areas, starting from cross-border offerings of financial products such as collective investment schemes and suitable initial public offerings. Institutions can save half or more of their compliance costs, if they only have to comply with one set of regulations recognised by both regulators. This benefits both markets by deepening liquidity and broadening product offerings. Singapore has participated actively in international efforts to harmonise regulations and policies across jurisdictions. As a small country, our ability to push the envelope on regulatory practices is limited. But we have conscientiously kept abreast of global regulatory initiatives, and adopted the best international standards and practices for regulating and supervising our financial institutions and capital markets, taking into account the specific circumstances of our financial industry.

Even when the countries deregulated financial systems and freed their capital accounts, they did too little to strengthen financial supervision and regulation, develop liquid markets, and promote sound corporate governance. International creditors were eager to participate in the Asian miracle, and accepted a close nexus between borrowers and lenders as the "way" business was done in Asia. But lending on the basis of familiarity and relationships is prone to abuse and a recipe for financial mishaps. The Asian crisis of 1997/98 vividly brought home the risks of this approach. The Asian crisis is now past, but we are not back to the status quo ante. The situation today is troubled, but it is different from that in 1997/98. Unlike then, there is no contagious financial panic, no more hot money to flee the region, crashing currencies and economies one after the other. The markets are more subdued, although they are not immune to shocks, especially from political developments. Global investors and traders have been chastened by the experience of the 97/98 crisis, and now differentiate more carefully between economies, the different problems that they face, and the varying degrees of seriousness with which they are tackling their problems. Part of the current problem is cyclical: Asian countries are major exporters to the US, and have been affected by the current slowdown in the US economy. This will pass when the US economy picks up. But many Asian economies also have serious structural problems, especially in their financial systems. Resolving these problems will be an arduous task.