These are the risks, but it would also be wrong to ignore the opportunities that environmental protection can provide for banks and other financial institutions. Most obviously, the costs of cleaning up pollution and the need to invest in environmentally friendly technology imply the need for finance, either from the banks or the capital markets. Just to take one small example in the Hong Kong context, the Government’s initiative to persuade diesel taxi owners to switch to LPG taxis creates the chance for the banks to finance the purchase of the new vehicles. Banks also need to bear in mind that while there will be losers from the drive to cut pollution, there will also be winners in the shape of those companies which can exploit the new technologies to curb emissions. Another by-product from efforts to combat climate change will be the growth of emissions trading between companies. Such trading allows companies that can reduce their carbon emissions below allotted targets to sell their surplus credits to those companies that cannot reach their targets. Admittedly, the immediate future of emissions trading is in some doubt following the Hague conference, but it still has the potential to become a major commodity market. If so, there will inevitably be a role for financial institutions to broker deals between buyers and sellers of emission credits, and perhaps to take positions themselves. Finally, banks and other financial institutions can profit from the growing public awareness of environmental issues by offering “green” investment products.

An accommodative monetary policy and a strong and well capitalized banking system provided a favorable environment whereby firms and household could continue to finance the consumption and expansion to support domestic demand. The Thai economy was able to navigate through short term sell offs and the sharp reversal of capital flows. The  BIS central bankers’ speeches  1  recent turbulence in fact provided a reality check on the importance of policy consistency and the fundamentals of the economy. Monetary and financial policies in Thailand have strongly relied on prudence and pragmatism. A credible monetary policy framework helped anchor inflation expectation, thereby fostering continued growth and stability. A flexible exchange rate regime also supported the efficient allocation of resources and competitiveness of the economy. A strong external position helped cushion against sharp reversals of capital flows. One can never put a price on the comfort with which a strong international reserves position brings. Imagine if we had to raise domestic interest rates to defend the currency that is weakening because of capital outflows. All of this at a time when the global economy is weak and the domestic economy needs the support of accommodative macroeconomic policies! Financial liberalization and regulatory reform efforts under the Financial Sector Master Plan provided opportunity for Thais, particularly small-scale firms, to have better access to finance. A competitive banking system and a vibrant capital market also helped strengthen investors’ confidence through efficient resource allocation and appropriate pricing of risks.