These and other issues related to the role, responsibilities and governance of central banks are discussed in the paper Governing the Governors: A clinical study of central banks, drafted by Lars Frisell, Kasper Roszbach and Giancarlo Spagnolo. A yet unpublished draft manuscript was issued in August 2006. 4  Charles Goodhart: The Organisational Structure of Supervision; FSI Occasional Papers No 1, Nov. 2000. 4  BIS Review 49/2007  banking supervision is weakened when resources are transferred and when skilled banking supervisors leave the authority. Another argument is that a unified supervisory authority could become stronger and thus more independent than the individual authorities. I would argue that the issue of independence is not related to the unification of supervision. Independence could equally be given to a small standalone supervisory authority as to a unified large one. Is there an urgent need to change your supervisory structure? Let me turn to another aspect. Is there any urgency to change to unified supervision or could you wait? The main argument for changing is when the non-bank financial sector is expanding rapidly and is taking a significant market share. Consolidated supervision is then needed to ensure that all risks to the financial groups and markets are taken into account. We see some development in this direction in almost all countries. The financial sector is expanding and introducing new instruments and activities. The boundaries between banking, securities operations, and insurance business are becoming blurred. In many countries this is a slow process, but in others it moves faster.

As advanced economies drive global demand going forward, these sectors stand to benefit, as seen in the recent pickup in exports of automotive parts and printers to the U.S. There is much potential for movement to competitive sectors, as Thai labor is recognized for quality in complex manufacturing as well as delicateness in services. Leading global auto manufacturers for instance are committed to long-term investment in Thailand. At this stage, government can play an essential role in development of skills in the labor force. The alignment of hiring needs, education in relevant skills, and the right incentive structure is the most important requirement to unlock Thailand’s productivity limit. BIS central bankers’ speeches  3  Furthermore, policy consistency and transparency are necessary for businesses to be certain about their long-term investments. Misalignment of policies, both between agencies and across regimes, must be reduced while concrete long-term plans should be communicated to businesses on the regular basis. The current government is aware of the need for supply-side development policies, and is implementing policies to improve infrastructure, support SMEs, and increase research and development, and will recommend continuation of these policies to the next government for consistency. Ladies and Gentlemen, I mention these structural challenges as I have in my previous talks, as complex issues benefit from the sharing of ideas. However, let me now move to issues within the direct mandate of the Bank of Thailand. Although less often mentioned, the Bank of Thailand’s roles in lifting growth potential still exist. Two roles are worth mentioning.