Zeti Akhtar Aziz: Malaysia - encouraging savings in a dynamic economy Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the launching of the Merdeka Savings Bond, Kuala Lumpur, 2 January 2004. *  *  *  Ladies and Gentlemen, It is my honour and pleasure to welcome you to the launch ceremony for the Merdeka Savings Bond. The launching of this bond marks another step forward in our efforts to enhance the diversity of financial products for Malaysian consumers. In this more dynamic environment, the Malaysian economy has continued to expand with per capita income rising to exceed levels prior to the Asian financial crisis. This growth has been supported by comprehensive pro-growth policies and the development of a much stronger banking sector that is able to better manage new risks and challenges. As a trade-oriented economy, external developments will continue to be important in affecting our growth prospects. In order to reduce our vulnerability to adverse external developments, increased attention has been given to promoting domestic demand. Policy strategies have therefore been directed at promoting domestic consumption and investment. Low interest rates, together with policies to increase disposable incomes, have led to higher consumption and a recovery in private investment. These trends have been important in sustaining growth. As a high savings country, Malaysia has the potential to promote a higher level of consumption without undermining the prospect for financing of private investment from domestic sources.

What did mark the post-crisis period was the financial system reform mainly with respect to the banking industry and reconsideration of central banks mandate with respect to financial stability. Financial turbulence, low yields and divergent monetary policies in the US and the EU caused asset managers to diversify and optimally balance risk and return. The global recovery has strengthened recently, but still there have been concerns with respect to its sustainability. Low productivity keeps clouding the prospects of future economic prosperity and growth, and inflation remains muted in many countries. In addition, there are geopolitical risks, risks of excessive indebtedness and financial sector resilience to potential new shocks. All of these critically relevant issues for the policy makers and asset managers will build in our agenda for today. The program will start with a keynote speech followed by four sessions. Session 1 will cover issues related to the current and prospective conjuncture of the global economy, monetary policy and the future of interest rates. Session 2 will tackle upon financial stability issues, and how well are we equipped to deal with potential turbulence. In Session 3, central bankers and asset managers will put forward their views on strategies for effective risk mitigation and how should asset managers prepare for the “new normal” in the converging monetary policies. Session 4 will focus on South East Europe and the perspectives of the region for European integration and growth. I am particularly delighted that we have prominent speakers and excellent panelists to address the topics of the conference.