SGX has taken the lead and attracted more than 50 Chinese companies to list in Singapore. Over 1,000 Chinese companies have set up offices here to tap opportunities in the region. We must continue to sharpen our competitive advantages to draw more Chinese companies to use Singapore’s financial services. We are close to concluding the Comprehensive Economic Co-operation Agreement (CECA) with India. This will reinforce the trend of Indian financial institutions and companies using Singapore as a base for expansion overseas, and allow Singapore-based financial institutions to benefit from India’s growth. We saw our first Indian listing this year. Banks such as ICICI Bank and State Bank of India are also serving the large non-resident Indian community and facilitating their fund raising activities from Singapore. BIS Review 72/2004  3  The Middle East has a combined GDP that exceeds ASEAN’s. Post 9/11, the Middle East is increasingly looking towards Asia in order to reduce its dependency on the West. There is a window of opportunity for us to play a bridging role. Singapore will host the inaugural meeting of the Asia-Middle East Dialogue (AMED) in June next year. To expand our economic space and strengthen political relations, I have visited several countries in the Middle East and will visit more next year. MAS should continue to work with other government agencies to deepen our engagement with the Middle East. The market estimates that of the $ trillion in Middle East private wealth invested overseas, less than 10% is invested in Asia.

Some $ billion or more could flow into regional markets to tap diversification benefits. This presents an opportunity for the asset management companies and capital markets industries here to develop investment funds and structured products, including Islamic financial products, to manage a portion of this wealth. Maintaining excellence in a riskier environment Our second priority is maintaining excellence in our core central banking functions in a riskier environment. In recent years, the external environment has become more volatile and complex. At the same time, our economy has been undergoing significant structural adjustments. We must ensure that the formulation and conduct of monetary policy continue to be robust and flexible. We will further strengthen our monetary policy formulation process by enhancing our forecasting, surveillance and research capabilities. We intend to reinforce our macro-econometric model by introducing new features that will enable us to better assess the impact of risks on key sectors and relationships in the economy. In the area of surveillance, we have started an intensive industry consultation process as part of our exchange rate policy review. We will continue to fine-tune this process. To enhance our understanding of the economy, we are constructing a flow-of-funds framework to get a better understanding of financial flows across different sectors of the economy. Changes and increased volatility in financial markets also pose challenges for the implementation of monetary policy. Singapore dollar capital markets have grown enormously over the last five years. Foreign participation has gone up.