This formal process of close coordination would help ensure that monetary policy is aligned with the country’s overall economic policy direction. More importantly, it will also contribute to a greater understanding of the public at large of the fact that the only long-term role for monetary policy is in creating an environment of price stability which would help support sustainable economic growth. In addition to the mandated responsibility of maintaining price stability, the BOT has also taken a direct role to further develop Thailand’s capital market and its infrastructure via our involvement in the National Capital Market Development Committee and the Domestic Bond Market Development Sub-committee which were set up to coordinate capital market development efforts among government agencies as well as the private sector. With regard to equity market development, beginning in 2002, we have taken a step-by-step approach in opening up outward portfolio investment, by first allowing institutional investors, such as mutual funds and insurance companies, to invest abroad. This year, as Thai investors have become more familiar with diversifying risks abroad and with financial instruments in more developed markets, we have now allowed Thai individuals to invest abroad through local securities company. Through this initiative, not only local investors and professionals in the capital market industry would have a better understanding of the link between the local market and the global market, as well as risk management strategy, it would help contribute to higher standards and practice in the local capital market in the long run.

First, Thailand’s external position remains strong. Our external debt to GDP has hit an alltime low since 1980, recording 29.4 percent last year. Our foreign reserves doubled within three years reaching over 100 billion US dollar at present day. The amount of foreign reserve has by far exceeded the short-term external debt by more than four times. This provides us an ample room to safeguard against instability from volatile capital flows and exchange rate movements. Second, the government’s fiscal position continues to improve as reflected by a falling trend of public debt to GDP. This gives the government the financial flexibility to tackle economic problems and stimulate the economy if necessary. It is no coincidence that credit rating companies often stated the strength of our fiscal and external position in their underlying reasons for affirming Thailand’s sovereign ratings. In fact, to cite James McCormack, the Head of Asia Sovereign of Fitch Ratings, at the firm’s last week annual Thailand conference, unless political uncertainty significantly undermines Thailand’s future growth prospect, it is unlikely that Thailand will be downgraded, for the country’s sovereign credit fundamentals remain sound. Third, the banking sector remains healthy and strong enough to weather the current global financial turmoil. The BIS ratio remains high and the ratios of NPLs to total loans continued to decline. Together with the implementation of IAS39 accounting standard in 2006-2007 and the adoption of Basel II by the end of this year, the banking sector would be less prone to adverse shocks.