as a result of the divergence in economic growth between the advanced economies and emerging asia. while the growth outlook for asia is positive, there are still significant risks to the recovery in the us, the euro area, and japan, including unemployment, high public debt, and the housing slump. in these countries, policies continue to focus on shoring up their recovery and strengthening their own momentum of growth, with monetary policy remaining loose. this is in stark contrast to asia ’ s emerging markets, where the threat of inflation is real and present in the near term. inflation is expected to rise, given rising costs and rising demand, allowing producers to pass on cost increases to consumers. in addition, rising demand from emerging markets can potentially further push up commodity prices and inflation expectations. therefore, anchoring inflation expectations and ensuring long - term price stability is the policy priority in emerging asia, and in thailand. the policy divergence between advanced and emerging economies will make it difficult for both sides to arrive at any policy coordination which could lead to a win - win situation at a global level. countries will likely pursue their self - interests in conducting policy, despite the externalities such policies may bring about. while it is unlikely that we will achieve a solution that would satisfy everyone, i would like to stress that we should aim to prevent ourselves from ending up in a lose - lose situation for all, such as a return to protectionism. ladies and gentlemen, as asia is on the rise, another source of risk is that complacency can easily set in, both in the private sector ’ s risk taking behavior and in the way policy is conducted. you may recall that almost 15 years ago, thailand was also part of the “ asian miracle ” and was on track to becoming the 5th “ asian tiger ”, before unsustainable behavior led to the asian economic and financial crisis. in order to prevent the mistakes of the past and guarantee that future growth in asia is sustainable, both the private and public sectors must not be complacent. to ensure these costly mistakes are not repeated, policies must be firmly grounded on safeguarding macroeconomic stability. bis central bankers ’ speeches this leads me to my final point, which is, how the bank of thailand plans to deal with these potential risks on both the external and internal fronts. for external risks, recognizing that sizeable capital inflows could be out of line with real developments, and that spillovers can persist in the near future, we need to

prasarn trairatvorakul : the rise of asia – finding the right balance for policy address by dr prasarn trairatvorakul, governor of the bank of thailand, at the japan bank for international cooperation ( jbic ) seminar on “ outlook for the global economy and financial markets 2011 ”, bangkok, 8 february 2011. * * * distinguished speakers and guests, ladies and gentlemen, it is my honor and pleasure to address today ’ s distinguished audience on the outlook of and the main challenges facing the global and thai economies. rather than giving you data and projections, which are readily available, i would like to take this opportunity to share with you my observations on the economic future of asia and thailand. while economic recovery in the west will likely be constrained by crisis legacies, the rapid bounce - back in asia and its fast rising role in the world economy have made many believe that asia is on the continued rise, to the extent that asia is entering a golden age. nevertheless, there are questions whether asia can manage the risks associated with continued growth, particularly inflationary pressure and the impact of volatile capital flows. in line with this introduction, my presentation today will focus on four related topics. first i would like to pose a question whether asia is truly approaching a golden age. secondly, to sustain the rise of asia, i would like to highlight the need for asian economies to build capacities, as well as strengthen innovation and productivity. to follow, i will discuss the role of policy in and ensuring that growth is sustainable and not prone to relapses, especially ways to mitigate potential economic and financial imbalances. and finally, i will explain how the bank of thailand intends to find the right balance for policy to foster businesses and investment during the rise of asia. ladies and gentlemen, since the ancient greek and indian times, a golden age refers to a period of peace and unity, stability, and rising wealth, with an abundance of hope and opportunities. evidence has pointed out that asia has increasingly embraced these characteristics. in terms of peace and unity, we have witnessed increasing international cooperation to boost economic welfare and safeguard against risks in the region. for asean, this has been reflected by the increase in free trade and investment agreements both bilaterally and under the asean economic community. in a broader group, the asean + 3 countries have been working closely to set up and improve a committed mechanism for regional crisis prevention and management. as for economic stability, i think that