inflation, if it exists, does have an adverse effect on real individuals ’ income, especially those in the lower brackets who are less able to renegotiate their pay. therefore, while the central bank does not have direct power to enforce a fair distribution of income, if the central bank fails to do its job properly and this results in high inflation, it can make the situation worse. next, the general public also wants the country ’ s exports to be competitive. here we are talking about the export of goods and services, inbound tourism included. again, the competitive edge of business depends on many factors outside the scope of central banking : marketing know - how, research and development, and technology included. and when one looks at competitive advantage of firms at the international level, things like quotas, trade protection and trade negotiations do add complications to the equation. but there is one factor that cuts across all considerations and that is inflation. if the inflation rate in a country far exceeds those in its trading partners, it will erode that country ’ s competitiveness over time. therefore, the central bank can affect the country ’ s export competitiveness, and the public can rightly expect the bank to guard against this. finally, the people invariably want transparency. they want to know how the central bank views the situation, how it acts and how it can be held accountable for its action. they will also want to see whether the central bank is capable of looking ahead into the future. … how can the central bank in an emerging economy like thailand best deliver to the people all that they expect? my answer is inflation targeting. the best environment that the central bank can provide for the economy to attain a high level of output and steady growth is one with price stability. under inflation targeting, the monetary policy board has to look ahead 18 - 24 months and adjust its stance today to influence the outcome of the future. this will help minimize the boom and bust phenomenon. the floating exchange rate regime will also help prevent imbalances from building up excessively, hence minimizing the risk of major crises. in terms of transparency and accountability, inflation targeting is probably the best tool of communication. while the general public may have difficulty understanding and keeping track of monetary growth targets, it fully understands inflation, the index of which is calculated and announced by an independent agency, in the case of thailand the ministry of commerce. the regular publication of inflation reports will also help inform and educate the public much better than in

economy, including risks in sovereign balance sheets and the financial system. we call on the fund to adopt a new integrated surveillance decision that replaces the 2007 decision, which focused too narrowly on exchange rates. international monetary system we encourage the fund to continue its work to strengthen the international monetary system. the experience of countries in our constituency attests to the complex policy challenges posed to emerging market economies by volatile capital flows. we expect the fund ’ s work in this area to continue to be even - handed, non - prescriptive and to take into account country specificities. further, we look forward to the extension of staff analysis of capital flows and associated policies to cover both source and recipient countries. we also support the fund ’ s work on examining the case for broadening the sdr basket. this could contribute towards the diversification of reserve holdings, thereby strengthening the stability of the international monetary system over the longer term. governance reform governance underpins the legitimacy and traction of the fund ’ s activities and advice. for this reason, we support the managing director ’ s call for greater progress in implementing the 2010 quota reform and re - composition of the executive board. we also emphasise the importance of completing a review of the quota formula by january 2013. bis central bankers ’ speeches