the external sector, our policies are : to ensure the sustainability of the country ’ s external debt ; maintain a market - determined exchange rate with scope for occasional action in cases of extreme movements in the exchange rate ; maintain a comfortable level of reserves ; and improve further the foreign exchange environment. on the financial sector, our policy thrust shall be to continue our reform efforts towards further strengthening the banking system. our banking sector reforms shall focus on : further enhancing the regulatory framework through the implementation of the basel ii roadmap ; improving corporate governance by promoting compliance with international accounting and financial reporting standards ; accelerating implementation of risk - based supervision technology ; encouraging the development of the domestic capital market ; and strengthening ties with other financial regulators. in line with these thrusts, you may recall that towards the end of last year, the bsp approved two important reform packages : the further liberalization of outward investments of residents. highlights that may be relevant to the fmap are : ( 1 ) allowance of outward investments by residents funded with foreign exchange purchased from the banking system not exceeding us $ 30 million per year no longer need prior bsp approval ; and ( 2 ) qualified investors may now apply for a higher annual outward investment limit. qis include, among others, insurance and pre - need companies, collective / pooled funds such as mutual funds, unit investment trust funds and variable insurance. the amendments to bsp regulations governing derivatives activities of banks and trust entities, including guidelines on risk management and sale and marketing of derivatives. both these reform packages are intended to help make the domestic market more able to quickly adapt to any further changes in the global financial markets. philippine economic outlook on the basis of these policy directions, the outlook for the macroeconomy continues to be favorable. average inflation is expected to be within target in 2008 and 2009. the volatility in world oil prices and uptrend in non - commodity prices remain the key risks to the inflation outlook. nevertheless, these potential risks to inflation are seen to be tempered by some downside risks such as the firm peso and reduced dependence on imported energy sources. meanwhile, the fiscal positions of the national government and the entire public sector are expected to continue to improve, taking off from their performance in 2007. finally, we expect the bop to continue to be in surplus although at a level that is smaller compared to the previous year. the liquidity impact of the external surplus will have to be managed such that the amount of money in the system remains consistent with

a safety net for entrepreneurs, especially those who commit personal assets to start a business and personally guarantee loans to the new venture. a 2008 study that compared self - employment in 15 countries in europe and north america between 1990 and 2005 found that more forgiving personal bankruptcy laws combined with ready access to limited liability protections, enhance entrepreneurial activity. furthermore, when the laws also provide for a well - managed redeployment of assets to more productive firms, jobs are preserved. a corporate reorganization code in colombia enacted in 1999 dramatically improved the efficiency of reorganization proceedings, its duration fell from an average of 34 months to 12 months. effective reorganization in countries such as colombia allowed a company ’ s workforce to remain employed and productive. from a financial stability perspective, effective insolvency laws help to reduce market disruption. in chile, for instance, the introduction of economic insolvency advisors – who were tasked to first determine the viability of firms in financial distress as basis for insolvency proceedings to commence – laid a foundation for the smooth processing of insolvency proceedings. it allowed chile to improve the recovery rate of distressed firms ’ creditors from 19 cents on the dollar in 2004 to 30 cents in 2013. what is the relevance of fria to central banking? some of you may be wondering – why the central bank governor is speaking at a seminar on insolvency and recovery. particularly given that, the resolution processes for banks is covered under another set of laws and regulations, not the fria. i asked your president, atty. lim the same question when he invited me. he reminded me of the ardent support of the bsp during the deliberations of the law. i guess, the answer to that question therefore is – as both francis and i agreed – the fria is important to the bsp as well, just as it is to you. in fact, while deliberations in congress on the fria were on - going, the bsp did parallel work on formally adopting financial stability as a policy objective. you may ask, how is financial stability related to fria? i submit [ as i alluded to earlier ] that, if fria is well implemented, it will help promote and advance financial stability in our country. there is no textbook definition for financial stability. but in the bsp, we define financial stability as that desirable state that is achieved when the governance framework of the market and its financial infrastructure enable and ensure the smooth functioning of