zeti akhtar aziz : asia in the world – sustaining the region ’ s transformative momentum keynote address by dr zeti akhtar aziz, governor of the central bank of malaysia, at the wharton global alumni forum : “ asia in the world – sustaining the region ’ s transformative momentum ”, jakarta, 22 june 2012. * * * the global economy is experiencing a period of profound change. asia is very much at the centre of this global change. asia ’ s changing role in the global economy has not only been in terms of its growing size, but also in terms of its influence in global economic and financial developments. the issue before us is whether asia will continue its transformative momentum over the medium to longer term, to become an increasingly important source of global growth and stability. it is my very great honour and pleasure to be here in jakarta to speak at this wharton global alumni forum. exactly a decade ago, i was actually invited to speak on the same subject on the state and future of asia at the wharton school in philadelphia. then, having just emerged from the asian financial crisis, the region was again being challenged by a series of economic and financial shocks, in particular, the bursting of the dot com bubble in the united states in the year 2000. observers had questioned the sustainability of the region ’ s medium and longer term growth prospects. now, five years into the global financial crisis, asia is faced with an even more challenging and uncertain global environment, as significant spillovers originating from europe and the united states are being felt by the region. again, questions on the sustainability of the region ’ s economic growth prospects are being raised. my remarks today will focus on the new challenges that are confronting asia, and whether its resilience built in this decade will now enable asia to rise to these greater and more complex challenges. challenges arising from global spillovers given the degree of openness of most of the asian economies, asia is highly integrated with the global economy. while asia benefited from this openness, it also resulted in the region being more vulnerable to global financial and economic developments. many previous episodes of economic recession and crisis were triggered by external shocks, which at times exacerbated and amplified domestic vulnerabilities. these include the commodity price shocks in the 1970s and ‘ 80s, the large swings of destabilising capital flows in the 1990s, the bursting of the tech bubbles and the sars epidemic in the early 2000s, and finally the global recession which

in exerting market discipline on service providers to drive greater efficiency, competition and innovation in the market place. in the design of a consumer protection framework, it needs to be recognised that financial products and services differ significantly from most other goods and services. specifically there is asymmetry in the access to information and bargaining power between the consumers and financial service providers. these imbalances can be addressed by three mutually reinforcing strategies. firstly, promoting stronger transparency and disclosure standards in financial institutions ; secondly strengthening the mechanisms for consumer protection ; and thirdly enhancing consumer education. an increasing number of countries have undertaken this more comprehensive approach in order to give greater focus to consumer protection issues for ensuring the soundness of financial service providers and ultimately to the stability of the financial system. this will also in turn promote more effective consumer participation in the economy, thus contributing more significantly to the economic growth and development process. the approach and mechanisms adopted to protect consumers in individual jurisdictions will vary from one country to another, given the unique characteristics prevailing in the different respective economies and financial systems. consideration of country - specific circumstances and contextualisation is important to evolve relevant and effective consumer protection and education infrastructures. individual countries need to customise the consumer protection and education framework to their environment, taking into account factors such as the stage of economic and regulatory development, the structure of the financial system and the level of consumer sophistication. prudential safety and soundness, competition and consumer protection need to co - exist to effectively serve the various stakeholders'interests. hence, implementing an effective consumer protection and education framework involves achieving an appropriate balance between providing adequate safety for consumers while promoting competition and financial innovation. in formulating policies to safeguard consumers'interests, adequate consideration needs to be given to ensure the appropriate level of consumer regulation without imposing excessive regulatory costs and burden on both financial institutions and consumers, and thus avoid compromising the benefits that the policies are designed to achieve. in this process, ethics and integrity cannot be legislated. regulators, therefore, need to consider other approaches in preventing market abuses or misconduct and in promoting consumer confidence. of importance is to evolve an appropriate incentive structure for financial institutions so that they recognise that it is in their best interests to foster fair and equitable business practices as part of good governance, corporate social responsibility and brand building. good business practices need to be instilled and embedded in all aspects of the operations and at all levels within the institutions. on consumer education, it is recognised