asian economies have also been severely affected, and policy adjustments are necessary. however, the medium - term prospects for growth remain strong. the secular trend in the growth of asian enterprises and corporations, growing intra - regional trade, and the demands for infrastructure financing will generate new opportunities for corporate and institutional businesses. wealth creation and the rise of the asian middle class, coupled with the low penetration of financial services will drive the growth of personal financial services. i am confident that when the dust settles, global financial institutions which rebuild their resilience and stay engaged in our region will increase the value of their asian franchises. asia will continue to provide strong growth opportunities and geographical diversification benefits. some asian financial institutions will also develop strong operations, brand names and a regional footprint. they will play their role in driving asia ’ s continued growth. in singapore, while we are working to cushion the impact of the crisis, we are also building capabilities in the economy and the financial sector for the upturn. i wish you all a fruitful two days of deliberations and interaction. thank you.

impaired. right now, we are dealing with the bursting of multiple, overlapping bubbles – the housing bubble, the household credit bubble and the consumption bubble. cutting across all three bubbles was leverage – households overstretched themselves ; the financial institutions which were extending this credit to households were themselves taking on excessive leverage. the combined effect now is a painful deleveraging process that drives down asset prices, shrinks balance sheets, and feeds straight into the real economy in the form of credit contraction. adverse feedback loops between the financial system and real economy have become entrenched. the eurozone, which accounts for the second largest share of global gdp, has deep financial linkages with the us. through these linkages, financial stresses were transmitted across the atlantic rapidly. many banks in europe, as well as other financial institutions such as insurance companies and asset managers had large exposures to us assets. many were over - leveraged and dependent on benign conditions for liquidity to continue flowing. so they got sucked into this vortex. we have a similar story of credit evaporating and strains being felt in the real economy. over in japan, recovery from a decade of economic growth stagnation has been derailed by the collapse of external demand with serious knock - on effects on domestic activity. japan ’ s capacity to support the growth of other advanced and emerging economies is now diminished. so a global recession is now upon us. the three economic giants – the us, europe and japan – together accounted for just over 50 % of global gdp in 2007. all three cylinders are sputtering. the impact has already been felt worldwide. how long and how deep this recession will be is still an unknown, though many economists are predicting a long l - shaped trajectory. what has become clear is that us households can no longer function as the engine for the entire world economy. unfortunately, there is no clear alternative growth driver in sight yet. on the financial front, american and european banks that have been at the core of intermediating global capital flows are severely weakened. global capital flows, not least flows into emerging markets, are likely to significantly retract in 2009 – as iif projections show. foreign direct investment is set to ease substantially. cross - border banking flows as well. on the surface, this is not unlike previous financial crises originating in emerging economies. but there is a critical difference. in those cases, external credit typically dries up due to some domestic factor triggering a loss of confidence in the host