the risk - weighted capital ratio increasing to 12. 5 % as at end - january 2002. although non - performing loans had increased in 2002, it has remained at manageable levels. the net npl ratio of the banking system stood at 8. 4 % as at end - january 2002, cushioned with a loan loss provision of 58. 7 % on the npl amount or 146. 5 % if collateral are taken into consideration. the banking system continued to record profits in 2001 amounting to rm7. 5 billion, which will further strengthen the capital position of the banking sector. in terms of potential risk to the banking sector, total outstanding loans in arrears have stabilised and continued to remain at manageable levels. significant progress has been achieved in the financial restructuring undertaken by danaharta and danamodal. progress in corporate debt and non - debt operational restructuring under the arrangement of the cdrc progressed at a more rapid pace in 2001 with the implementation of the new framework introduced in august. as part of debt restructuring, a number of large corporations have undertaken rigorous restructuring exercises in terms of management and ownership structure, and the disposal of non - core businesses and assets. the satisfactory progress of corporate debt restructuring under the new cdrc framework is expected to have a positive impact on the npls in the banking sector. the successful resolution of the larger cdrc cases has contributed towards reducing the npl in the banking system. with the completion of the debt restructuring process under cdrc envisaged by july 2002, the asset quality of banking institutions can be expected to improve by approximately 3 percentage points. the consolidation programme for the domestic banking institutions represents a major structural enhancement of the banking system. the successful completion of the consolidation and integration of the banking groups in 2001 has benefited the industry and the banking public. the merged banking groups are now more well capitalised to meet future calls for capital expenditure as well as undertake a wider scope of business activities. the operational business integration process and rationalisation exercise have been an important part of the merger to reduce duplication of resources and to attain higher levels of economies of scale and efficiency in the banking institutions. the year 2001 marked a significant period for the islamic banking industry. in terms of performance, the industry registered encouraging growth during the year. total assets of the islamic banking increased by 25. 2 %, amounting to rm58. 9 billion as at end - 2001 representing 8. 2 % of the overall banking system. in terms of profitability,

tan sri dato'dr zeti akhtar aziz : economic and monetary developments in malaysia for 2001 statement by tan sri dato'dr zeti akhtar aziz, governor of the central bank of malaysia ( bank negara malaysia ), at the bnm 2001 annual report press conference, kuala lumpur, 20 march 2002. * * * in the tradition of bank negara malaysia, i have the pleasure to officially release the bank negara malaysia annual report for the year 2001. the report releases the bank's annual accounts for the year 2001, and provides an analysis of the economic and monetary developments in 2001, and gives the forecast for the malaysian economy for year 2002. the country's economic performance in 2001 was significantly influenced by the unprecedented external developments during the year that had widespread implications on the global economy. being a highly open economy, malaysia was affected by the weak external economic environment. the impact was compounded by the effects of september 11. malaysia's strong economic fundamentals and the promotion of domestic sources of growth have however, reduced the impact of the external developments on the domestic economy. the strengthened macroeconomic fundamentals have also increased policy flexibility to implement pro - growth policies without creating imbalances in the domestic economy. with adequate domestic resources, stability in domestic financial markets and prompt pre - emptive actions, malaysia has been able to weather this global economic slowdown to record a positive growth for the year at 0. 4 % and to contain unemployment at below 4 %. this growth was sustained with a strengthened balance of payments position. macroeconomic policies during the year were focused on supporting domestic activities as the main driver of economic growth. private consumption remained resilient despite the lower export earnings. national savings remained high at about 35 % of gnp. public sector investment increased by 15. 5 %, while consumption expenditure increased by 11. 9 %, mitigating the impact of the contraction in domestic private investment. the more diversified economic structure of the malaysian economy also moderated the impact of the decline in external demand faced by the export - oriented industries. the weaker growth in the export - oriented manufacturing sector which contracted by - 10. 2 % was mitigated by positive growth in all other sectors. stronger growth in the domestic - oriented industries, which increased by 7. 4 % compensated for the shortfall from declining external demand. the agriculture and the mining sectors, which expanded by 2. 5 % and 0. 2 % respectively, accounted for 15. 5