objective. so far, we have found this approach to be practical and useful. on a final note, financial globalization is an important issue for emerging markets. it is the development that is likely to continue given the strong momentum of globalization in trade and in production that we are now seeing. but financial globalization is not without risk as the current turmoil shows. for emerging markets, this risk can be quite potent because of the smallness of the financial market and the limited abilities of economic agents to adjust to shocks. how well we manage this risk will depend critically on how well we manage the process of financial globalization. in dealing with this, my view is that we should not resist it, but should manage it by adopting a pragmatic approach to financial globalization. being pragmatic means having the right reservation about it, taking a careful step toward it, and be willing to take the needed action to deal with the unintended consequence. this is not going to be easy, but it is probably the best that we can do for now. thank you.

bandid nijathaworn : financial globalization and emerging market economies speech by dr bandid nijathaworn, deputy governor of the bank of thailand, at the panel discussion, bank of thailand ’ s international symposium 2008, bangkok, 8 november 2008. * * * first, let me thank the organizer for inviting me to take part in this panel. a lot has been said in the last two days about financial globalization and emerging markets. we spoke about the challenge for monetary policy, the challenge for financial regulation, and the implications for capital flows management, and on this panel, we discuss the importance of having the right international financial architecture to respond to the global challenge. but more important at this time, i think the current global financial turmoil also offers a unique and important perspective for us to look closely at financial globalization, in terms of the inherent risk, the lessons that can be learned, and how emerging markets should go about managing the process of financial globalization. my remarks today will be on the practical challenge faced by emerging market economies like thailand in managing the process of financial globalization. on this, i will focus on the financial sector and the implications that financial globalization has for the financial sector in emerging markets. a good starting point to discuss the issue is to look first at the lessons that can be learned so far from the current turmoil. for all that can be said, the current turmoil is a powerful manifestation of the risk and the complexities that could come with financial globalization. for me, the turmoil points to three important observations. first and foremost, it shows that financial turmoil can happen in any market regardless of whether it is large or small, or whether it is emerging or developed. once the imbalance is allowed to occur, financial distress will likely happen and there is no exception to it. second, the turmoil highlights the central role that the financial sector plays in a boom - bust cycle. first is the role that it plays as a mechanism that can contribute to and trigger a crisis. this is because a bubble usually cannot happen without excessive credit growth. therefore, without proper regulation, a combination of strong capital inflows, easy credit, and the procyclicality of the financial system can set the stage for a build - up of serious economic and financial imbalances. the financial sector also plays an important second role in that its strength and resilience can significantly help cushion the real economy from the impact of external shock. the fact that a majority of emerging markets in