will introduce bahtnet ii, which is the large value payments system that meets international standards and will serve both domestic and overseas financial institutions. the system will provide a facility to serve the transaction of debt instruments for which the bank of thailand is the registrar. the pricing of this service will also be more market oriented. the bank of thailand also plans to improve convenience of the general public by standardising the width of all bank notes, and to introduce chemically treated paper to promote hygiene and lengthen the life span of the notes in circulation. ladies and gentlemen, the most important factor for preventing the recurrence of the financial crisis is to put in place a framework of financial institution supervision in which the business sectors and the public place confidence. from the first of january next year, the bank of thailand will introduce a new financial institution supervision framework which is risk - based supervision, focusing on the risk management system of the financial institutions. under this new system, the responsibility of the supervisor in charge of each institution will be clearly set out in order to ensure direct accountability. their work will be supplemented by on - site inspection, where the supervisor will work with internal supervisor ( off - site ) of the bank of thailand and external auditors of the financial institutions. in order to promote transparency and to ensure that the financial institutions being examined understand the purpose of the visit, a formal audit program will be sent out to inform the financial institutions prior to the visits. the annual bank supervisor ’ s on - site visit plan requires that each institution be visited at least once a year. the process of bank examination will be timelier. moreover, to ensure that the quality of the assessment of each financial institution is of the same standard and to ensure transparency in the process, the supervision report will be submitted to the financial institution development committee, which comprises the heads of all supervisor teams. the bank of thailand ’ s management will meet with the board of directors of the financial institution to present the findings of the supervision report, and there will be a close monitoring and follow up on the directives given, as well as the points raised in the supervision report. to put in place this new supervision framework, the court of directors of the bank of thailand has approved the new structure of the supervision group due to be effective on the first of january 2001. under the new organisational structure, there will be a clear separation of the three lines of work, namely supervision, examination, and research and analysis. this will provide for checks and

m r chatu mongol sonakul : bank of thailand ’ s review of major economic events in thailand during the past year a statement by m r chatu mongol sonakul, governor of the bank of thailand, on thailand ’ s economic and monetary conditions : bank of thailand ’ s public report, 27 december 2000. * * * ladies and gentlemen, on the occasion of the new year, the bank of thailand as one of the main national institutions would like to take this opportunity to review some of the major economic events during the year. we would also like to review the work that the bank of thailand has carried out in terms of economic policies and internal restructuring. this would also be a good opportunity to raise a number of issues, which the private sector may find important for consideration in the next year. in the past year, the thai economy has continued to expand. however, the growth rate was more moderate than anticipated. economic recovery was not broad - based, and there remain pockets of fragility. in the second half of the year, with the adverse effect of increased oil prices, consumer and investor sentiment deteriorated, leading to deceleration in domestic spending. as a result, inventories of finished products rose by 22 % from the same period of last year. at the same time stocks of finished products, which averaged around 15 days of sales last year, rose to 17 days of sales this year. sectors that saw large increases in stocks were canned seafood, beverages, and automobiles. consequently, the capacity utilisation rate of the industrial sector remained at 56 % on average for the year. capacity utilisation rate did not expand significantly was due to the fact that many manufacturing industries for domestic market were affected by the deceleration in domestic expenditure which led a number of industries to operate at less than half of total capacity namely beverages, automobiles, and iron & steel products. another reasons being that those export - manufacturing industries which have performed well have been expanding their capacities. for example, the electronics industry, where the capacity in the integrated - circuit sector has increased by 65 % since 1997. with excess capacity prevailing, demand for new investment has been low, thus reducing the role of investment in propelling economic recovery. moreover, some firms halted operations temporarily as the result of debt problems, adding to excess capacity in the system. this year, the recovery has been propelled mainly by export. industries geared to export markets expanded by 22 % on average, while industries selling to domestic markets contracted