goh chok tong : strengthening singaporea€™s position as a leading financial centre in asia speech mr goh chok tong, senior minister and chairman of the monetary authority of singapore ( mas ), at the 2005 mas staff seminar, singapore, 29 november 2005. * * * let me begin by welcoming you to the 2005 mas staff seminar. it has been a busy but good year for the industry and mas. positive global and regional outlook 2. globally, 2005 looks set to end on a positive note. the imf has projected world economic growth of 4. 3 % this year and sees the potential for further growth next year. the us economy remains resilient. it has withstood progressive interest rate hikes and the devastation caused by hurricanes katrina and rita. while the oil market remains tight and the us current account and budget deficits continue to be cause for caution, the greenspan era should end positively. 3. asia is doing well. east asia's combined economy has been growing by an average of 3. 4 % per year between 2000 and 2004. take away japan, east asia's annual growth rate is even more impressive - 6. 4 %, well above the global average of 3. 8 %. east asian countries have accumulated massive foreign reserves and now account for nearly 60 % of global reserves. global investors looking for better returns have shown strong interest in asian equities, bonds and alternative investments. 4. the blockbusters in asia's growth story are china and india. i have spoken about them in some detail last year. china and india, fast becoming global economic powerhouses, offer immense opportunities for asia and the world. 5. but we should not overlook japan. it is, after all, still the second largest economy in the world. japan is experiencing renewed vigour after more than a decade of economic stagnation and deflation. earlier this month, i was in tokyo for the nomura singapore seminar. the political and business leaders i met exuded a strong sense of confidence that japan has turned the corner and is firmly on the path of sustained growth. asean is doing well 6. prospects for southeast asia have improved. despite the bali bombings, regional economies remained stable. unless there is an avian flu pandemic, we can expect asean countries to grow at a steady 5 % this year and next. 7. asean has been deepening and quickening the pace of integration. asean countries have agreed to form an

hand they should not be so stringent as to impose unnecessary costs on the financial sector. it is a matter of finding just the right level of regulation. handling the interactions between monetary policy and macro - prudential policy poses further challenges. during the recent financial crisis, we observed the difficulties of conducting monetary policy in a non - stable financial environment. interest rate signals from the central banks were sometimes dwarfed by contradictory events in the markets. conversely, financial stability is dependent on smooth and predictable monetary policy. thus, policy makers must always keep in mind that the increased use of regulatory tools will inevitably affect monetary policy in different ways. regulations will affect the interest rates that firms and households meet and this is something that the central bank needs to take into consideration when setting the policy rate – in much the same way as monetary policy has to take into account changes in interest - rate spreads due to changes in financial conditions. a key element in handling the interactions between monetary policy and macro - prudential policy will be putting an appropriate governance structure in place. how should we structure the decision - making process in order to take account of the nexus between monetary policy and financial stability? it seems clear that the central bank should have some role in setting macro - prudential policy but that precise role may differ depending on the regulatory structure preferred by different countries. for example, responsibility for macro - prudential policy could be given to a committee in which a representative from the central bank would sit ( like in the united states ) or it could be given to the central bank ( like in the uk ). and central banks can adopt different internal governance approaches : some have a separate board for monetary policy ; others also have a separate board for financial stability. most central banks have the same board for both, but may have separate deputy governors responsible for each of the two strands. what matters, as i see it, is that “ the buck stops somewhere ”. there must be a decision at some high managerial level which balances the interests of monetary policy and financial stability as well as other central bank responsibilities. the organisation and processes of the central bank must also be structured so that there are analytical tools and resources available to help policy makers take a balanced view in their decisions concerning both monetary and financial stability policy objectives. for instance, there should be interdepartmental working groups. it is also important to remember that systemic risks can quickly spread between countries and reducing the build - up or impact of such risks will require coordinated