##pt pockets of asset price bubbles developing in the economy. ladies and gentlemen, i turn now to the second part of my talk on the potential scope of regional cooperation as asean faces yet another common challenge on how to manage the global contagion of the us financial crisis. today ’ s global financial crisis is the world ’ s worst since the great depression in 1930s with an estimated credit loss of 1. 4 trillion us dollars. trillions of us dollars have been used to provide liquidity and to recapitalize distressed financial institutions. deposit guarantee has been introduced in a large number of countries to restore investors ’ confidence. at this juncture, i doubt if any one can predict with any good accuracy when this episode of financial market turbulence would come to an end. the current global financial crisis reminds us of the lessons we learnt from the asian financial crisis just one decade back. indeed, what have happened in advanced economies today are stark reminders of those lessons learnt in asia. just like asia, investors took excessively high risks creating asset price bubbles in advanced economies. lax prudential policy, along with fragility of the financial system, quickly brought on a crisis of confidence, starting with debt defaults. credit underwriting behaviors of financial institutions and credit rating agencies are being questioned along with imprudent lending practices and the bloating real estate sector. thus far, the effects on emerging market economies in asia have been minimal. nevertheless, we are still awaiting final moments of truth as there will be a number of aftershocks following the financial tsunami. clearly, having a resilient economy and financial sector that is stable, which i have discussed previously, is only a necessary condition for avoiding crisis. but, it is not sufficient to ensure non - occurrence of crisis. this is because the key pressure points that can lead to difficulties for us can be externally - induced, especially through capital account developments. we all know that sudden changes in global financial conditions and risk - appetite of investors can create difficulties through spillovers. mindful of this, asean needs to come up with cooperation strategy that best fit asean objectives. here, i wish to raise two key areas on regional cooperation strategy for your further exploration. first, the new global crisis should hasten asean to think more deeply about the effectiveness of regional surveillance that can detect weakness early on. waiting for the global community through international financial institutions ( ifis ) for regional surveillance may be too little too late for timely policy measures that can safeguard the

region from contagion from other parts of the world. while ifis will remain useful for surveillance and financing balance of payments need when necessary, regional surveillance capacity must be enhanced more quickly. this is one important area where central bank cooperation can be strengthened. indeed, it is very important for policymakers in asean with common challenges to put greater efforts in regional cooperation on maintaining financial stability. having close consultations and sharing experience can usefully avoid potential policy missteps and create policy synergies that eventually foster confidence of investors and other economic agents within and outside asean. second, we have to consider making regional liquidity pool sufficient and effective enough in size and automaticity of disbursement in time of need. in the past, stakeholders outside asean have been more concerned about moral hazard problem than the real benefits of regional liquidity pool in time of actual need. the present global situation has reconfirmed the vision set forth by the asean swap agreement ( asa ) and chiangmai initiative ( cmi ) that asia needs to have its own liquidity pool to protect itself from contagion, be it caused within the region or from outside. on the whole, the current financial episode has taught us that, to restore confidence to the public, the authorities ’ action must be decisive and timely. coordination and cooperation among asean countries must be further enhanced to ensure that prompt remedial actions can be put in place should a crisis occur. ladies and gentlemen, in closing, i would like to reiterate that it is important for asean ’ s economic and financial stability that asean central banks continue, individually and collectively, to increase the effectiveness of their policy instruments through domestic reforms of markets and financial systems as well as communication efforts with markets and one another. in this spirit, i am reminded of how asean has risen over the years to common challenges. history has recorded asean as an exciting region second to none. while rich in diversity, asean has always been united in bringing about successful solution to tackle our common challenges. asean, itself, was formed forty years ago against the backdrop of political and security threats to the region. in addition, asean free trade area, or better known as afta, was created sixteen years ago to ensure that asean together reap benefits from greater trade liberalization under the wto. going forward, with sustainable growth and development of asean at stake, i have no doubt that we will be able to jointly find ways to overcome the present difficult global environment and together continue to