the region has seen. if you look at investment, it ’ s really shifted to korea, to china and it ’ s going to probably get much more competitive when china joins the wto. in many ways, a lot of southeast asia has lost its competitive edge. the political problems, economic problems have really hurt the region. so, what you are seeing now is a lot of investors really reassessing their view of this region and moving much more towards the north east of asia. ” 1 falling behind the figures confirm this. since 1996, foreign direct investments ( fdis ) to the north have continued to rise, whereas fdis to the south have fallen to about half pre - crisis levels. as a result, southeast asia ’ s share of total fdis to east asia ( excluding japan ) halved, from 33 % in 1996 to just 15 % in 1999. in equity markets, southeast asia ’ s weight has declined, while northeast asia ’ s has increased. before the crisis, southeast asian markets had more than twice the weight of northeast asian markets robert templer of strategic intelligence, interviewed on asia business report, bbc tv, 22 november 2000. ( excluding japan ) in morgan stanley ’ s msci asia free index. now the position has been totally reversed. lessons from the crisis asean countries must not allow this situation to continue. they should strengthen themselves individually, and also work together to sustain their long - term prosperity. then they can dispel the perception of a region in distress, restore confidence and get on the move again. sound fundamentals what lessons should asean countries draw from the crisis? first, that despite the upheaval, the transformation of east asia over the last two decades was no mirage. the asian miracle was real - the halving of poverty rates, the dramatic improvement in living standards, literacy and health standards, and the modernisation of the economies. asia ’ s prolonged boom had been underpinned by sound economic fundamentals. these remain a vital positive factor, which can help asean to prosper again. however, many economies had significant structural weaknesses. financial regulation and supervision were weak, transparency was lacking, and there were serious shortcomings in governance and public administration. “ kkn ” - the indonesian acronym for corruption, collusion, and nepotism - was often a problem. these weaknesses may or may not have caused the crisis, but they certainly contributed to its severity. the weaknesses must be resolutely tackled, otherwise

3. 0 percent by next year. maximizing expanded toolkit : adjusting the policy rate and managing the exchange rate now, what did we [ at the central bank ] do? it is quite simple : we raised rates. the other one is, we are also an exchange rate - managing central bank. if you look at our record, we are able to build our foreign exchange ( forex ) reserves when the peso is strong. that is why our forex reserves went from us $ 45 billion to almost a hundred billion dollars between 2008 to 2012. on the other hand, we can allow the peso to depreciate if that is part of market fundamentals. looking to history as guide my point is, we are quite confident that we are already on a target - consistent path of inflation. if you count the number of months where we are [ inflation was ] above target, in the past, the longest [ streak ] was 15 months. in this particular case, as i said, we were hit by a really large and long wave of supply shocks. in the last 12 months, everything was 0. 4 percent [ in terms of m - o - m inflation ] or higher. there were months [ when m - o - m inflation was ] of 0. 8 percent or 1. 0 percent and, as i said, january [ m - o - m inflation ] was really terrible at 1. 7 percent. 2 / 4 bis - central bankers'speeches indeed, when you look at every month when inflation is high, you can actually point at exactly what products [ items in the consumer price index ] caused it. this time, we think that we will break our record : [ it may take ] 19 or 20 months of inflation being abovetarget from the previous record of 15 months. policy settings remain reasonable now, is [ a policy rate of ] 6. 0 percent a high or low rate? well, if you look at the current inflation, it looks low, right? [ headline ] inflation is 8. 7 percent [ in january ]. however, relative to our forecasts, it is a reasonable one. our forecast is that by november or december, we will [ inflation ] be below 4. 0 percent. the reality is that the current policy setting is reasonable - not too tight, not too loose monetary policy. part of the [ reason behind elevated ] inflation is due to demand. the reason is, we were all surprised by the 7.