##mediaries but to the detriment of the public ; and for not responding quickly enough when the crisis began to emerge. although there are many lessons to learn, not all of these criticisms are fair. the rapid, unconventional and coordinated response by central banks at the peak of the crisis undoubtedly averted a collapse of the system, and the vigorous measures to maintain the functioning of financial systems have been largely effective – so far. nevertheless, the crisis itself, and the very scale of the response, have brought central banks more into the foreground than ever before. as the full implications of what has happened unfold there will undoubtedly be questions about their role and the policies they pursue. the appropriate response to this is for central banks, international organisations, and government authorities to seize the initiative for reform so that financial crisis does not become a crisis of confidence in the system itself. since, as recent events have resoundingly demonstrated, the financial system is a global system, the reforms must be organised along international lines. the limited achievements in international co - operation following the asian financial crisis might make us sceptical. but, in fact, the signs are positive. co - ordination among central banks in crisis management has been effective. technical blueprints for regulatory reform on an international scale have already been drawn up. and the political will has been demonstrated in the commitment by the world ’ s largest economies to implement far - reaching reform. one area of progress is the movement towards greater participation by developing economies in international forums and in the process of reform. this is important, not just because of the growing influence of these economies – nor even because the leading international forums are currently dominated by the very economies that are now in the deepest trouble – but because the ordinary people of developing economies are usually the ones who suffer most in a global financial crisis. international co - operation will also, i hope, act as a countervailing influence against any repeat of the disastrous mistakes that were made in the 1930s. there has so far been a resistance to trade protectionism, although the idea has begun to gain some ground as a spurious answer to economic distress. there is a risk that the idea will spread to the financial sector, particularly if there is political pressure to include protectionist measures in rescue packages for troubled banking systems in the developed economies. i need hardly point out that – no less than trade protectionism – such a trend would deepen the hardship of the developing economies, many of which rely heavily on international finance

fair share. what is interesting, however, is that perhaps the most controversial action by the malaysian authorities in recent years – the response to the 1997 - 8 asian financial crisis – has now come to be understood as appropriate and effective. at the centre of this response was the imposition of capital controls to contain speculative capital flows, stabilise the ringgit, and give the economy a breathing space. this was widely criticised internationally as a retrograde step. yet it was a limited and temporary measure, which, along with other policies succeeded in stabilising the system and providing the conditions for economic recovery. the role of bank negara in promoting international understanding of this measure was crucial to its effectiveness. it is not, of course, my purpose to recommend capital controls as a general solution to financial crisis. the lesson here is that unorthodox measures can be effective, provided that they are well thought out and properly implemented. at a time like the present, when governments around the world have been ready to adopt measures that were barely conceivable a few months ago, this is perhaps a lesson that has already been quickly learned. the region's recovery from the asian financial crisis was nearly as rapid as the unfolding of the crisis itself, thanks to the vigorous measures taken by authorities in the region and the underlying momentum and vibrancy of the asian economies. the experience of this shock generated a determination in the region to try to ensure that such a crisis did not happen again, and to strengthen financial systems against other forms of crisis. it would be complacent to suppose that we have been completely successful in these aims. we are, after all, in the midst of a serious financial crisis that no efforts by this region on its own could have prevented. the region ’ s financial systems may have been largely undamaged by the first wave of that crisis. but the second wave is now upon us, and this second wave may well carry greater risks to emerging markets. even so, the determination among asian economies in the aftermath of 1998 to build strength against future crises has placed this region in a much more resilient position. the raw resources for maintaining financial stability – foreign exchange reserves – have more than doubled in most of the economies in this region over the past decade. many economies have embarked on financial - sector reform, with the aim both of ensuring that the banking system is well capitalised and of promoting other forms of intermediation. central banks have seen a strengthening