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

first as our economic fundaments remain sound and the banking system is in a position to support economic recovery. as a result, interest rates in emerging market economies are expected to be raised faster than the industrialized countries. these interest rate and growth differentials against the backdrop of ample global liquidity are breeding the carry - trade behaviour with the usd as the funding currency this time. this leads us to our third challenge, which is how to prevent the surge in capital inflows from creating unwarranted instabilities such as excessive volatility in the currency market and asset price bubbles. in response to this challenge, we are beginning to see some countries such as hong kong, korea, singapore and china tightening their prudential standards to cool down speculative pressure in the real estate sector. in addition, brazil has recently imposed measure to slow down the inflows of fund into its stock market. in the case of thailand, net capital flows have turned positive in july and continued to remain so, causing the thai baht to strengthen as the current account is also in surplus. nevertheless, the thai baht has been moving in line with other regional currencies and the bank of thailand remains vigilant in ensuring this continues to be the case. in order to make capital flows more balanced, we are in the process of furthering the liberalization of capital outflows. this would also increase the flexibility of our businesses in financial management. as for the issue of asset price bubbles, while the signs of accelerating asset prices observed in many countries in asia are not so apparent in thailand at this time, the risk is not neglected. as a matter of prudence, the bank of thailand will continue to closely monitor asset prices to ensure financial stability prevails in the long term. ladies and gentlemen, i would like to conclude my speech tonight by reiterating that the economic recovery in thailand is expected to continue going forward. nevertheless, the risk of an aftershock is not negligible due to fragile global and domestic environment. hence, businesses and policymakers alike need to remain vigilant, but at the same time, should not be overcome by unreasonable fear. one important factor that will help speed up the process of recovery is the return of investment and trade within the country. with our economic resilience and strong economic fundamentals, i would like to assure you that thailand remains a lucrative place to invest. despite this difficult time, the bcct has always been