the panel of supervisors is developing a common understanding of how citigroup has established its risk management structure and risk measurement systems, and how the entity will use the various statistical inputs and methodologies for determining its minimum regulatory capital requirements under basel ii. the host - country participants are active in the process and, importantly, all involved are working collaboratively under the principles articulated by the basel supervisors ’ committee. as the home - country supervisor in the citigroup exercise, we are organizing an outreach program to inform other host countries, not participating in the case study, of the efforts. in addition, u. s. supervisors are involved in many other case studies in which we are acting as the host supervisor for foreign banks ’ u. s. operations. in short, efforts to ensure effective cross - border supervisory coordination are under way, and we are committed to making them successful. the objective of the home - host exercises is to understand what has to be done, what information has to be shared, and what understandings have to be developed to make host supervisors comfortable with the operations of foreign banks in their jurisdictions, as well as to reduce the need for host supervisors to duplicate the work of the home - country consolidated supervisor. please note that the operative word is reduce, not eliminate, but our hope is that the reduction will be substantial. just as under basel i, host supervisors will still examine the legal entities in their country. we hope to keep the supervisors better informed about how operations outside their jurisdiction affect the entities they supervise, and to do this with a minimum of burden on the consolidated organization. the principles developed from these case studies are expected to be applied broadly. i expect that they will include mechanisms for coordination among home and host supervisors in the development of the work plan to be applied by the home country in its consolidated examination. coordination would also include the sharing of examination results with host - country supervisors to the extent practicable. in addition, we will do our best to promote extensive home - host communication on a continuous basis, not just in times of stress. overall, the aig effort should help to reduce home - host coordination problems considerably, but, as with basel i, there will inevitably be bugs to work out as implementation proceeds. during that shakeout period, some of your concerns may turn out to be real - although, i hope and expect that they will be less daunting or costly than you may fear. i have focused so far on credit - risk aspects of basel

have skilfully used religious and nationalist sentiments to garner political support and protect themselves against arrest. however, the bali bombing has changed the situation. president megawati has promulgated tough anti - terrorist decrees, including powers to detain suspected terrorists. the indonesian government has arrested abu bakar ba ’ asyir, who is the emir, or leader, of the jemaah islamiyah group, who had till now defied the indonesian authorities to act against him. government action in the aftermath of the bali bombings has won the strong backing of key local institutions and the indonesian population. parliamentary leaders concurred with the passing of the anti - terrorism decrees, and the leaders of the two largest muslim groups in indonesia, the nahdlatul ulama and muhammadiyah, have also voiced their support. the people of indonesia know that if the militants succeed, not only will international confidence plummet and economic progress grind to a halt, but their country will be torn asunder. southeast asian governments will act because they know that the objectives of the terrorists are totally beyond the pale. these are not innocent political dissidents exercising their democratic rights. they are ruthless fanatics, quite willing to destroy innocent lives in order to create civil strife and animosity between communities and countries, shake confidence in southeast asian economies and their legitimate governments, and weaken the basis of the states. they cannot succeed, but they can cause great harm in trying. provided the governments respond vigorously to the extremist threat, they can contain the problem and gradually restore confidence to the region. access to markets third, southeast asian economies need to boost external demand by strengthening their access to the major developed markets. in the short term, there is little we can do about the cyclical downturn. but for the longer term, favourable and assured access to key trading partners will allow southeast asian countries to maximise benefits from free trade and globalisation, and make themselves more attractive to investors. one basic approach is to promote multilateral trade, and contribute to a successful outcome of the doha development agenda of the world trade organisation ( wto ). but we need to complement the multilateral approach with bilateral free trade agreements ( ftas ) with our key trading partners. this is why singapore is actively pursuing an fta strategy. we have concluded ftas with new zealand, japan, and the european free trade area ( efta ), and hope to conclude agreements with the us and australia very soon.