tharman shanmugaratnam : building financial bridges between asia and the middle east luncheon address by mr tharman shanmugaratnam, minister for education and deputy chairman of the monetary authority of singapore, at the inaugural asia - middle east dialogue, singapore, 21 june 2005. * * * your excellencies distinguished guests friends, it is a privilege to address you here today at this important gathering, as we discuss ways to strengthen ties between our two regions, asia and the middle east - two regions of the world that not only have immense potential in themselves but have the potential to shape each other ’ s futures for the better. let me use this opportunity to talk about the bridges we can build in financial services, and how financial flows can help shape this inter - dependence between the middle east and asia. i will also touch on what we can do in education together, because it is in education that we build trust and lasting relationships between our peoples. financial bridges between asia and the middle east - the economic underpinnings the economic underpinnings for financial flows between our two regions are in many ways obvious. both the asia and the middle east regions are on an upward trajectory of economic growth. the economies of asia and the middle east are growing at a trend rate of 7. 5 % and 5 % respectively. to put this in historical perspective - no region of the world saw sustained growth exceeding 5 % for any period before the middle of the last century, except for australia and new zealand in the 19th century. no one expects growth to be linear or to continue unbroken, in either asia or the middle east. there will be bumps along the journey, sometimes flash floods, and sometimes a cave - in. but the basic trajectory is upward. the growth story that we are seeing is not an aberration, or a flash in the pan before growth in asia or the middle east recedes to the very modest norms that were seen for much of economic history before world war ii. growth is being propelled by fundamentals. first, both our regions have an abundance of natural resources, and are benefiting from the natural interplay between industrialization and demand for natural resources. asia ’ s industrialization alone is driving an unprecedented global demand for raw materials, energy and other commodities. china and india alone have contributed over 35 % of the increase in global oil demand over the last 15 years. yes, there are huge inefficiencies in energy use, and concerns over

publicly, accountable for meeting the inflation target. the government remains responsible for setting the annual inflation target, within the context of legislation that requires the bank of england to achieve ‘ price stability and subject to that to support the government ’ s objectives for output and employment ’. under its current remit, the mpc is required to achieve 2 % consumer price inflation ‘ at all times ’. if inflation deviates from target by more than 1 percentage point, the mpc has to write a public letter to the chancellor to explain why, and what it is doing to bring it back. these arrangements remain relatively novel and unusual in uk constitutional terms. prior to 1997, a longstanding objection to bank of england independence was concern that such arrangements would be inconsistent with ministerial duty to answer to the house of commons on major matters of policy. a high level of transparency and openness about mpc decisions has been a critical aspect of meeting expectations of parliamentary and public accountability as well as an effective way of enhancing the credibility of monetary policy. in fact greater openness about monetary policy was part of the package of changes that were made to restore credibility after the uk ’ s exit from the erm in 1992. the bank played its part by introducing a new quarterly inflation report, which by 1997 had won widespread respect for its objectivity and goodhart, c ( 1999 ) ‘ recent developments in central banking : some special features of the monetary policy committee and of the european system of central banks ’ jean monnet lecture, dublin european institute, 1999. professionalism. against this background, the 1998 bank of england act required the new monetary policy committee to sign off the bank ’ s inflation report. in practice, the mpc ’ s sign off has been far from a formality, though the inflation report formally remains the bank ’ s report. it is not that surprising that a committee of experts whose external members are based in the bank and who devote at least 60 % of their time to monetary policy should get deeply involved in preparing and debating the forecasts that they sign off. it may be more remarkable that nine economists, labouring under the burden of individual accountability, have so far succeeded in signing off 31 editions of the inflation report, and found ways of dealing with the inevitable range of views. the nature and role of the forecast nowadays the forecast has two related roles in the monetary policy process. first, it helps the committee to set monetary policy by organising, informing and focusing its discussions. and second, it provides transparency