gms is a region of opportunities? over the past 25 years, integration within the gms has deepened, integrating a diverse group of members through physical, trade, investment as well as people - to - people connectivity. even more remarkable is the recent growth momentum of the gms. since 1992, the ppp - adjusted gdp of the gms has expanded almost seven - fold from $ 455 billion to around $ 3 trillion, making it, in aggregate, the eighth largest economy in the world, or the size of the british economy. 1 intra - regional trade also increased 90 - fold since its inception. 2 intra - regional investment growth has also been impressive. more specifically, last year, the gms agreed to further prioritize over 100 infrastructure investments and technical assistance projects worth over $ 32 billion for the next 3 years, including the laem chabang - bangkokdawei corridor in myanmar and thailand, and the vientiane - boten railway project in laos. 3 these remarkable developments are the results of continued efforts, both from within and outside the region, on strengthening physical, trade, and investment connectivity. while gms ’ s growth prospects are promising, the strength of the gms will depend on its ability to remain competitive. despite the gms ’ s young population, growing middle class, increased urbanization, and rich natural resources, we cannot only rest on our endowments and past achievements. rather, we have to find new ways to unlock the potential of the gms. while physical infrastructure connectivity has seen much progress, i believe that financial integration is needed to complement infrastructure, trade, and investment connectivity. this leads me to my second topic. * * * 2. how can we harness these opportunities through greater financial connectivity? let me introduce three potential benefits of financial connectivity : ( 1 ) lower costs, ( 2 ) broader coverage, and ( 3 ) modern choices. on costs : costs of cross - border financial transactions are still relatively high in the gms. this is especially true for low value transactions and cross - border remittances, where fees can be as high as 13 % of the value of funds transferred. 4 these high costs impede not only remittances but also bilateral trade and investment. we therefore need to work on solutions that will promote competition and innovations, making these services more affordable. while a complete solution for cross - border transfers is yet to emerge, significant progress has been made with respect to payment solutions within each gms

a wider set of rules and regulatory framework, especially on cross - border capital flows, that tends to be more difficult to dismantle quickly. at the same time, the policy approach on capital flows liberalization in east asia has been more cautious following the asian financial crisis because of the risk of capital outflows and the weakened external financial positions. this, in my view, is one reason that led to a more cautious approach in liberalizing cross - border capital outflows. let me now come to the second part of my talk, that is, the prospect for financial integration in the region going forward, and what should be the role of policy. on this, i see substantial scope for the pace of financial integration in east asia to be gaining more momentum going forward as the constraints that used to limit the pace of integration begin to unwind. first, the external positions of the economies in east asia have now become much stronger, with current account surpluses, substantially lower external debt, and larger international reserves. second, asian savers themselves increasingly want to diversify their savings abroad in search for better yields while asian firms also look for better opportunities to lower their costs of fund by tapping funds from external sources. reflecting these two factors, we are seeing a reorientation of policy in the region to make cross - border capital outflows more liberal without compromising the risk on macroeconomic stability. and the third factor is that asian financial institutions are now back in good health after a period of restructuring and consolidation. so, we are likely to see asian financial institutions becoming more active in intermediating cross - border capital flows within the region, as they explore new business opportunities based on their expertise and knowledge of the region. all these factors, i think, will set in train a stronger momentum of cross - border capital flows within the region in the period ahead. and under such circumstances, what then should be the role of policy? government policies, in my view, have played an important role in the development of east asian financial markets. the key policy has been the implementation of financial sector reform which has resulted in a much improved financial system, especially the banking sector. policies have also been directed at developing the region ’ s capital markets, especially the bond market. and as i noted, policy cooperation has also been strengthened to support regional financial integration. but while policies have been important, financial integration in east asia has essentially been left to the market, in the sense that the process is basically