some light on why there has not been more widespread positive activity in the corporate sector and what measures should be taken to encourage its spread. ii. two types of structural adjustment pressure faced by the japanese economy the first type of structural adjustment pressure faced by the japanese economy in the 1990s was the pressure to change the industrial structure exerted by the expansion of supply capacity in asian countries. other asian countries have more abundant supplies of labor than japan, while japan has a comparative advantage in terms of capital stock and technology. economic theory suggests that the japanese manufacturing sector will focus less on labor - intensive manufacturing industries whose products can be substituted with imports from other asian countries and tend to specialize in capitalor technology - intensive industries. theory also suggests that, if growth in the nonmanufacturing sector can be realized, this will enable the surplus labor emerging as the share of labor - intensive industries declines to be successfully absorbed. the expansion of production capacity in asian economies was therefore expected, through the adjustment process detailed above, to shift the japanese economy's orientation from external demand to domestic demand. in the event, the manufacturing sector witnessed both increased specialization in capital - or technology - intensive industries and a decline in the share of labor - intensive industries. however, japanese firms'efforts to reallocate their business resources, concentrating on highly profitable markets and withdrawing from other areas, ended up being only moderately successful. they could not keep up with changes in business conditions that were remarkable for their extent and the speed with which they occurred. the profitability of individual firms thus dropped significantly. in addition, the poor performance of the manufacturing sector hindered growth in the nonmanufacturing sector : household income declined, and generation of corporate demand such as advertising activities and computer software development was weak. as japanese consumers became more sensitive about prices, especially the balance between price and quality, there was an unprecedented level of import penetration from other asian economies, and this was part of the reason why the nonmanufacturing sector, particularly the wholesale and retail industry, also ended up suffering from a significant drop in profits. in addition to adjustment pressure affecting the japanese industrial structure, another type of adjustment pressure is associated with the fall in land prices after the bursting of the economic bubble. this had a powerful negative impact, on the nonmanufacturing sector in particular. it is a well - known fact that the significant fall in land prices gave rise to a huge amount of nonperforming assets in the real estate,

are a few things that we could do for the smes. first, we can lower the financing cost for smes which obtain guaranteed financing under cgc. on the average, smes are being charged between 10 to 12 percent. this is about blr plus 5 to 6 percent. the rate imposed is much too high. it seems that pricing mechanism doesn ’ t price properly the guarantees given by cgc. we ought to work on this. on the part of cgc, we need to response quickly to the banks when guarantees are being called upon. an ideal situation is akin to an irrevocable undertaking where once a guarantee is called upon, it will be made good immediately. second, to intensify promotion and awareness program on cgc products and services. cgc needs to work closely with the trade associations and generate more media exposures through radios and tvs. make cgc a household name among the smes. third, expand further advisory services, its reach and contents. not all smes require financing, some might need more “ hand holding ”, and rather than access to financing above. lastly, come up with new and specific guarantee products for new growth area, start - ups and young entrepreneurs. existing guarantee products might not be suitable to meet the needs of these groups. cgc should embark a study on this matter and come up with an action plan. before i end my speech, i would like to express my heartfelt congratulations and appreciation to the board, management and staff of cgc for 40 years of service to the malaysian smes. it is our greatest wish that cgc will continue to walk and grow alongside our smes in our effort to make our country prosperous. bis central bankers ’ speeches