rest of the world could lead to strong capital inflows. this could in turn fuel asset prices, thereby increasing the risk to financial stability which could undermine the process of economic recovery. indeed, some countries in the asian region are already facing these issues and have introduced measures to reduce the risks associated with capital inflows. for malaysia, however, it should be noted that the financial industry, the private sector and the country have the capacity to manage these challenges, given the stronger overall financial conditions in the country, low levels of corporate leverage, a sound banking system and a strong external balance of payments position. beyond the immediate priority of establishing economic recovery and preserving macroeconomic stability, it is also acknowledged that the malaysian economy currently stands at a pivotal juncture. in order to secure continued medium and long - term growth and development, the structure of the economy has to undergo several important changes – changes that would better position malaysia in meeting the new challenges and reaping the opportunities that the future asian and global landscape brings. foremost, the events of the past two years have brought to the forefront the importance of having a more balanced and diverse model of development. malaysia ’ s openness and integration with global trade and investment flows is an important source of our economic strength, and must remain so going forward. however, given the more dispersed growth prospects of the global economy in the future, it is important that the export structure of malaysia evolves to be more diverse too. this will both increase our economic resilience and decrease our reliance on the traditional markets for our export growth. encouragingly this trend of export market diversification has already started before the onset of the crisis. a decade ago, the share of malaysia ’ s exports to emerging and developing economies were below 50 % of our total exports, but now, the figure has exceeded two - thirds. going forward, it is important that this trend is reinforced. however, to achieve a more balanced growth, we need to not only leverage on our competitive advantage in the external sector, but also expand the strength of our domestic sector. since 2003, domestic demand has been a main contributor to our economic growth, especially private consumption, in which growth has consistently outstripped that of the overall economy. going forward however, a more sustainable balanced growth would require higher contribution from private investment. it is important to recognise that no country has ever managed to consume its way to prosperity. both economic theory and the history of economic development point to the lesson that high -

##rted. now, a new world is emerging, one that is very different from the one before the crisis. in this new world, the prospects for asia is encouraging, in both contributing to and assuming greater responsibility for supporting global stability and longer - term growth. for malaysia, sustained growth and successful transformation of the economy towards a higher level of development would depend crucially on how we prepare ourselves in facing the coming challenges and seizing the emerging opportunities.