their retained earnings, the banking sector is still by far the largest source of funds for the corporate sector and is likely to remain so for many more years. thus, a dysfunctional banking sector can surely threaten to undermine the strength of the economic recovery. in the near term, non - performing loans ( npl ) as well as non - performing assets ( npa ) must be reduced more speedily, and indeed this has been one major focus of my work at the bank of thailand. of the remaining 773 billion baht of npl in the banking system at end - june 2003, over 400 billion are either in the court process or have completed the court process and in the legal execution process with assets awaiting to be liquidated. to speed up the process of asset sales and liquidation, we have proposed to the ministry of finance to carve out this portion of the npls from the banks by an independent body that would be assigned the task of asset sales and liquidation. this proposal could become effective by early next year and the approach would greatly assist a speedy resolution of npl problems. the remaining npl of approximately 350 billion baht would not be a difficult problem for banks to handle, given the current low interest rate environment, the ongoing economic recovery, and improving bank profitability. as for the longer term, it is important that the banking system diversifies its services and reaches out to meet the needs of the rural population currently considered under - serviced by the industry. this will ensure that financial constraints will not remain as an obstruction to a broad - based economic prosperity of thailand. the financial sector master plan, which has been drafted by the bank of thailand and is currently under the ministry of finance ’ s review, has looked closely at this important issue. and last but certainly not least, even when the thai economy can manage to sustain growth, we are not immune from new challenges and risks brought about by globalization. outstanding export performance, strong domestic fundamentals, and continued gdp growth will unavoidably attract foreign capital into the country and, as in the recent months, exert upward pressure on the currency. while the economy now enjoys a more flexible adjustment mechanism compared with the past, a huge influx of foreign capital relative to the size of domestic financial and capital markets can nevertheless cause substantial market volatility and, if persists, can even lead to the emergence of asset price bubbles. regarding the upward pressure on the baht, the bank of thailand has been monitoring the currency movements

that the eu is indeed an important export market for thailand, and export to the united kingdom in particular comprises around 3 - 4 percent of thailand ’ s total export value. the good news is that even with keener competition in the world market, thailand ’ s export growth to the eu remains quite high at around 18 percent in the first half of this year, thanks in part to the contribution of chambers of commerce like yours. regarding export of services, we are all aware that the thai tourism industry was hit hard by the outbreak of sars in the second quarter. the number of foreign tourists in may dropped by as much as 50 percent year - on - year, a magnitude that dwarfed the impact of 911 by comparison. however, the severe impact was quickly over by the end of the quarter, and external income from services started to return to normalcy by july. for august, the number of foreign tourists indicated positive year - on - year growth, and the service account was in strong surplus for the second consecutive month. favorable conditions for the export of goods and improving environment for the export of services have allowed for a continued current account surplus and a reduction in external obligations. steady external debt repayments, both by the public and private sectors, have resulted in a remarkable decline in the external debt stock, from the peak of 112 billion us dollars in june 1997 to only 52 billion us dollars at the end of july 2003. even with the last portion of loan prepayment to the imf two months ago, it is good news that our international reserves position continues to remain at a comfortable level of 39 billion us dollars. looking ahead, barring any unusual market developments, export should do well for the rest of this year. we have already seen in recent months sizeable raw material import in preparation for export at end year. beyond that, the momentum is likely to benefit from encouraging signs of economic improvement in the us and japan. ladies and gentlemen, the other important engine of growth in this recovery has been private consumption. on the one hand, strong household spending has been induced by a strengthening of consumer confidence, especially confidence on future income as farm income and non - farm employment continue to expand favorably. on the other hand, consumers have benefited much from lower interest rates and greater access to loans from financial institutions, leasing firms, and other non - bank institutions. this pick - up in consumption is most clearly seen in the double - digit growth rate of durable consumption such as passenger cars and motorcycles,