ardian fullani : prevent rather than recover greeting speech by mr ardian fullani, governor of the bank of albania, at a technical seminar on surveillance systems to assess and monitor economic and financial stability, tirana, 24 july 2006. * * * honourable participants, i would like to thank you all for your participation in this very important seminar. allow me first to welcome ms. alvarez - plata and mr. kholodilin, two experts representing the distinguished german institute for economic research diw, who will be holding presentations over these two days and discuss the introduction and implementation of early warning systems for the financial markets and the exchange rate stability. over the recent years, the bank of albania has been working closely with prominent international partners, such as the gtz, in various projects, which aim at enhancing and further consolidating the work of the bank in achieving our main objectives. i avail myself of this opportunity to thank prof. bolle, who has been coordinating our cooperation with the gtz and ms. guda, local gtz coordinator, for making this seminar possible, as a series of activities we have been organizing jointly with the gtz. today ’ s seminar focuses on an issue we have already begun working on. last year in april, we organized a regional seminar in tirana with the topic “ stress - testing ”, wherein were discussed the ways of identifying timely the financial system weaknesses, which may jeopardize the maintenance of its stability in case macro and microeconomic conditions are unexpectedly aggravated. today ’ s seminar focuses on similar issues, but it provides more progressive approaches as far as early warning systems are concerned. such approaches and discussions bear a high level of technique, however, allow me to explain briefly and somehow simply the purpose of their implementation. last week, the bank of albania changed its core interest rate. as you may have already been informed of from our statements, the increase in the interest rate came as a consequence of future expectations effect and of a variety of factors which relate to inflation. what is important to the policies we conduct is the anticipation and prevention of destabilizing pressures in advance, rather than their correction after they have already occurred. waiting to take the proper measures after the signals have become a fact may be costly in two aspects. first, the maintenance of stability is not stable, as long as the measures are taken upon the aggravation of the macroeconomic situation. second, post - destabilization measures generally have their effects after

the g8. after years of virtually fruitless discussions, there are now signs of progress in the long overdue reforms to the governance and functions of the bretton woods institutions, the world bank and international monetary fund. however, less progress has been made on reforms of the regulation and supervision of financial institutions. and yet, there is a need to curb the excessive risk - taking by these institutions. after all, it was their behaviour which threatened the collapse of the global financial system in 2008, that then triggered the recession. similarly, there is little sign of reviving the global trading system under the doha round of trade talks. and yet it is clear that even - handed trade relations that could emerge through these negotiations could boost world trade and fulfill the g20 commitment to discourage countries from pursuing policies that restrict trading through protectionist measures. here at home, one of the main lessons derived from the global financial turmoil and economic recession is that reliance on the one dominant sector is far from safe. clearly a concerted effort towards diversifying the economy is even more urgent, and the government needs to partner with the private sector in this endeavour. many of the building blocks are already in place for diversified investment and development. we have macroeconomic stability ; we have strong and robust structures for sound policy formulation ; we have no exchange controls ; and the banking system is stable, soundly managed and offers diverse products. these positive attributes have been consistently recognised by the sovereign credit rating agencies and other international organisations. at international level, the country scores highly in indicators of international competitiveness, such as the heritage foundation ’ s “ economic freedom ”, the world bank ’ s “ ease of doing business ”, the world economic forum ’ s “ global competitiveness “, and transparency international ’ s “ corruption perception index ”. as you will readily agree, despite these impressive scores, there remain challenges in attracting foreign direct investment outside the mining sector. therefore, the time has come to address the remaining constraints to broadbased investment. in particular, the cost of doing business in botswana is high compared to other landlocked countries. businesses should lobby for necessary changes that reduce production costs, but not seek generous subsidies or clamour for imposition of additional obstacles that favour a particular interest group. equally important, businesses should not always look up to the government for solutions to their problems, as such an approach tends to entrench a culture of dependency. all - in - all, business should embrace the benefits that accru