external demand, aided by the improvements in commodity prices. our assessment is that the global economy will continue to gradually improve. nevertheless, many developments around globe warrant a very close surveillance. it is still too early to declare a definitive revival in the global economy. in fact, at this point, despite the emergence of a few positive developments, the overall risks remain tilted to the downside. major events that could shape global growth in the near term include uncertainties in policy and political spheres, especially in major economies ; the potential retreat arising from backlash against globalisation ; the rise in trade protectionism ; and the volatilities of global commodity prices. financial markets have in recent months remained eerily calm. however volatility may 1 / 6 bis central bankers'speeches reignite if risks re - emerge, whether real or perceived. beyond these short - term risks, structural changes are also afoot. the ageing population, income inequality and youth unemployment are slow - churning yet potent structural changes that require policy prescriptions. changes in policy today are needed to secure future prospects for growth. in malaysia, the economy has been boosted by the expansion in global demand. the strongest export growth in 28 quarters has provided additional impetus to our domestic demand. consequently, the malaysian economy started 2017 with a robust growth of 5. 6 % in the first quarter. we are on track for a better economic growth compared to last year. nevertheless as an open economy with sizable and globally connected financial markets, malaysia cannot neglect the risks dominating the global environment. we are certainly not immune from events unfolding around us. some say central bankers are paid to worry. in good times and even more so, the bad. however i am comforted that earlier reforms have accorded the country with strong macroeconomic fundamentals and resilience to weather these still - challenging times. however, we cannot afford to rest on our laurels. new risks and challenges continue to emerge and confront us. an important lesson is to continue to strengthen our resilience and buffers, especially during the good times. a world of contrasts : bankers as active stakeholders, not passive bystanders the banking sector has been a central pillar of strength for the malaysian economy. the industry can play a more positive role by engaging positively in conversations on economic and financial issues confronting the country. as i have experienced in the last one year, the chamber of conversation on the economy could be further expanded. narratives on the economy and the industry continue to be shaped

, kotri, gwadur which have large untapped potential. if the sme branches of the banks remain limited to a few big cities you will never be able to make a profitable business out of the sme sector. the balance sheet, cost of funding, the geographical spread do confer a big advantage to the big banks and if they do not make innovative use of technology, skills, systems and procedures to capitalize on this advantage they will soon be marginalized by the intrusion of more agile and nimble small private banks. the banking industry has to invest in people, processes and systems to minimize their risks and enhance their returns on the sme segment. besides banks and dfis, leasing companies and modarabas are also the right vehicles for delivery of credit to the sme sector. unfortunately with the exception of one or two leasing companies they have limited their activities so far to large urban areas and have not opened up their doors for business in those cities and towns where the clusters of smes do exist. as they face tough competition from banks in leasing business, it is expected that they would diversify both in product lines as well as in geographical coverage. lastly, there is a widespread network of technical and vocational training institutes and polytechnics throughout the country. those who graduate from these institutes are unable to find suitable remunerative jobs. on the other hand, the smes lack adequate technicians and trained manpower who have the requisite skills to help them in the production of their goods and services. thus, there is a mismatch between the demand and supply of this type of manpower. the provincial governments who own these institutes should examine the contents and curriculum, pedagogical tools, evaluation and assessment procedure, incentive structure for the faculty members and bring about the necessary changes to align the supply of the graduates with the emerging needs of the sme sector. synergies can be generated if some of the institutes are located in the clusters and apprenticeship and internship programmes are instituted to give practical hands - on training to the students. sme financing and sbp – achievements and strategies in recent years, the sbp has reviewed its own role to determine whether or not it was creating any hurdles in the way of lending to smes. we found out that the same prudential regulations which were applicable to corporate borrowers were also made applicable to consumer, sme and micro finance although the requirements were different for each market segment. we therefore decided to formulate a separate