the supply of workers with vocational training in demand and ensuring labor productivity upgrades. i cannot stress enough the importance of having a future generation of workforce that is capable and flexible enough to accommodate changes in production technology. in addition, fostering close collaboration with the private sector could also be an essential part of the solution, and it is very encouraging to see more involvement from large thai corporates in the process of recruitment and training as of late. engineering a “ transformative ” upgrading of the supply side in addition to relieving constraints in the labor market, the second reform focus i would like to discuss is the urgent need for a “ transformative ” upgrading of the supply side. pursuing growth from labor - intensive activities is no longer a viable option, due to the fact that thailand would not be able to compete with lower - wage competitors, and also the fact that such strategy is simply unsustainable from a long - term perspective. more importantly, failing to upgrade now will cost us an inestimable amount in the form of missed opportunities. indeed, it was precisely the inability to engineer a large - scale upgrading, when the time was ripe, that separated our path from peer countries like taiwan and korea that started out at a relatively similar income position several decades ago. by using the word “ transformative ”, i mean that the upgrading process needs to go beyond mere efficient use of workers and capitals. it has to support firms to move up the value chain to higher value - added activities. it has to equip firms with capability to move toward higher bis central bankers ’ speeches product sophistication and flexibility to cater to changing global consumer demand. it has to nurture innovation, given that meaningful growth spurt tends to come from either new products or new ways of producing and delivering them. the strategic focus is thus to create the right environment and give the right incentive for firms to invest and innovate. physical infrastructure is where we lack behind and suits to be the starting point. hightech, capital - intensive industries tend to benefit greatly from knowledge spillovers and concentration of economic activities. therefore, more specialized hubs and clusters – in the spirit of, for instance, singapore ’ s biopolis and japan ’ s tsukaba science city – are needed. for industries with lower capital intensity, establishing industrial hubs and zonings of related industries would be beneficial, so that these industries can reap localized benefits such as the availability of specific inputs and better labor market pooling

bandid nijathaworn : the future of monetary policy remarks by mr bandid nijathaworn, deputy governor of the bank of thailand, at “ south east asia central banks / bank for international settlements ( seacen / bis ) seminar on central bank challenges in emerging market economies in the post - crisis era ”, kota kinabalu, malaysia, 21 january 2010. * * * first, let me thank seacen and the bis for asking me to lead off the discussion on this important topic. for the seacen economies, i think two important questions stand out. the first is what went wrong with monetary policy and what can we learn from it? and the second is what more can we do to improve our understanding of monetary policy so that long - term price stability can be assured while the risk of financial instability is avoided? although the current global financial crisis has been a dramatic experience for central banks, it also offers an opportunity to reassess both the intellectual underpinning and the practical implementation of monetary policy. as we all know, monetary policy in the last fifteen years did cover almost the whole of a global business cycle, starting from the period of the socalled “ great moderation ” when there was a perceived end to economic volatility with interest rates remaining low for an extended period, to the current global financial crisis that saw aggressive use of monetary policy by the major central banks to combat economic contractions with near - zero interest rates and the use of unconventional measures. this reassessment, therefore, is important and will provide a useful starting point for a better deliberation of monetary policy going forward. for this morning, i want to focus my remarks on three issues : first the lessons we can learn from the crisis ; second how to move forward to strengthen monetary policy framework in light of the crisis to ensure long - term price and financial stability ; and third the relevance of inflation - targeting as a monetary policy framework in the post - crisis era. from the crisis, there are a number of important lessons that can be drawn. the first is that monetary policy remains the right instrument to maintain a low inflation environment which is crucial for sustainable growth. but the most important lesson from the crisis is that low and stable inflation alone is not sufficient for ensuring financial stability. this is because the risk to financial stability can come from many sources other than domestic inflation. in the current crisis, it was the housing bubble and excessive risk - taking by the financial institutions that