its own high levels of savings to support investment. the financing cost for corporates and smes will also be higher because of the round - tripping of funds. this, i think is a fair and important point, because greater reliance on the region ’ s own savings will help reduce the volatilities associated with capital reversals that we have seen in the recent months. the third is the concern that, despite rapid growth, the role of asian financial institutions remains small. their participation in the region ’ s finance, especially cross - border finance, is not at par with the flows of savings that need to be intermediated. the challenge here is to promote greater roles of asia ’ s own financial institutions without compromising the open, competitive, and level playing field that has been the hallmark of the region ’ s financial markets. the fourth observation is the concern about the attendant risk associated with increased financial flows and integration. with increased flows, the region ’ s financial markets are susceptible to greater risks and spillovers from the international financial markets. the issue then is whether a better system is needed to help mitigate and manage these risks. and the fifth is the concern about the region - wide benefits of the efforts we are doing on financial market development and integration, given the vast diversity of the economies and markets in the region. ideally, regional financial development should be a win - win situation. nonetheless, the uneven pace of development and unbalanced focus could risk hallowing out the region ’ s financial system. and if this happens, it could sow a seed for future instabilities. i think these observations and concerns are important, and in a way they point to the issues that should be addressed in our next step of financial reform. and it is in this context that i see the world bank flagship study on east asian financial markets to be timely. and from what i heard this morning, significant benefits and insights can probably be gained from this study, and be useful to our future works in the region. i also have a number of specific remarks and views to make on the aspects of east asian financial markets to be discussed in the next sessions. but for the benefit of time, i think i should leave them for later opportunity. for now, let me close by saying a little bit about the role of policy. government policies, in my view, have played an important role in the current development of east asian financial markets. the key policy, of course, has been the implementation of

financial sector reform which has resulted in a much improved financial system, especially the banking sector. policies have been directed at developing the region ’ s capital markets too, especially the bond market. policy coordination has also been strengthened to increase regional financial integration and to develop a policy coordination framework that can help the region deal better with the likelihood of a crisis. i am referring here to the cmi or the chiang mai initiative and its surveillance process. but while policies have been important, the process of financial market development in east asia has essentially been left to the market, in the sense that the process is basically a market - driven one. but on account of what is perceived to be a slow progress, question arises whether policy should do more. my view is that the process should continue to be market - driven and not policy - driven. but there are areas that government policies can do more, especially on issues that involve efforts on a region - wide basis. in this context, future efforts at policy coordination should start by setting out a clear and concrete medium - term goal, then followed by a few but concrete and specific issues to be addressed or projects to be executed. a case in point is the development of a shared regional financial infrastructure such as linking the clearing and payment systems, harmonizing minimum regulations on cross - border investment flows, and developing a shared facility to promote greater flows of investment information. this type of specific efforts and projects would be easier to win region - wide political commitment and support. another suggestion is that, for the market - based approach to work efficiently, we may need to engage more formally the cooperation of the private sector. on this, i think east asia can learn a lot from the experience of the eu in engaging the private sector in planning and reviewing major financial initiatives. specifically here, i am thinking of the giovannini group of private experts, established in 1996, which has done at least four useful reports for the eu commission. their inputs have helped the eu in introducing the necessary directives. my last point is on the role of ifi ’ s such as the world bank. in recent years, in a good way, we have seen active involvement of all major ifi ’ s in the region ’ s financial market development. they contribute to research, ideas, technical assistance, policy advice, and funding. some are even involved as market participants. i am thinking here of the world bank, the adb, and the imf. but while their efforts are good, well -