are crucial. in addition to healthy financial positions, good systems of risk management and corporate governance would ensure better management and a healthy corporate sector. another important aspect is the availability of timely and reliable financial information and the strengthening of the legal and regulatory framework for enforcement of the laws and regulations. strong professional organisations can also play an important role to improve and enforce the standards and best practices. developing and diversifying the financial infrastructure is another important component of capacity building. in this respect, our financial sector master plan which was released in 2001 represents a ten - year strategy that charts the development of the financial sector. the focus of the initial phase of the plan is on the development of the financial infrastructure and financial markets as well as capacity enhancement and institutional development, in particular, of the domestic financial institutions, thereby putting in place the pre - conditions for moving forward to a more liberalised and competitive environment. gradualism has been adopted to avoid disruptive and unstable conditions. the aim is to evolve a more diversified financial system with financial institutions that are efficient, innovative and resilient. the masterplan places priority on good corporate governance and transparency within an effective regulatory and supervisory framework and a strong structure for consumer protection. liberalization of capital account the second factor in enhancing national resilience is the approach to liberalising the capital account. while liberalisation of the capital account has potential benefits, it also carries substantial risks. for emerging economies, where the financial infrastructure is still relatively less developed, the premature liberalization of capital flows could lead to an accumulation of risk factors that could lead to instability and culminate into a financial crisis. the approach for the liberalisation of the capital account in malaysia has been to adopt appropriate sequencing so that the increase financial integration will not have destabilising implications. it is important to have sufficiently developed domestic financial markets, sound macroeconomic conditions and sound institutions in place. also important is a surveillance mechanism to monitor capital inflows and outflows. of particular importance is the monitoring of the accumulation of external liabilities by the financial system and the private sector. advance knowledge of imbalances and risks would facilitate early actions to manage emerging vulnerabilities. an appropriate exchange rate regime finally, i would like to mention the significant value to national resilience of having an exchange rate regime that is aligned to the economic fundamentals. it is important to understand that the exchange rate is a means to an end and not an end in itself. its purpose is to provide

the overall economic interests of the country. this will continue to be the objective of our exchange rate policy. ladies and gentlemen, dr. yilmaz akyuz ’ s lecture today would provide an international perspective on managing financial instability and shocks in a more globalised world and touches on some of the issues i have mentioned. although the regional financial crisis occurred more than six years ago, the issues it raises are not history. they are still very relevant and important. emerging economies need to continue to evolve approaches and solutions on how best to manage the vulnerabilities and to promote and preserve stability. in this endeavour, there is potential to not only consider what individual economies can do but also the opportunities for regional arrangements or regional solutions. as the region becomes increasingly more integrated in terms of trade and investment flows, the potential for this will be greater. the desired outcome is to achieve stability, which in turn, will contribute to the overall stability of the international monetary system and thus, enhance the prospects for shared global prosperity.