global growth. it is the underlying economic and financial foundations and its strength that will determine the capacity and resilience, and thus, the ability to ride out the storms and take advantage of the opportunities that the external environment accords to achieve sustainable performance over the medium and longer - term.

into the industrialisation process as trade flows expanded at double - digit rates during most of this period. while the east asian economies benefited from this global trend, the economies have not however, been immune to external shocks arising from shifts in international demand. the economies were affected by factors such as swings in commodity prices, significant oil price adjustments, and the slowdown in the major economies. while the impact of these trade - related shocks on the domestic economies of the east asian countries involved costs, in terms of slower growth and dampened domestic economic activity, these economies were able to adjust to the sudden changes. in such an environment, there was also greater predictability in the direction of the economic trends, providing the basis on which appropriate policy responses were implemented to manage the economic adjustment process. emerging economies in particular, in the east asian region participated in this globalisation process and benefited from the enhanced trade activities. in the recent decade however, there has been a distinct change in the nature of the globalisation process. globalisation is no longer confined to trade and direct investment, but increasingly involves large cross - border financial flows. over the recent decade, these financial flows have dominated the global market place. an emerging concern is that this trend would result in a widening of the divide between the developed and emerging and developing economies. in a world in which the magnitude of the financial flows are significant, in which the financial transactions have instantaneous implications, in which the flows are unconstrained by any regulatory framework, then size, the degree of development and the degree of resilience of economies will matter. countries that are small, and have less developed economic and financial systems, are open and liberalized, and that do not have the range of policy options at their disposal, will be highly disadvantaged in this global market place. it is this globalisation process that will contribute towards widening the existing disparities between nations. against this trend, the current global economic and financial environment has been characterised by increased uncertainty. there is uncertainty in the global economic outlook, financial markets and geopolitical developments. the expected strengthening of recovery in the advanced economies has yet to occur. financial reporting irregularities and the weakening of the corporate sector has affected confidence, contributing to the increased volatility in the global equity markets. further risks also remain on the horizon, including those emanating from structural imbalances in some of the advanced economies. these developments have res ulted in unstable and highly volatile conditions in both the asset and