domestic policies, institutions, and data transparency which have led to greater flexibilities in dealing with shocks, ( 2 ) improving external positions by running current account surpluses, reducing external debt, and holding larger international reserves, ( 3 ) being more careful with capital account liberalization with greater willingness to use prudential and capital account measures to check excesses and to deter speculative short - term capital flows ; and engaging in regional cooperative efforts, such as the chiang mai initiative in east asia, to undertake collective regional surveillance and set up liquidity facilities that can be drawn in the case of emergency. to me, these developments reflect the genuine desire by regional policymakers to work together towards a common goal of reducing the likelihood of the next crisis. the fund can look more positively at these developments as they contribute to raising global capabilities in preventing and dealing with financial crises. in particular, regional arrangements, such as the chiang mai initiative, if correctly designed and disciplined, can be an important supplement to the existing imf facilities. for those of you not familiar with east asia, the chiang mai initiative, or cmi, was set up in the aftermath of the asian financial crisis in the year 2000 as a regional arrangement of the ten asean member countries plus japan, china and korea. the initiative comprises a process of economic and financial surveillance at governmental level and a voluntary financing arrangement in terms of a network of bilateral swaps, which now amounts to us $ 55. 5 billion. twenty percent of the agreed bilateral swaps can be drawn to meet emergency liquidity needs unrelated to an imf program. the cmi is now under review, with a view of making it more useful and more relevant to the needs of the region in the longer - term. i see regional arrangements, such as cmi, as an important regional financial architecture that complements and supports the fund ’ s works on crisis prevention and resolution. first, in addition to imf surveillance, the surveillance undertaken under cmi provides a new dimension of peer review that draws on regional knowledge and expertise in the surveillance process. second, the drawdown of the bilateral swaps under the first tranche provides an important liquidity support facility. this is a feature which is now missing in all of the fund ’ s current lending facilities, and third, since the remaining drawdown of the swaps is linked to a formal package of assistance that requires exceptional financing, governments in the region, in a way, have pre - committed substantial amount of fund to

be made available to support crisis resolution. in this regard, the imf will only stand to benefit because part of the financing requirement will have already been shouldered by governments in the region, thereby equipping the fund with greater financial leverage to deal with other issues elsewhere. let me now turn to other aspects of self - protection against future crises. on self protection through reserves accumulation, i think it is only proper that differentiation is made of the reasons for reserve buildup on a country - by - country basis. this is to say that one needs to assess whether the buildup is excessive with respect to that country ’ s overall level of exposure to the global financial markets, to its structure of exports and imports, and to the country ’ s overall level of external liabilities. on self - protection through the use of capital account measures, i welcome the fact that the fund ’ s thinking on this subject has become more liberal. on occasions, it is appropriate to use capital account measures for crisis prevention. and on capital account liberalization, i agree with my asean colleagues that it would be more useful for the fund to concentrate on managing the process of capital account liberalization of its members instead of discussing whether to make capital account liberalization an explicit purpose or mandate of the fund. finally, the third point i want to make today is that i see strong merits in separating lending and surveillance. at present, crisis resolution is done as an extension of surveillance by the area departments using the approach they see fit. separating these two functions in terms of duties, responsibilities, and decision - making would provide clear accountability within the imf on role and responsibilities over these two issues. moreover, since crisis prevention and crisis resolution require different sets of skills and expertise, separating the two would allow the fund to pool resources and the special skills on a fund - wide basis, thereby strengthening the overall institution ’ s capabilities to deal with crisis resolution. finally, with the work on crisis resolution becoming more centralized, the fund ’ s program design could be more uniformly structured to reflect a common set of guiding principles in relation to absolute limits of access to imf financing, the use of standstills on debt repayment, the role of the fund in debt restructuring, and the extent of the involvement of the private sector. we have given some thoughts to this issue, and to execute the idea, one solution would be for the fund to set up a new department that will handle only crisis cases involving exceptional financings. this new department will