. such shifts have not been limited merely to the diversion of the production of goods requiring unsophisticated techniques to the developing countries. indeed, some developing nations, particularly in asia, are establishing themselves as important suppliers of a wide range of internationally traded products, including high - technology manufactured goods. at the same time, industrial economies are moving more towards the export of services, as a result of improvements in communications and information technology. all in all, these changes are to the good, in that they should result in expanding international trade, more rapid increases in productivity and, hence, improved living standards everywhere, but especially in developing countries. however, these ongoing globalization trends and adjustments to new technology do imply changes in the structure of national economies. canada and other industrial countries are having to cope with these changes. but change is never easy and is often stressful. even in the large u. s. economy, there has been considerable concern over the uncertain job prospects, especially for unskilled workers, in light of the changes in technology, production and trade trends that i have just described. however, the process of adjustment in the united states to these developments began early, and their economy has been operating successfully at full capacity. why is it that in canada we seem to have had a more difficult time of it? there are a number of reasons for this. but, in my view, one of the most important is the fact that in canada we started adjusting later and, as a result, we were further behind. why was that? the depreciation of the canadian dollar in the mid - 1980s, by easing the pressure from foreign competition, blunted the urgency to adopt more efficient production processes. and through much of the second half of the 1980s, because many canadians were still acting on expectations of accelerating inflation, we were devoting a good part of our energies and resources to speculative activities, rather than investing in improvements in productivity and competitiveness. rising government deficits, which were absorbing increasing amounts of domestic savings, were not helping either. thus, with poor productivity growth, rapidly rising wages and generally weak cost control, canadian businesses and exporters found it increasingly difficult to compete, especially at the end of the 1980s, when the canadian dollar had reversed its earlier depreciation. for a nation that is highly dependent on foreign trade, canada certainly was doing all the wrong things to get ready for the new world of changing technology and increasing global competition. it was not until the early 1990s

rating agencies in flagging the risks built up in banks and sovereigns, ahead of the crisis. most credit rating agencies also tend to apply ordinal ranking of credit, rather than specific risk metrics that can be mapped to default probabilities or expected losses. in my view, one of the major weaknesses of credit rating agencies is their objective to establish rating stability by applying smoothing methodology that can potentially delay minor downgrades, but trigger cliff - like and abrupt downgrades in the event of sharp credit deterioration. the abrupt regrading of credits tend to spook markets and is certainly not good for investors with a heart condition. regional central banks and major institutional investors are aware of such limitations ; hence the best way forward is to complement rating - embedded investment guidelines with a more robust and rigorous internal credit risk evaluation framework. in tandem with diversification into alternative asset classes, there is a growing emphasis to improve the sophistication of risk modelling, taking into account how risk can be initially understated when herding behaviour dominates, but rears its ugly head during reversals. iv ) the growing importance of islamic finance as events unfolded in the midst of the financial crisis, the sustained expansion of global growth and development in islamic finance has emerged as one of the most prominent trends in global financial landscape. the industry continues to draw significant interests from all corners of the world. the global financial crisis underscores the potential role and relevance of islamic finance as a viable approach in investing. due to the shariah prohibition of excessive leverage and unproductive cash hoarding, shariah - compliant funds have outperformed their conventional peers since the onset of the crisis. as a result, there has been greater appreciation of the principles of islamic finance, as evidenced by the expansion of interest and demand for islamic financial products on a global scale. in line with the rapid growth of islamic finance, emphasis has been placed on the development of the international financial infrastructure such as setting prudential standards and international best practices, a role spearheaded by the islamic financial services board. the most recent significant development was the establishment of international islamic liquidity management corporation in kuala lumpur. this corporation will act as a conduit to issue highly rated short - term islamic instruments to enhance cross - border liquidity management and provide islamic financial institutions with an additional avenue to manage their short - term liquidity. complemented by other initiatives under the “ malaysian as an islamic financial centre ”, i am quite confident that