anticipate increased regional integration. the key driver and rationale behind this momentum is clear. asean economies aim to increase competitiveness from increased economy of scale and scope, and technology transfer, with link up of supply chain of asean and asean plus 3, in particular. this, in turn, will help strengthen our competitive position in the global market. thus, the vision of financial sector is that it should seamlessly facilitate this process, whilst safeguarding financial stability. it should be emphasized that economic integration in asean is not aimed to reach the same level of integration as eu, as the single currency and monetary union is not on the agenda. the banking sector liberalization agenda includes discussion on harmonized standards of regulations, which is key criteria for licensing, as well as financial stability arrangement. this will be finalized this year, with timeline of liberalisation in 2014 to 2020, depending on country ’ s readiness. capital market integration will also be important to ensure that regional market becomes deeper and wider, to serve growing needs of growing and large investment projects to link up the region ’ s production and infrastructure. moreover, it will also help to intermediate capital inflows into the region in a more efficient and stable manner. regional capital market will also be important for managing the growing pension funds of the region, where some countries are facing growing savings but aging population. it will offer a regional alternative to the currently fragile market in the west. how well prepared is thailand for this? the banking system already has high degree of foreign participation. market share of foreign banks and hybrid banks is 20 percent. the foreign banks also accounts for about 50 percent of transactions in otc derivatives market here. these main players in foreign and hybrid banks include banks from the uk, eu, us, japan, and china, as well as banks from singapore and malaysia. thus, the banking system and thai banks are familiar with international competition. thai banks already have presence in all asean countries, except brunei. and for this, the aec will help reduce barriers and enhance business operations of thai banks abroad. the financial sector master plan phase ii, for 2010 – 2014, has outlined to the banks the timeline of increased competition, and thus banks have prepared themselves. in line bis central bankers ’ speeches with this, we have already announced that existing foreign bank branches can open up to 20 branches in thailand if they choose to become local subsidiaries with capital base in the country. we are also assessing the possibility of allowing new restricted banking license 2012 – 2013

prasarn trairatvorakul : the strength of the thai economy and future development in thailand ’ s financial system speech by dr prasarn trairatvorakul, governor of the bank of thailand, at the british chamber of commerce, bangkok, 4 september 2012. * * * ladies and gentlemen, first of all, i would like to thank the british chamber of commerce for inviting me to give a keynote speech at this prestigious gathering. the great britain and thailand have built strong economic relationship and business ties over the decades. within europe, the great britain is by far the second biggest trading partner of thailand, accounting for 13. 9 percent of total trade volume between europe and thailand. in terms of foreign direct investment, britain is also the second most important investors among european nations, particularly in banking, real estate, and retail sales sectors. i, therefore, hope that thailand and britain will continue this strong tie both in terms of trade and investment, and to prosper together in the future. the past few years have brought us many economic surprises and challenges. after severe floods took a toll last year, thailand is currently facing much challenge from the global economic downturn, particularly from the continued euro debt crisis and more intensified global competition. despite this backdrop of strong headwinds from abroad, i believe that the thai economy will be able to sail through. i am pleased to say that during the first half of this year, post - flood recovery has been robust. production constraints continue to ease, while private sector demand is back on track. the growth momentum in the period ahead is likely to sustain, driven mainly by domestic demand. we expect that economy will grow at 5. 7 percent this year and 5. 0 percent next year. this episode of rapid growth recovery is that it also witnessed macroeconomic stability. thailand has a long history of low and stable inflation, averaging around 3 percent over the decades. the unemployment rate in recent years has also been low at around 1 percent. meanwhile, external position remains solid with moderate short - term external indebtedness. the banking sector has been safe and sound with sustained profitability amidst the ongoing global financial crisis. despite capital inflows into thailand, there appears to be no sign of asset price bubble while the degree of leverage in the corporate and household sector is still low. such promising outlook is reflected in thailand ’ s sovereign credit rating which has been stable at investment grade despite intermittent political tension. at this juncture, please allow