koh yong guan : review of singapore ’ s economy and financial sector opening remarks by mr koh yong guan, managing director of the monetary authority of singapore, at the press conference releasing the mas ’ s annual report, singapore, 21 july 2004. * * * introduction good morning, ladies and gentlemen. let me first give you a quick overview of current economic conditions. i supporting non - inflationary economic growth as you know, the singapore economy experienced a difficult first half last year. global economic conditions had improved markedly since then, providing support for a rebound in the domestic economy. we have since recorded four consecutive quarters of solid growth. the latest economic data released by mti showed that gdp in second quarter this year grew a robust 9. 1 % on a seasonally adjusted annual rate basis. looking ahead, the prospects for the external economy remain bright. notwithstanding the risks from rising interest rates, higher oil prices and a sharper than expected slowdown in china, the upturn in the global economy is likely to be sustained through the rest of this year and will support the continued expansion in the domestic economy. barring any major shocks, singapore is on track to achieve gdp growth of 5. 5 % to 7. 5 % this year. following an extended period of very low domestic inflation, signs of inflationary pressures have emerged in recent months. the forecast for cpi inflation in 2004 was hence revised upwards to the 1. 5 - 2. 0 % range. the labour market is also expected to strengthen, with the unemployment situation improving for the rest of the year. against this backdrop, mas shifted to a policy of modest and gradual appreciation of the s $ neer in april 2004. this policy stance was assessed to be supportive of economic growth, while ensuring low and stable inflation over the medium term. let me now turn to other aspects of mas ’ work during the past year. ii regulation and supervision first, in the area of regulation and supervision, we issued the “ objectives and principles of financial supervision in singapore ” monograph earlier this year. this will help the financial institutions we regulate and supervise better understand the desired outcomes of our supervision. let me say a few words specifically on risk - based capital. we issued details of changes to the capital adequacy requirements for singapore - incorporated banks in may 2004. we believe the new requirements are prudent but competitive, and more sensitive to the banks ’ actual risk profiles. these changes will give the banks greater flexibility to manage their capital

made net - zero commitments, a three - fold increase from the year before. this number will continue to grow rapidly. there is also greater international impetus for growing the voluntary carbon markets. the taskforce for scaling voluntary carbon markets, sponsored by the institute for international finance, has set out 20 recommendations for building trusted and wellfunctioning markets for voluntary carbon credits. climate impact x this is why today ’ s announcement of climate impact x, or cix, is significant. cix is a visionary idea for a global carbon exchange and marketplace anchored out of asia, centred on trust and innovation. it is an initiative borne out of the alliance for action on sustainability under the emerging stronger taskforce the sustainability alliance proposed to develop an asian voluntary carbon credit market, and i am happy to see more partners coming together to take forward this meaningful work. cix is a promising solution to the problem we face today of fragmented carbon credit markets characterised by thin liquidity and credits of questionable quality. cix can be a test bed for the recommendations of the taskforce for scaling voluntary carbon markets. example : the recommendation to create mechanisms for signalling demand. cix is forming a coalition of buyers and sellers committed to high quality credits. this will provide suppliers the confidence to scale up supply and catalyse the development of the carbon market. if cix can demonstrate the effectiveness of the recommendations of the taskforce, it will build strong momentum for effective carbon credits markets globally. let me highlight two significant features of cix : first, the focus on carbon credits generated through nature - based solutions ; and second, the use of technology to ensure a transparent and verifiable carbon market. nature - based solutions are measures taken to protect, sustainably manage, and restore ecosystems. examples include reforestation, and restoring peatlands and mangroves. it is estimated that nature - based solutions can provide more than 30 % of the climate mitigation needed globally by 2030. yet, such solutions currently only account for 2 % of climate funding. nature - based solutions are an attractive proposition. they not only green the world, but provide social and economic benefits that make it a better 3 / 5 bis central bankers'speeches place to live in. take for example the restoration of mangroves. mangroves not only save carbon emissions but also serve as a natural barrier against floods and support biodiversity. trust is a critical ingredient for any successful marketplace. the use of innovative technology solutions to ensure the integrity of the carbon credits traded will