pongpen ruengvirayudh : managing currency stability speech by ms pongpen ruengvirayudh, deputy governor for monetary stability of the bank of thailand, at the scb collaboration with myanmar banks dinner talk, yangon, 13 august 2015. * * * good evening, excellencies, governor of the central bank of myanmar, distinguished guests, ladies and gentlemen, i would like to thank the siam commercial bank for inviting me to give a keynote speech on this occasion. myanmar and thailand have a long - standing cultural and economic relationship, particularly in trade and investment. this auspicious event marks yet another crucial step forward in promoting myanmar - thailand friendship, especially through financial and banking system. it is my hope that our two nations will continue to mutually benefit from their strong economic bind for many generations to come. living in a more volatile and interconnected world ladies and gentlemen, one of the most important trends over the past decades is the rapid integration of international finance. from the perspective of our asean economies, we have also gone through both regional and global interconnectedness. this is especially apparent for myanmar, whose pace of integration is among the fastest, with ongoing liberalization on many fronts. myanmar is thus becoming one of the attractive destinations for foreign investments. this configuration of financial integration is a double - edged sword. on the one hand, it helps distribute and diversify risk, raising economic efficiency and strengthening system stability. on the other hand, tighter financial linkages imply large and swift transmission of shocks across countries, particularly through a large expansion in gross capital flows with an increased volatility of those flows and exchange rates. the challenges we face in thailand to large extent also apply to emerging markets as a group. the massive equities and bonds sell - offs in emerging markets during the taper tantrum episode in 2013 were vivid examples of “ financial spillovers ”. there is no doubt that the benefits of integration into global economic and financial markets outweigh their costs. therefore, the relevant question is thus how countries should respond to increased capital flows volatility. this year, we gather here at an important juncture of what seems to be yet another shift in global economic and financial landscape. this may create a challenging environment for small open economies to conduct policy, particularly capital flows and exchange rate policy. given recent economic and financial development, it is clear that the main drivers of ensuing volatility in capital flows and exchange rates are threefold. first, policy

. though much work is required on the corporate sector in the march toward modernization of the thai economy, the government and the central bank also have vital roles in maintaining stable economic environment and providing the required infrastructures to allow the private sector to drive forward to create wealth and prosperity. several long - term plans have been made in the past couple years. on the macroeconomic front, the bank of thailand has adopted inflation targeting as a framework of our monetary policy since may 2000. it may be a little too early to claim our success, but the results thus far have been encouraging. long - term interest rates of the interpolated 14 - year government bonds were reduced from 8. 3 percent at the beginning of 2000 to currently at 6. 1 percent. inflation remained subdued and will stay within the target range during the next two years. the maturity of state enterprise debentures offered in the market increased from a maximum of 7 - year in 1998 up to 20 years in 2000, reflecting greater confidence on the long - term economic stability. on the financial system level, we are drafting a new financial system master plan in cooperation with stakeholders and representatives from other regulators within thailand such as the sec as well as the department of insurance. this will provide a new and vibrant financial system whose survival will be judged by the value added it creates and delivers to the clients. and these will ensure adequate provision of financial services as required by the new economic environment. as for the current economic policy, we are not yet out of the crisis. the economy recovered from a 10. 8 percent contraction in 1998 and posed a 4. 2 percent and 4. 3 percent in 1999 and 2000, respectively. nevertheless, the global slowdown, particularly from our main trading partners such as the us and japan who account for roughly 35 percent of our exports, have complicated our tasks. here, it is the lack of confidence in the overall economic conditions that is the main problem that prevents the resumption of business lending. earlier this week, the government announced its plans to put in place additional fiscal stimulus for the fiscal year 2002, as well as programs to stimulate domestic spending. these include new measures to utilize excess liquidity in the banking sector to further enhance economic activities, to increase investment through a matching fund, as well as to retrain the workforce. these should provide the much - needed economic stimulus to the corporate sector. prosperity of our nations rests on the hard work of the corporations, for what really matters in the long run is your