adequacy of capital and provisions. in view of the depth of the current problem, and the fact that it may be quite sometime before the global standards on these issues can be settled, regulators, in my view, must be ready to take the needed action to ensure that we address these risks in our financial systems systematically. this is why pillar ii is all the more important, because the essence of pillar ii is to ensure that financial institutions have adequate risk management process and capital, commensurate with their risk profiles. and this is why we are seeing increased vigilance by regulators and the financial institutions themselves, in terms of the rigour in the use of stresstests, which is essential in the environment of heightened volatility that superseded historical norm. the implementation of pillar ii is, however, a challenge, not only in terms of the technical and quantitative expertise for reviewing internal capital adequacy assessment process, or icaap, but also on qualitative aspects such as how to foster an on - going two - way dialogue with the supervised institutions that would enhance the icaap process. to meet this challenge, regulators need to establish a strong credibility so as to strengthen the impact of their recommendations and requirement on icaap, and in some cases, increase capital requirement to ensure capital appropriate to the material risks, not yet covered in pillar i. also, there are challenges on the legal and institutional capacity aspects on how to handle the more principle - based, and therefore, more institution - specific regulatory requirement. as for the bank of thailand, our progress on pillar ii implementation is continuing. by working closely with all stakeholders especially thai bankers, association, we have issued three prudential guidelines for basel ii since 2006. pillar ii formally took effect the end of last year, while pillar iii will be implemented in june this year. as far as pillar ii is concerned, we expect thai banks to put in place the icaap within this year and establish the comprehensive process by the end of next year. overall, we are on track with the implementation of basel ii, thereby reaffirming our commitment to international best practice. with this brief initial remark, it is my hope that this seminar would provide the needed knowledge and skills to supervisors from seanza countries for the challenges posed by pillar ii.

prasarn trairatvorakul : economic transformation and inclusive growth in frontier economies welcome and opening remarks by dr prasarn trairatvorakul, governor of the bank of thailand, at the conference on “ economic transformation and inclusive growth in frontier economies ”, jointly organized by the international monetary fund ( imf ) and the japan international cooperation agency ( jica ), bangkok, 28 january 2013. * * * ministers and central bank governors, distinguished guests, ladies and gentlemen, 1. it gives me great pleasure and honor to welcome each and every one of you to thailand, and more specifically, to the conference on “ economic transformation and inclusive growth in frontier economies ”. this event is the second in a series of conference jointly organized by the international monetary fund ( imf ) and the japan international cooperation agency ( jica ). 2. the topic of the conference is timely and relevant to current developments in the region. frontier economies are new and becoming large markets. they all have the potential to grow into tomorrow ’ s emerging economies. in recent years, we witness faster economic growth in frontier economies than larger emerging economies. we have seen frontier economies integrate into the regional and global economy. 3. frontier economies are full of potential. however, continued efforts on strengthening policy frameworks are still needed. this is to ensure long term economic growth and sustain robust economy. and i believe that today ’ s conference will contribute to these efforts as we will share and learn the appropriate lessons of others. one can leap jump the process, without repeating the mistakes. our discussion will revolve around the critical decisions on policy considerations for economic development and the way forward. 4. sharing lessons about economic development leads naturally into a discussion about the development experiences of thailand. thailand ’ s rapid growth between the late 1970s and 1997 was the result of the structural transformation. we moved from primary production to industrial production, mostly manufacturing and high - value agricultural products. the combination of ( 1 ) processed agricultural products, ( 2 ) import substitution industrialization, and ( 3 ) export promotion was the principal feature of economic development. 5. moving up global production chains elevated thailand ’ s per capita income of $ 100 in the early 1960s to nearly $ 3, 000 after 1997. more importantly, the process has resulted in the dramatic fall in poverty and improved the living conditions of the thai people. the rate of poverty had been reduced from 57 per cent in early 1960s to around 24 per cent in 1981 and to 8