zeti akhtar aziz : strengthening of regional integration in asia speech by dr zeti akhtar aziz, governor of the central bank of malaysia, at the koreamalaysia business forum, kuala lumpur, 8 april 2010. * * * it is my great pleasure to be here this afternoon to speak at the “ korea - malaysia business forum ”, in conjunction with the 50th anniversary of diplomatic relations between korea and malaysia. the global economy is now on the path of recovery after the worst financial crisis in decades. this recovery is however uneven. several of the advanced economies are still being confronted with unresolved crisis - related issues, in addition to structural factors that will constrain their growth performance in the years to come. emerging economies, in particular asia, is leading the global recovery. the region is fast becoming the anchor of growth and stability in the world economy. new growth dynamics are already at work to reinforce the strength of asia over the next decade. increased intra - regional economic and financial integration and other structural factors are supporting this trend. while this trend will intensify, the future global environment is going to be fundamentally different. asia will be confronted with new challenges in this changed environment. asia, therefore, needs to be well positioned to effectively manage these fundamental new global trends to ensure sustainability of our economic advancement. the business community and policymakers need to rise to the new challenges and build on our existing relationships. we can work together to forge a more integrated asia in the areas of trade, investment and finance and thus, strengthen the potential of asia. my remarks this afternoon will focus on three areas ; the increasing regional economic and financial integration in asia, the implications on the evolving bilateral relationship between korea and malaysia and on malaysia ’ s strategies for reforms to better position our economy to rise to the new challenges of the global economy. the emergence of the new asia in these 50 years, asia has undergone several phases of economic transformation. while individual countries have embarked on their own strategies and achieved tremendous individual success, today, however, as the world becomes more interdependent, the development of asia has reached a new phase in which greater economic and financial integration will contribute to unlocking our potential in the global economy. over the years, trade and investment barriers within the asian region have been progressively removed and capital mobility has been on the increase. ties within asia have strengthened on several fronts, from trade to investment and financial linkages, as policymakers recognise the importance of the region as

firmly anchored and aligned to the objective of generating sustainable and balanced growth, raising the standards of living, creating employment and promoting development. with clarity in the role of the financial system and the importance of its link to the economy, the range of the financial solutions offered needs to meet these highly differentiated and changing requirements. for the households, the financial system provides a means to optimally spread their income and consumption over their life cycle. accumulating wealth via saving, investment and borrowing in the initial years, and de - accumulating of the wealth during the later years, such as through pension products and annuity schemes during retirement. this is particularly important as a population matures. the absence of these products will impose tremendous burdens to the government fiscal position and the overall standards of living. the malaysian experience has been to encourage diversity of financial product offerings to ensure that the needs of all segments of the population are met. this includes, from having basic banking products at negligible cost for lower income groups, to the wider range of bis central bankers ’ speeches savings, investment and protection products for the middle income groups and for the higher income groups, wealth management and comprehensive advisory services. in the area of financing, a key priority for any country is financing to promote home ownership. this is to meet an important basic need of society and to encourage wealth accumulation among households. malaysia approached this by initially establishing cagamas, a national mortgage corporation, which enables banks to source long - term funding to match long - term housing loans. the national mortgage corporation has continued to evolve to promote the secondary market for housing loans via securitization and mitigating risks in mortgage financing through the provision of mortgage insurance. a recent innovative arrangement introduced this year is the risk - sharing arrangements between the government and banks to provide opportunities for the lower income and younger segments of the population to own homes and thus accumulate wealth at an earlier age. another important form of wealth accumulation is the collective investment schemes such as unit trusts. the pooling of savings provides economies of scale, access to professional investment managers, as well as a diversified investment portfolio. in malaysia, this was initially promoted through the establishment of government sponsored national savings scheme ( amanah saham nasional ). participation of the average household has now paved the way for the growth in the private unit trust industry. the formation of such national savings schemes has also contributed to the development of an institutional investor base in malaysia that has been able to mobilize substantial volumes