than the aes. the re - emergence of growth in the crisis - affected aes could be expected to strengthen external demand for the exports of emes, thereby mitigating the effect of slower domestic demand. among the asian economies, we do expect to see similar trends. again, sustained domestic demand, while lower than in the past, will continue to support growth. there has been a lot of concern about the chinese economy for obvious reasons – it having become the second largest economy in this world. and among many regional economies, it is now their most important trading partner. so, if the chinese economy catches a flu, we will all feel the effects of its sneezing. having said that, the chinese economy will continue to grow and the policymakers there seem to be determined in ensuring that it does. implications to malaysia malaysia will certainly benefit from the more positive growth environment, especially given the better growth of its major trading partner economies. the malaysian economy is bis central bankers ’ speeches projected to grow by 4. 5 – 5. 5 %. this outlook is supported by the strong growth of 6. 2 % in the first quarter of 2014. the outlook has improved due to better external demand conditions. after growing by only 2. 4 % in 2013, malaysia ’ s exports have grown by almost 13 % so far in 2014. for a small open economy like malaysia, and others like it, the experience of the crisis and the years since has certainly brought home the vulnerabilities and risks of being integrated with the global economy. but, i believe that it has also highlighted our dependence on the global economy and the need to be even more integrated with the global economy. at the risk of a slight diversion, allow me to elaborate a bit on this point. after the crisis, there was some excitement about domestic demand being the driver of growth, and there was some justification for such enthusiasm. there was certainly a component related to the growth in incomes and private demand. but there was also a significant component related to public spending and the rapid growth of domestic credit. the outcome is higher debt levels for both households and the government. this is clearly not a sustainable strategy for growth. indeed, the experience has shown that there are limits to how fast and how sustainably we can grow by relying on domestic demand alone. therefore, going forward, while domestic demand will continue to support growth, we really need to strengthen our integration with both the regional and global economy, and by implication, strengthen

our overall level of economic competitiveness, if we are to achieve sustainable growth over the long term. returning to the economic outlook, the good news is that we are seeing more sustained growth around the world and that is already beginning to benefit malaysia and creating more balanced growth of the malaysian economy. now what are the potential clouds over this rather sunny outlook? there are several, but in the interest of time, i will just mention five. the first of this is the slow recovery of investment in the aes after the crisis. it has been noted that this recovery, unlike recoveries from past recessions, has been accompanied by rather lackluster investment. this is despite the fact that companies are sitting on large piles of cash. what have companies been using those cash piles for? well, either they have been returning that cash in bucket - fulls to shareholders or using it to support their share prices through share buy - backs. it was reported in yesterday ’ s financial times that during the first three months of this year alone, the s & p 500 companies in the us spent a record us $ 241 billion to repurchase shares and pay cash dividends. while this may help to keep share prices high, they do not create new sources of growth. meanwhile, capital spending by the s & p 500 companies has grown by an average of just 3. 6 percent per year over the last five years. ultimately, the quantity and quality of investment will determine the quality of growth now and well into the future. the second issue facing these economies is that despite the drop in unemployment, productivity growth has remained weak. the way we understand the recovery process, when demand picks up, companies will first try to meet it using its existing workers. productivity increases. however, as demand continues to grow, the increase in productivity of existing workers will be insufficient and companies have to hire new workers to increase production. so employment increases. therefore, an increase in productivity is accompanied by an increase in employment. we have not witnessed that phenomenon this time. in the us, the unemployment rate has fallen from its peak of 9. 8 % to 6. 3 % in may 2014 but productivity was only growing 1 %, less than half of what it was in the years prior to the crisis. bis central bankers ’ speeches there are a number of possibilities as to what is going on : • in the uk and us, it has been noted that the number of business start - ups has increased significantly in the post - crisis