This paper focuses on policies to promote the greater use of regional currencies in intra-regional trade and investment. This will reduce the dominance of the U.S. dollar and lessen the region's exposure to U.S. monetary conditions and monetary policy. A key focus in this paper is on policies to help set up efficient currency exchange markets to reduce currency exchange transaction costs. This is fundamental, as high currency exchange spreads between local currencies discourage local currency usage for trade and investment. China's policy to internationalize the RMB and set up offshore direct foreign exchange markets between the RMB and other currencies is also highlighted. Other important issues include the Local Currency Settlement Framework, the Asian Bond Market Initiative, and Asian Bond Funds.

The extent of financial globalization and volatilities of short-term capital flows create many challenges for policies of individual economies as well as challenges to global and regional mechanisms that should provide effective safety nets for countries to maintain financial stability. To maintain economic stability, countries—particularly emerging market economies—need to make use of appropriate policy tools, including monetary and exchange rate policy, reserves accumulation, and, when needed, capital control and macro-prudential measures. In addition, liquidity support mechanisms, whether bilateral, global, or regional can make a crucial difference in times of stress. Bilateral arrangements are by nature political so may not be reliable for many countries. Global (IMF) and East Asian regional arrangements (Chiang Mai Initiative Multilateralization) still do not have effective designs that will make them attractive to countries in the region. Recommendations are put forward on how these facilities can be modified to make them more attractive and effective.

This paper discusses Thailand's long-term growth experiences and future challenges for driving growth. Good growth performance between 1960 and 1985, and the boom between 1985 and 1995, led to an aspiration for Thailand to become an advanced economy by 2020. This was completely derailed by the 1997 financial crisis. It took eight years for the economic overhang from the crisis to fully dissipate. Thailand then entered a period of political crisis, which has continued to the present. After 1997, the growth drivers changed substantially, with exports becoming the main growth driver and investment collapsing. Growth has been slower than before the financial crisis and Thailand is now one of the worse growth performers in ASEAN. Export is now less effective in driving growth and there is a need to revive investment as the future growth driver. There remain many challenges to Thailand's long-term growth. The paper suggests a number of policy directions to make investment effective as the future growth driver.

Since the Asian financial crisis in 1997, Thailand has become highly dependent on exports as the main engine of economic growth. In 2008, the ratio of export to GDP was about 76.5 percent. The global economic crisis triggered by the sub-prime loans debacle in the United States has prompted Thailand to rethink its high dependence on export. This paper examines the options for external and internal economic rebalancing strategies for Thailand. External rebalancing will require Thailand to rely more on regional markets and less on the Western markets for its exports. The paper examines the possibility of promoting greater intra-regional trade and Thailand's regional trade strategies. As for internal rebalancing, the paper emphasizes the need to boost domestic public and private investment in terms of both quantity and quality to narrow the current saving–investment gap, bearing in mind the need to ensure fiscal sustainability. Finally, the paper examines broader rebalancing strategies that will help Thailand to become less dependent on exports. These include the need to (1) improve productivity; (2) increase economic efficiency; (3) deepen the production structure and create new dynamic industries; and (4) generate new growth poles.

The East Asian financial crisis was the impetus for many financial cooperation initiatives within the region. This paper reviews progress in a number of areas, particularly the Chiang Mai Initiative, which aims to enhance a country's access to foreign reserves in times of stress via a series of swap arrangements in the region, and the development of the Asian Bond Market in order to increase long-term financing for deficit countries so they will not have to rely mainly on short-term foreign borrowing, as was the case prior to the crisis. A number of recommendations are made, including the setting up of a regional organization to coordinate a multilateral version of the Chiang Mai Initiative and further development of the regional currency and bond markets to increase the private sector's access to long-term financing. Given the region's huge holding of foreign reserves, the paper also recommends a much more proactive approach in managing these reserves in order to influence global financial developments.