In this regard, there is a significant role for key stakeholders, including industry players, to educate the public to be more responsible for their retirement needs, enhance understanding of the risks faced by retirees and design products and services that provide long term financial security for the retirees. Another major challenge facing pension systems is the implication of financial market environment on pension investment strategies . While the demand for savings and retirement products exert growing influence on financial markets, subsequent falls in asset prices have led to wide-spread funding pressures in the past for most pension systems. This was exacerbated by the limited supply of financial instruments to meet the long-term liabilities of pension funds leading to asset liability mismatch and enhanced exposure of the fund to short-term price volatility. Another observation worth highlighting under the current pension setup in most jurisdictions is the absence of a single regulatory body to oversee the functions of an effective and efficient pension delivery system, both public and private. The absence of a single regulatory body has its list of drawbacks such as impeding the development of market infrastructure, the ability to conduct effective oversight of the providers' performance and strategies and monitor the investments made by pension funds. A pension industry that is not cohesively governed may result in duplications and unnecessary administrative cost. Hence, to strike a balance between achieving goals of market efficiency and reducing contingent fiscal liabilities, while promoting appropriate social benefits, may warrant a singular and unified approach under a single regulatory body.

This might involve higher rather than lower interest rates because of a risk premium, plus greater uncertainty. Before moving on from the subject of competitiveness, let me leave you with a couple of thoughts. If Hong Kong has, in some underlying sense, been suffering from severe uncompetitiveness, how does one explain the continuing strength of the trade and current account performance...  … and the fact that the pace of recession in Hong Kong over the last two years has not been significantly different from that in a number of other economies in the region? 6  BIS Review 17/2002  I am drawn to conclude that the criticisms of the peg on competitiveness grounds do not stand up too well under scrutiny. Even if the foregoing analysis and discussion does not prove unequivocally that fixing is superior to floating, it does challenge the contention that perceived problems of competitiveness would dissipate if only we had a floating exchange rate. Living with deflation Let me turn now to the other focus of criticism of the monetary regime that I mentioned earlier, namely deflation. There are four main factors which have been contributing to falling prices in Hong Kong. First, there is the state of the global economy. A combination of recession and remarkable success in taming inflation in recent years have left policy makers in several countries facing the unusual situation of deflation. Hong Kong has not been alone, although the process has perhaps been more prolonged here than in many other places.