•  Market research shows that equity investments in certain advanced economy companies with significant emerging market exposure can indeed enhance portfolio performance. Local presence to serve global interests Even so, there is no substitute for direct investment in emerging market assets. But to understand the performance and risk characteristics of each market requires access to specialist knowledge of political systems, macroeconomic trends, currency conditions, and regulatory and legal frameworks in these countries. Singapore offers a compelling value proposition for government funds seeking a vantage point from which to build knowledge, insights, and partnerships in Emerging Asia. As a premier asset management centre, Singapore offers global funds a gateway to investing in Asia. Asset managers are drawn to Singapore’s strong global and regional links and their growing presence reinforces these links and at the same time enhances the larger financial ecosystem of banks, insurance companies, and the supporting networks of legal, accounting, and technological expertise. The growth in assets under management has in turn helped to draw in more sell-side products, including traditional and alternative assets like real estate and private equity, as well as a wide range of capabilities. Several government funds have set up offices in Singapore to support their research and investments in Asia. They include: •  ICPRC;  •  Norges Bank Investment Management;  •  the Swiss National Bank; and  •  La Caisse de dépôt et placement du Québec. Conclusion Managing money for the long-term is one of the most difficult of human endeavours.

Another important consideration that needs to be taken into account is the ability of households to service their debt. With rising income levels, the household sector in Malaysia has continued to accumulate net financial savings as reflected in higher accumulation of deposits against accumulation in debts. Household deposits, as a percentage of GDP, remains high at 67%. Strong household debt servicing capacity is also reflected in the continued improvement in non-performing loans ratio of the household sector, which declined from a peak of 12.2% at end-1998 to 8.1% at end-November 2003. Amidst low and stable inflation, the cost of financing has been kept low to promote sustained consumption and, of greater importance, to stimulate stronger investment activities. The positive effects of increasing bank lending, especially to small businesses, have been an important factor in supporting the domestic economy. As at end-November 2003, bank lending to small and medium scale enterprises expanded by 9% year-on-year, accounting for one-third of the share of business loans. The growth of the small and medium scale enterprises is important in supporting a more balanced economic structure that will enhance Malaysia's potential for economic expansion and employment. The Merdeka Savings Bond will provide Malaysians with an additional avenue and incentive for savings. For retirees who spend out of their pensions and accumulated savings, returns on their  BIS Review 2/2004  1  savings is an important source of income to support their consumption.