went into real estate investment. it will be a shame if asia ’ s considerable savings pool, not to mention the inflows of capital from abroad, goes into speculative real estate instead of productive infrastructure investments that enhance long - term economic growth. having well - developed capital markets is a good way of ensuring that capital is allocated to productive uses. 23. a promising experiment in developing better mechanisms for allocating capital is the world bank - singapore urban hub. established in 2009, it brings together singapore ’ s public agencies, research institutes, and private sector players to share their experiences with developing countries, in areas ranging from water and waste management, land use planning, and urban development. as a financial centre, singapore provides a suitable platform for public - private - partnership financing frameworks to help channel private capital into infrastructure development in asia. bis central bankers ’ speeches build expertise for investing capital 24. while pricing capital correctly and improving the channels to distribute it more efficiently are necessary, they will be insufficient if the human expertise to manage and allocate the capital is not well developed. building a successful team of financial intermediaries hinges on identifying the right talent and building the right competencies. 25. in singapore, mas and the industry have worked together to develop the financial industry competency standards ( or “ fics ” ), aimed at enhancing the professionalism of the financial sector workforce. the accredited programmes of fics are readily accessible, with funding support of up to 90 per cent of the programme fees. mas supports relevant training programmes under the financial training scheme, which co - funds training costs for training courses. 26. substantial investment has also been made in the area of financial research. the work of researchers here helps to increase the body of knowledge and understanding of risks unique to asian markets. many research institutes have been set up in singapore to support these efforts. 26. singapore has put much effort into attracting asset managers to bolster the buy - side of the investment equation. as at end - 2010, assets managed out of singapore stood at s $ 1. 4 trillion, with a rolling 5 - year average growth rate of 16 per cent per annum. the asia pacific region continues to be the key investment destination for singapore - based asset managers, accounting for just over 60 per cent of total assets under management. private equity, venture capital, and other alternative investors have found singapore a conducive centre to access regional and international investment opportunities. such concentrations of investment talent and expertise in the major financial

35 per cent of gdp, compared to 21 per cent in latin america and 25 per cent in eastern europe. high rates of investment and high rates of economic growth created a virtuous cycle of development in emerging asia during the last 40 years, unmatched in history. 7. but there are growing concerns whether this is too much of a good thing. the investment - to - gdp ratio in developing asia has gone up further, from 30 per cent in 2000 to 38 per cent last year. the ratio of gross capital inflows to gdp has doubled over the same period, from 8 per cent to 17 per cent. these numbers, in themselves, are not cause for concern. indeed, some would argue that emerging asia ’ s investment on a per capita basis is not very high. the real question is whether these investments are going into the right places. asia ’ s periodic bouts of asset market bubbles – especially in real estate – are a case in point. michael pettis of beijing university, for instance, warns that asia ’ s extraordinarily successful development model will eventually run into the constraints of “ massive over - investment and misallocated capital ”. bis central bankers ’ speeches 8. the key challenge that faces asia therefore boils down to this : “ how can asia harness its sizeable domestic savings and large inflows of foreign capital to realise its economic potential? ’ there are three things emerging asia needs to do right. first, asia needs to price capital correctly. second, asia needs to strengthen its infrastructure for allocating capital. third, asia needs to build up expertise in investing capital. price capital correctly 9. let me begin with the pricing of capital. history is replete with examples of how mispricing capital leads to serious misallocation of resources, which in turn leads to excessive risk - taking and a build - up of debt that eventually ends in a financial crisis. 10. take latin america in the 1970s. global interest rates were low and capital sought higher returns in a booming region. international creditors lent huge sums for industrial development. external debt quadrupuled between 1975 and 1983, rising to 50 % of the region ’ s gdp. but when interest rates soared from 1980 onwards, the payments to service this debt began to cripple the economy. at the same time, the projects these investments went into failed to deliver the expected returns. it all ended in a severe debt crisis that set back latin america by at least a decade. essentially