investment. there are, i think, two main reasons, and both can be related to the idea of “ maturity ”. greater investor awareness - resulting partly from investor education programmes and retail bond schemes - has encouraged individual investors to think of bonds, instead of just sticking with deposits and equities. in addition, the population of the region - like all of us - is growing older. about 7. 5 % of the population of the region was over the age of 60 in 2000. that percentage is expected to double to 15 % by 2030 : in hong kong, we have already reached 11. 5 %. not only are populations growing older. people are also living for longer. all of these considerations have led to greater attention to retirement planning and to an increase in the size of the pension fund portfolio. although asia as a whole lags behind the rest of the world in the development of pension schemes, the numerous pension reforms undertaken to facilitate pension and other retirement schemes have stimulated considerable growth in the size of funds. in some economies, such as malaysia and singapore, the pension asset - to - gdp ratio is as high as 50 to 60 %. for a number of good reasons, pension funds tend to involve large bond allocations. this has already added to the demand for bonds, and, as with public sector funds, this demand is likely to grow in the future. but, as we are all aware, there is lack of a deep bond market in the emerging asian economies and therefore much of the increased demand, from both the public and private sectors, has been satisfied by investments in bonds denominated in the major foreign currencies. indeed the net portfolio outflows from nine emerging markets in asia ( including both public and private sectors ) have increased sharply over the past five years - from us $ 50 billion in 1998 to us $ 225 billion in 2003. emerging asia as a whole is now a large net exporter of portfolio capital. the growth in demand for bonds arises from what is surely a positive process - the increase in public and private wealth in our region. however, satisfaction of this demand brings us back to the problem of the market dynamics of globalisation, which, as we all learnt from bitter experience, can have very negative effects. in a discussion about bond market development in the region, it would be useful for us to remind ourselves what this problem is. the pattern of the flow of international funds in asia has, for some time now and encouraged by financial

cross - border financial transactions within the region. a separate, but parallel consideration is the development of financial infrastructure. a number of studies have been carried out to explore the feasibility and desirability of establishing region - wide infrastructure, such as a regional rating agency and regional settlement and payment systems. apart from the many technical complexities, any proposals for infrastructure on a regional dimension would require thorough discussion among different jurisdictions and rigorous assessment of business viability and impact on the market. long planning time would therefore be expected before any conceptual proposal could be put into practice. effective financial infrastructure across the region is a precondition for debt market development within the region. without it, all of the other initiatives i have described would be about as useful as buying aeroplanes without having the airports in which to land them. a pragmatic approach is therefore necessary, leveraging on existing infrastructure within each jurisdiction and creating a network of bilateral links between jurisdictions. each jurisdiction will, of course, develop its own infrastructure and links according to needs, although the main lesson in this field is that it is better to be ahead of needs than behind. let me take hong kong as an example. we have a reasonably advanced and sophisticated financial infrastructure, in keeping with our status as a regional and international financial centre. we have, over the past decade, extensively developed our payment and settlement systems to enable cross - border, multi - currency transactions to be conducted and settled in real time, without settlement risk. for debt settlement, we have established bilateral linkages between our central moneymarkets unit and debt depositories in other jurisdictions, such as euroclear and clearstream, australia, new zealand and korea. we have also recently set up a direct link with the gsbs in mainland china. hong kong already has a real time settlement system for the hong kong dollar, the us dollar and the euro. we have a standing offer in the region to link up the rtgs payment system with other currencies in other centres with rtgs capability - for example tokyo. we hope that, in time, when circumstances permit, it will be possible to extend this to the renminbi. the aim is to provide a platform that prepares hong kong to maintain and develop its role in the changing regional and international financial intermediation process. conclusion i have outlined in this address the case for an asian bond market and the role being played by the public sector in promoting the development of such a market. collectively and individually, central banks and governments