needs have traditionally been financed largely by government debt, asian governments are increasingly recognising that their own balance sheets cannot support the required scale of infrastructure development. thus, private sector participation is welcome in the region. 33. but public - private partnerships ( “ ppp ” ) in asia face not insignificant risks. ppp policies are not always well - defined, regulatory and legal systems are sometimes weak, and there are varying restrictions on foreign ownership. 34. robust legal frameworks and clear ppp policies need to be put in place. singapore has been supporting such efforts in partnership with multilateral agencies such as the world bank. 35. in 2009, we established the world bank - singapore urban hub to bring together singapore ’ s public agencies, research institutes, and private sector players to share experiences with developing countries, especially in areas such as water and waste management, land use planning, and urban development. to expand the urban hub ’ s infrastructure finance advisory work, an infrastructure finance centre of excellence ( ifcoe ) was launched last year. 36. the urban hub has also partnered the singapore cooperation enterprise – a platform that leverages on the public sector expertise of singapore. together, they have implemented six projects in indonesia, vietnam, china and mongolia. this includes helping these governments develop a regulatory and financing framework to prepare ppp projects for private sector investment. bis central bankers ’ speeches 37. regional governments have also introduced schemes to encourage private sector investment. for example, the indonesian ministry of finance has worked with the world bank to set up the indonesia infrastructure guarantee fund. this fund provides guarantees to the private sector against risks arising from government actions, so as to improve the creditworthiness and quality of ppp infrastructure projects. 38. a critical success factor for achieving asia ’ s infrastructure investment potential is a well - developed financial sector. asia needs financial markets that are deep enough to effectively intermediate its considerable savings pool and broad enough to provide a range of suitable instruments for risk mitigation. although asean has made progress on these fronts since the 1997 crisis, more needs to be done. these include strengthening legal and regulatory frameworks, increasing market access, harmonising cross border regulations, and raising the level of corporate governance. 39. asean has set in motion several initiatives. it has drawn up a scorecard to identify gaps in the development of bond markets. its capital markets regulators are working on initiatives to harmonise domestic laws, regulations, and practices. it has introduced the asean plus standards, which are disclosure

12. third, asia ’ s strong recovery from the crisis has led to high rates of capacity utilisation and tightening of labour markets. this has prompted a gradual build - up in wageprice pressures. 13. i do not want to minimise the inflation risks in asia – no central banker would take a light attitude towards inflation risks – but i do want to put the issue in perspective. 14. some of the price pressures facing asia are no doubt structural. we can expect the relative price of food – and commodities in general – to increase over the medium to long term on the back of growing global demand especially in the emerging economies. likewise, capital will continue to flow from advanced economies to emerging economies, reflecting growth differentials and a shift in global portfolios towards higher yielding asian assets. these two factors will be a source of inflation bias in emerging asia over the medium term. 15. but a good part of the inflation in asia is also temporary. the pace of food price inflation and capital inflows into asia will moderate compared to the last two years. much of the recent food price increases reflect the impact of supply disruptions, and these are largely expected to be of a temporary nature. capital inflows are also unlikely to persist at the volumes seen in the last two years, as monetary policy settings in the advanced economies are normalised. 16. more importantly, policymakers in most asian economies are not behind the curve, or at least not anymore. central banks in asean are deeply cognisant of underlying inflation risks. they have either hiked interest rates or allowed the exchange rates to appreciate over time or done both. malaysia and thailand have raised policy rates by four and six times respectively since early 2010. key asean countries are also relying more on exchange rate appreciation to dampen import price pressures. bis central bankers ’ speeches 17. in singapore, mas preemptively tightened exchange rate policy as early as april 2010. subsequently, exchange rate policy was tightened in october 2010 and again in april this year. allowing the singapore dollar to strengthen has had a dampening effect on inflation in singapore, which would otherwise have been much higher. headline inflation has probably peaked in singapore and is expected to average 3 to 4 per cent this year. core inflation – which excludes private transport and accommodation costs – is expected to be 2 to 3 per cent this year. 18. asean policymakers have also been complementing monetary policy actions with macroprudential measures aimed at managing the inflation