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 $ billion in 1998 to $ 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.
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 are making good progress on a variety of initiatives aimed at reducing barriers, building infrastructure and encouraging interest in the market. In the end, however, there is only so much that the public sector can - or should - do, particularly in a region where there is traditionally not a lot of public debt. Central banks and governments have a responsibility to facilitate and promote development, and to provide an environment that is conducive to both supply (the issuers) and demand (investors). It is, I have argued, in the public interest that a healthy bond market should develop in our region. However, it is for the private sector to provide the great bulk of supply and demand. Happily, it appears that the private sector is playing its part with enthusiasm. 4  BIS Review 40/2004