ASEAN+3 Finance Ministers Symposium on Issuance of Bonds Denominated in Local Currencies
Opening address by
John Lintjer
Vice-President (Finance and Administration)
Asian Development Bank
Beijing, People's Republic of China
14 November 2003
Distinguished Guests, Ladies and Gentlemen,
Let me first thank the Ministry of Finance of the People's Republic of China for inviting ADB to co-chair this important Symposium. It is a pleasure to see old friends from the International Department of the Ministry of Finance and the other members of the ASEAN+3 group again. I am also very glad to see potential investors in Asian bonds at this gathering.
This is the third working group event in which the ASEAN+3 Asian Bond Market Initiative has brought together policymakers and the private sector, following the Guarantee Meeting hosted by the Republic of Korea in June and the Foreign Exchange and Settlement Symposium hosted by Malaysia last month. Together we need to build on this momentum, because I believe that concrete actions founded on the exchange of ideas between private and public stakeholders offer a way forward for bond market development in the region.
The discussions that took place at the Euromoney Conference on Developing Asian Bond Markets last month show there is now a consensus that the development of strong and deep Asian bond markets is essential in ensuring continued stable growth.
The Asian region, as we are all aware, faces some major development challenges. To meet physical infrastructure needs alone, the investment level required by major countries in the region totals $20 trillion - $30 trillion over the next 10 years, according to ADB estimates. Asia's nonperforming loans amount to about $2 trillion, and need to be restructured and refinanced. This sheer magnitude of the region's financing requirements calls for urgent mobilization of funds.
It is comforting to know that annual savings in major Asian countries total about $2.1 trillion. Intermediation of these huge savings into investments is still primarily undertaken outside the region. Obviously, it would be more effective and efficient to have this intermediation take place within Asia.
ADB can help this intermediation process by issuing long-term bonds and providing local currency denominated loans to fund projects and companies. This can be carried out either on a local or on a crossborder basis so that projects and companies can match the currency of their revenues. The challenge, however, lies in developing a market infrastructure, along with an effective regulatory and supervision framework to attain the degree of comfort that will attract market participants to new markets. Providing benchmark yield curves, and introducing tax laws that are conducive to bond investments and various hedging instruments are some of the key challenges that face regulators in developing bond markets in the Asian region.
The ASEAN+3 countries are making encouraging progress in developing bond markets. And ADB will do all it can to support these important efforts.
We will continue to help build the infrastructure needed for Asian bond markets to flourish and assist our developing member countries to bridge the gap between investors and borrowers.
ADB is delighted to have the opportunity to work in partnership with the six working groups of the ASEAN+3 Asian Bond Market Initiative. Most of the important issues that affect bond market development are being tackled by these groups - guarantees, securitization, foreign exchange and settlement, ratings and information dissemination, technical assistance coordination, and Issuance of Bonds Denominated in Local Currencies by MDBs and Government Agencies, which is the focus of this working group.
In support of the working group on Guarantees chaired by the Republic of Korea, I am glad to report that, last month, ADB approved a study to be carried out on the regional guarantee mechanism. We are now selecting consultants for this and hope to have these finalized in time to present them to the working group meeting at the ASEAN+3 Finance and Central Bank Deputies' Meeting in Seoul.
Also for consideration in Seoul will be the Asian Bonds Online website proposed to the Credit Ratings and Information Dissemination working group, co-chaired by Singapore and Japan. If agreed upon, members of the Association of Credit Rating Agencies in Asia will then discuss at their annual meeting at the end of this month their future involvement in providing information for the website. Their participation would have several benefits. It would provide a wider audience for their research and offer a kind of peer pressure that might provide a new impetus to upgrade the quality of their analysis.
In today's symposium, organized by the Working Group on Issuance of Bonds in Local Currencies, we will be hearing presentations from Dr. Park, the views of issuers and investors, and the experiences of the region's countries. I am sure that the information shared today will be invaluable to Asia's countries as they move to set their policies and regulations governing issuance by foreign entities in their markets. It is to be hoped these government policies will then be conducive to promoting the further development of Asia's bond markets.
I therefore look forward to the presentations and frank discussion ahead of us today. This Symposium and the other programs of the working groups for ASEAN+3 Asian Bond Market Initiative will help us accelerate our efforts towards efficient and vibrant bond markets in the region. This end benefits will go beyond local financial market development to underpin growth in the region and contribute to the stability of the rest of the global financial system.
Thank you.
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