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Raising Development Impact through Evaluation

Technical Assistance Grants to Support Development of Cross-Border Bond Markets in the ASEAN+3 Countries

Evaluation Document | 2 October 2015

This report assesses the performance of seven regional technical assistance (TA) grants executed by the Asian Development Bank (ADB) for the Asian Bond Market Initiative (ABMI), funded primarily by the People’s Republic of China (PRC), Japan, and the Republic of Korea. The ABMI was launched in December 2002 by finance ministers from the Association of Southeast Asian Nations (ASEAN), the PRC, Japan, and the Republic of Korea—collectively referred to as the “ASEAN+3” countries. The TA grants were designed to promote financial cooperation and to develop efficient and liquid bond markets in the region. ADB has been an active supporter of ABMI since its inception and currently acts as its secretariat. The seven TA grants supported ABMI during its early operations (2003–2008) and were supervised and executed by the Office for Regional Economic Integration. The choice of TA grants for this evaluation was limited to TA projects designed to promote cross-border bond issuance and trading, and for which completion reports were available.

The TA grants considered for this evaluation shared a common goal: developing effective and efficient regional bond markets in ASEAN+3 countries. The TA grants were designed and developed by ABMI in response to requests from the ASEAN+3 countries, and covered four areas: (i) development of a regional guarantee and investment mechanism, (ii) establishment of a regional clearing and settlement mechanism, (iii) development of multicurrency and regional basket currency bonds, and (iv) harmonization of bond standards and practices in the region. These areas were viewed as essential building blocks for the development of regional bond markets, which was a response to the 1997–1998 Asian financial crisis. The development of bond markets was expected to reduce the vulnerability of the financial system to economic shocks by reducing the system’s dependence on banks.

The seven TA projects focused on four areas, and taken as a whole they were rated successful. The TA grants addressed critical issues related to regional bond market development and supported decision making by the working groups of ABMI. The two initial TA grants were designed to develop a regional guarantee and investment mechanism, and led to the eventual establishment of the Credit Guarantee and Investment Facility (CGIF) by the ASEAN+3 countries in 2010. In the second focus area, the two TA grants that reviewed mechanisms for bond clearance and settlement and establishment of a regional settlement intermediary enabled the ASEAN Capital Market Forum (ACMF) to decide on the preferred settlement linkage model. The ACMF was established in 2004 with a membership composed of capital market regulators from the ASEAN countries; it deals with strategic issues relating to greater integration of the region’s capital markets. The two TA reports in the third focus area reviewed the pros and cons of multicurrency and regional currency basket bonds and identified impediments to their issuance in ASEAN+3 currencies. The final TA addressed the harmonization of bond standards, and was instrumental in the establishment in 2010 of the ASEAN+3 Bond Market Forum (ABMF), which advanced the harmonization process. The ABMF is composed of bond market experts from the region and serves as a platform for standardization of market practices and harmonization of regulations relating to cross-border bond transactions in the region.