Asem forum to boost Asian Bond Market<\/p>\n
Pavin Chachavalpongpun, The Nation Asia News Network, Bangkok<\/p>\n
Earlier this month, Asia and Europe shared an upbeat view of
\nthe world economy at the end of the annual Asian-Europe Meeting
\n(ASEM) of finance ministers Meeting in Bali, Indonesia. One of
\nthe highlights was Europe's endorsement of the Asian Bond Market,
\ndesigned to funnel Asia's huge pool of savings directly into
\nAsian investments. Further consultation on ways to strengthen
\ncooperation will be pursued at the ASEM foreign ministers meeting
\ntoday and tomorrow.<\/p>\n
When ASEM was born in 1996, Asia and Europe recognized the
\nneed to forge a new kind of cooperation. Unexpectedly, Europe
\nwitnessed Asia's financial meltdown in the aftermath of the 1997
\ncrisis. Europe saw how, behind the facade of economic success,
\nAsia was laid low by its vulnerability due to the lack of
\nregional financial stability.<\/p>\n
Only recently have Asian economies made a comeback. When
\nThailand announced the first \"Asia for Asia\" network through the
\ncreation of the Asia Cooperation Dialogue (ACD) in 2002, Europe
\nwas anxious to engage in a new partnership with ACD.<\/p>\n
When Thailand initiated the Asian Bond Market development
\nunder the ACD framework, the opportunity for such engagement
\nbecame clear. The launch of the first Asian Bond Fund, endorsed
\nby 11 Asian central banks, resulted in the pooling of reserves to
\nestablish a US$1 billion (Bt43 billion) regional bond market.<\/p>\n
Furthermore, at the recent ACD meeting, participants saw the
\nmerit of having ACD financial experts explore the possibilities
\nof setting up Asian Bond Fund 2 to enable other Asian countries
\nto participate in Asia's own financial arrangement. India has
\nalready expressed interest in putting forward $1 billion to start
\nup the Asian Bond Fund 2.<\/p>\n
The concept of an Asian Bond Market was met with a favorable
\nresponse from European leaders. Pascal Lamy, the EU Trade
\nCommissioner, told Prime Minister Thaksin Shinawatra that the
\nAsian Bond Market was a very good idea for mobilizing regional
\nfunds, for Asia to invigorate its own financial system and to
\nwhittle away the region's financial vulnerability.<\/p>\n
The premier stressed the need to keep Europe abreast of the
\nlatest developments. He proposed through Asem last year a Task
\nForce for Closer Economic Partnership, with special emphasis on
\nthe Asian-Euro Bonds linkage, the creation of a Euro Bond Market
\nin Asia and the use of the euro as a major currency in the region
\n-- all moves that would reduce Asian vulnerability from dollar-
\ndenominated debt instruments.<\/p>\n
The use of the euro as a reserve currency and as a means of
\ntransaction in Asian financial and commercial markets would
\nenable Europe to make a greater contribution to the development
\nof Asia's new financial architecture, providing confidence and
\nfinancial security by spreading the risks from sudden shocks.<\/p>\n
But Europe has cautioned that, at this embryonic stage, a lot
\nmore needs to be done in the development of the Asian Bond. Asia
\nwill have to make sure that it is able to stimulate a regional
\nconvergence before proceeding to capital market integration.
\nEurope can help provide technical training to further refine
\nAsian capital market infrastructures, such as rating agency
\nstandards, a settlement system, tax impediment, currency risk and
\nexchange control liberalization.<\/p>\n
Europe's contribution to Asia's financial structure was
\nrevealed during the first ASEM Task Force Meeting in May. The
\noutcome of the meeting reflected Europe's enthusiasm to form a
\nnew forum for Asem to discuss the European experience in
\nfinancial integration, its successes and obstacles.<\/p>\n
Participants from Europe pointed out that the prerequisites
\nfor the realization of the Asian Bond Market include firm
\npolitical support from Asian leaders in order to achieve a
\nsuccessful regional economic and financial integration, and
\nregional cohesion in the process leading to intra- and inter-
\nregional integration.<\/p>\n
Thailand is fully aware of the significance of mustering
\npolitical support from other Asian leaders. On the one hand,
\nother cooperative frameworks have been promoting various aspects
\nof the Asian Bond Market's development. On the other hand,
\nThailand has been emphasizing the role of the ACD as a forum
\nwhere political support of Asian leaders can best be expressed.<\/p>\n
The success of the Asian Bond Market also depends very much on
\nthe involvement of other players outside the region to guarantee
\nthat this regional bond market complies with strict market-based
\nrules, the logic of good governance and institutional
\ntransparency. The Asem Task Force is working hard to encourage
\nEurope to actively engage in the process.<\/p>\n
To reaffirm their commitment to the Asian Bond Market, ACD
\nmembers adopted the Chiang Mai Declaration on the Asian Bond
\nMarket Development during the second ACD Meeting as a guideline
\nfor future development.<\/p>\n
From a European perspective, it expects the future expansion
\nof the Chiang Mai Initiative from a regional outfit to a
\nmultilateral arrangement. Europe sees its engagement in the Asian
\nBond Market as a move to enhance existing strong ties between the
\ntwo continents through their cooperation under the ASEM
\nframework.<\/p>\n
Europe wants to play an important role in Asian financial
\nintegration, whereas Asia sees a need to get Europe involved so
\nthat it can learn from the best European practices. This ASEM
\nForeign Ministers Meeting will help Asia move forward the Asian
\nBond institutional building process.<\/p>\n
Dr Pavin Chachavalpongpun is an official in the Department of
\nInternational Economic Affairs, Ministry of Foreign Affairs.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/asem-forum-to-boost-asian-bond-market-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}