APEC business council moves to draw capital back

APEC business council moves to draw capital back

KUALA LUMPUR (AFP): The APEC Business Advisory Council will
push for the use of Asian sovereign collateralized bond
obligations as a means to attract private capital back to the
crisis-struck region, a report said yesterday.

Council chief Shafiq Sit Abdullah was cited by the Business
Times newspaper as saying the proposal would be discussed at the
Asia-Pacific Economic Cooperation (APEC) summit here later this
year.

Shafiq, who released a concept paper on the structure and
introduction of the proposed Asian bond obligations, said the
mechanism aimed at spurring international private capital could
be the grouping's solution to the Asian financial crisis.

The bond obligations allow the injection of liquidity by
investors who would not or were unable to participate directly in
the debt, he said at a press briefing on the council's summit in
November.

The council chief said in the case of Asia, potential equity
investors identified were Taiwan, Brunei, Japan, Singapore and
the Asian Development Bank.

Shafiq said the mechanism was applied in the aftermath of the
collapse of the US high-yield market in the late 1980s and again
in the Mexican crisis in 1995 to kick-start private capital
flows.

It was an effective way of creating new sources of funds by
accessing investors who would not or were are unable to
participate directly in Asian debt, he said.

Shafiq said the set-up proposed by the business council would
see equity capital being provided by cash-rich members like
Taiwan, Singapore, Brunei and Japan, and leveraged up slightly
over two times on the international debt capital markets.

Safiq said the proceeds raised should then be lent to fund
strategic areas, mostly in the private sector, via development
banks, export-import banks and financial restructuring agencies
in each country.

The Asia-Pacific Economic Cooperation forum groups Australia,
Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South
Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, the
Philippines, Singapore, Taiwan, Thailand and the United States.
Russia, Vietnam and Peru are set to join the group in November
when the group holds its annual summit in Kuala Lumpur.