ASEAN, Japan to set up body to back bonds by Asian companies
ASEAN, Japan to set up body to back bonds by Asian companies
Agence France-Presse, Tokyo
The Association of Southeast Asian Nations (ASEAN) countries and Japan plan to set up a new body in two years to guarantee bonds issued by major Asian companies to help them raise stable long-term funds, a report said Thursday.
They believe the scheme would also help decrease the regional dependence on dollars if more bonds are issued in local currencies, the Nihon Keizai economic daily said.
The plan will be endorsed at an informal meeting of member states of ASEAN and its three key dialogue partners -- China, Japan and South Korea -- in Tokyo on Friday, it said.
Deputies to finance ministers and central bank governors will discuss how to develop bond markets in Asia at the meeting, the finance ministry said, while declining to confirm the report.
The nations will aim to approve the scheme officially when their finance ministers meet in May, the Nihon Keizai said in a dispatch from Bangkok without naming sources.
The countries will decide how much money they would put up for the new institution, while considering stepping up credit guarantees by the Asian Development Bank (ADB) until the new body is established, the paper said.
The bonds to be guaranteed by the new body will be denominated in dollars in the short term but later they would be issued in yen and other Asian currencies, it said.
The move would reduce foreign exchange risks for issuers and encourage Asian consumers to funnel their relatively high savings into bonds, it said.
It is also aimed at paving the way for the creation of a common Asian currency, the report added.
Peter McCawley, dean at the ADB Institute here said "in principle, moves towards developing and improving bond markets across Asia are very welcome."
Bond markets in Asia were still underdeveloped, especially in developing countries, he noted.
"Certainly over time looking to the future, Asia needs to have well-functioning bond markets," he said, adding this would require further development of institutions.
"We need both institutions, regulatory agencies and so on that are effective and we need players in the market that are companies that are increasingly willing to issue bonds," he said.
Besides macroeconomic benefits, good bond markets would also contribute to increasing corporate governance, he said.
"One of the advantages for having a good private-sector bond market is that it does expose companies to greater transparency," he said.
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.