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.