..Press Release................................ UNESCAP News Services

Date 20 February 2007
Press Release No. G/01/2007

UN: DEVELOPMENT OF CORPORATE BOND MARKETS IN LOCAL CURRENCIES COULD HELP RAISE FUNDS IN REGION

UNESCAP workshop examines development of bond markets

Bangkok (United Nations Information Services) – The development of corporate bond markets in local currencies will facilitate the raising of long-term and large-scale funds, this according to experts at a UNESCAP-sponsored workshop in Bangkok held from 14-15 February.

The experts also agreed that the issuance of bonds in a country’s local currency would reduce dependence on foreign currency bonds, and could contribute to the elimination of excessive currency mismatches, a common problem in the region.

The two-day workshop, Regional Workshop on Capacity Building for Development of Bond Markets in ESCAP Members Countries, attracted delegates from countries with underdeveloped markets as well as those with advanced financial sectors.

Participants from Bangladesh, Japan, Mongolia, Pakistan, Republic of Korea, Sri Lanka, and Thailand included policy makers from the region’s central banks, Ministries of Finance and Treasury Departments, as well as representatives of public and private institutions.

Mr. Ravi Ratnayake, Director of UNESCAP’s Poverty and Development Division, stressed the importance of members working hand-in-hand to develop this area.

“The sharing of such experience will not only enhance the understanding on the effective ways for bond market development,” he told participants, “but also increase the financial stability of the Asia-Pacific region and help to provide resources for further development.”

As part of the workshop, participants shared experiences and opinions on the development of bond markets, which could mobilize resources efficiently and provide low cost capital necessary for sustained economic development.

A number of UNESCAP members, for example, Hong Kong (China), Japan, and the Republic of Korea, possess advanced financial sectors, including well-developed bond markets. According to UNESCAP, good practices on policy formulation for institutional evolution in promoting bond markets in these members hold very high potential to be adapted in the countries with underdeveloped bond markets in the region.

Mr. Jae-Ha Park, Senior Research Fellow of the Korea Institute of Finance, described the Republic of Korea’s transition to a developed economy and its recovery from the 1997 Asian financial crisis. He said that despite a number of problems, the country was able to create a sound financial system through reorganization, significant enhancement of the Central Bank’s independence, creation of a consolidated supervisory body, and by increasing the supply of bonds.

“After the crisis, everything was restructured,” Mr. Park said. “The Korean experience of developing bond markets may provide a good benchmark for other Asian countries in building their local bond markets,” he added.

In order to enhance capital flows in Asia, there should be a continuous information exchange between Asian countries and institutions, suggested Professor Naoyuki Yoshino of Japan’s Keio University, who gave a comparative analysis on foreign direct investment and capital flows.

He also urged “a harmonization of the various legal frameworks, development of the financial market and its products and finally, and a drive towards consumer education, particularly with regard to asset management and personal loans.”

Speakers representing countries with underdeveloped markets outlined past efforts and recent initiatives, as well as the main hindering factors for the development of bond markets. Many similarities were identified in the challenges and strategies to developing well-functioning bond-markets.

Additional Superintendent of the Public Debt Department of the Central Bank of Sri Lanka, Mr. C.J.P. Siriwardena, noted that “without commitment of the government and political stability it’s impossible to develop an efficient bond market.”

The importance of a creation of a Regulators network among UNESCAP members was also emphasized, as it would enhance information exchange and promote common policy rules of various financial activities. Participants also agreed to work on several fronts to improve working methods and enhance efficiency.

For further information, please contact:
Mr. Ravi Ratnayake, Director
Poverty and Development Division, UNESCAP
Tel: (+66) 2288 1902
E-mail: ratnayaker@un.org

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