The Asian Development Bank (ADB) and ASEAN nations, along with China, Japan, and the Republic of Korea, are moving to establish a jointly owned credit guarantee facility, which is aimed at promoting financial stability and boosting long-term investment in the region.
The Manila-based financial institution said in a news release on April 14 that ADB's Board of Directors approved the establishment of the Credit Guarantee and Investment Facility (CGIF) as a trust fund with a capital contribution of 130 million USD. The ASEAN+3 governments will provide a combined 570 USD million to create the 700 million USD facility, including 200 million USD from China, 200 million USD from Japan and 100 million USD from the Republic of Korea.
"The Credit Guarantee and Investment Facility will make it possible for corporations to issue bonds in their domestic markets and in neighboring markets and across ASEAN+3," said Noy Siackhachanh, advisor with ADB's Office of Regional Economic Integration, adding that "channeling regional savings into regional investments will support economic growth, creating jobs and alleviating poverty."
According to ADB, the local currency bond markets of emerging East Asia have expanded dramatically in recent years to stand at 4.4 trillion USD at the end of 2009. However, they still only account for around 7 percent of outstanding bonds globally. Moreover, corporate bonds account for only 30 percent of outstanding local currency bonds in the region.
Since the 1997-1998 Asian financial crisis, governments in the region have been working to expand domestic bond markets, with ASEAN+3 countries launching the Asian Bond Markets Initiative in 2002, and a number of central banks establishing the Asian Bond Fund in 2003 to support market development. CGIF marks a continuation of efforts to promote regional markets in an increasingly interdependent region.
The pilot CGIF, due to start operations in 2011, will provide guarantees on local currency denominated bonds issued by companies in the region, according to ADB.
ASEAN is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam./.
The Manila-based financial institution said in a news release on April 14 that ADB's Board of Directors approved the establishment of the Credit Guarantee and Investment Facility (CGIF) as a trust fund with a capital contribution of 130 million USD. The ASEAN+3 governments will provide a combined 570 USD million to create the 700 million USD facility, including 200 million USD from China, 200 million USD from Japan and 100 million USD from the Republic of Korea.
"The Credit Guarantee and Investment Facility will make it possible for corporations to issue bonds in their domestic markets and in neighboring markets and across ASEAN+3," said Noy Siackhachanh, advisor with ADB's Office of Regional Economic Integration, adding that "channeling regional savings into regional investments will support economic growth, creating jobs and alleviating poverty."
According to ADB, the local currency bond markets of emerging East Asia have expanded dramatically in recent years to stand at 4.4 trillion USD at the end of 2009. However, they still only account for around 7 percent of outstanding bonds globally. Moreover, corporate bonds account for only 30 percent of outstanding local currency bonds in the region.
Since the 1997-1998 Asian financial crisis, governments in the region have been working to expand domestic bond markets, with ASEAN+3 countries launching the Asian Bond Markets Initiative in 2002, and a number of central banks establishing the Asian Bond Fund in 2003 to support market development. CGIF marks a continuation of efforts to promote regional markets in an increasingly interdependent region.
The pilot CGIF, due to start operations in 2011, will provide guarantees on local currency denominated bonds issued by companies in the region, according to ADB.
ASEAN is made up of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam./.
