Asia-Pacific financiers on Sunday called on the region's economies to quickly develop bond markets to provide alternative forms of capital for businesses.
Luc Rousselet, chairman of the APEC Financiers' Group, a private sector initiative to strengthen financial systems within the APEC region, said a taskforce should be set up in each country to develop domestic bond markets.
The bond market in APEC economies was totally underdeveloped, Rousselet told reporters at the Asia Pacific Economic Cooperation forum, the finance ministers' meeting in the oil-rich sultanate of Brunei.
In Langkawi, Malaysia last May the financiers submitted a report to the finance ministers, identifying actions required to improve the efficiency and liquidity of Asian bond markets.
Although the ministers last year ordered their officials to work with the private sector to address the shortcomings of Asian bond markets, Rousselet said there was still a need for action.
"We think that every economy in APEC should establish a taskforce (to develop bond markets) as soon as possible," he said.
Rousselet, general manager of the Brunei-based Baiduri Bank — which is affiliated with French bank BNP-Paribas — said each taskforce would need to develop reliable benchmark yield curves and introduce a credit rating process.
It had been demonstrated by the mid-1997 Asian crisis that debt markets in emerging markets were "totally underdeveloped."
"The consequence is that the private sector tends to finance all its financial requirements in short-term debts," he said.
This caused a mismatch between the maturity of the debt and the maturity of the investments made, he added.
"And that has been demonstrated by the (Asian) crisis," he said.
A domestic bond market would reduce the dependence on foreign currency debt.
"Of course ... as happened in this part of the world, when the local currency depreciated, it killed the borrower," he said.
APEC groups Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam. — (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
