Developing bond markets in the region

Developing economies of the Asia-Pacific region are faced with a chronic need to expand the resource base to strengthen the foundations of sustained economic development and poverty reduction, according to an international finance expert.

“For efficient resource mobilization, establishment of a sound financial system is a pre-requisite. Bond market development is an important area which should be promoted to provide lower-cost capital for use in the productive sectors,” Dr. Hong Bum Jang, Expert on International Finance, Poverty and Development Policy Division, UNESCAP said at a Colombo capacity building workshop for Development of Bond Markets in UNESCAP Member States this week.

He said the importance of the bond market development has been emphasized after the Asian currency crisis as an alternate and stable source of financing. “As we are aware having a robust domestic bond market is important for a number of reasons such as reducing maturity and currency mismatch, diversifying sources of debt financing within the economy, providing greater investment opportunities for financial institutions and retail investors, deepening markets by attracting reputable foreign investors, and providing an alternative source of funds whenever banks, which dominate most of the region's financial markets, are unable to help,” he pointed out.

He noted that bond financing is also one of the most appropriate financing options for long term infrastructure investment which is a priority of the region.

Jang also said the bond markets in the region excluding some countries of ASEAN are either not adequately developed or at an early stage of development. “The institutional settings are inadequate, and policy framework is weak to provide effective support for the emergence of a well-functioning bond market. Thus it is quite important to promote bond market development under government initiatives in these countries,” he said, adding that this could be promoted through capacity building for bond market development in using lessons from some selected advanced countries of the region with developed bond markets.

This workshop is a part of the main activities of UNESCAP's ongoing project on Capacity Building for Bond Market Development in UNESCAP Member States" supported by the Korean government.

The goal of the project is to strengthen and improve the policy framework for establishing an efficient bond market for efficient domestic resource mobilization by promoting through "capacity building for bond market development" of the policy makers using lessons from some selected countries of the region with developed bond markets such as Japan and Korea.