THURSDAY, FEBRUARY 27, 2003
Asian nations to discuss Asian bond schemes
REUTERS
BANGKOK: Asian finance officials meeting later this week plan to work out details of a new Asian bond fund that would help keep money in the region, where it would be more easily and cheaply available to nations in financial stress, a Thai official said on Wednesday.
Experts from the Association of Southeast Asian Nations as well as China, Japan and South Korea will gather on Friday in Tokyo and are expected to discuss plans to raise money by selling bonds to Asian central banks and other investors.
Creating a common fund would discourage Asian investors from sending funds out of the region to foreign institutions, which often turn around and loan the funds back to Asian borrowers at higher interest rates.
"We are going to develop new products which will be branded Asian bonds," a Thai finance ministry official said on condition of anonymity. "We don't have to wait for all the countries in the region to agree in order to proceed with the plan."
The Asian bond idea has been endorsed by Thailand and is supported by Japan, Singapore and Hong Kong. It appears to be linked to an earlier proposal by Japan to create an Asian Monetary Fund similar to the International Monetary Fund to help countries with financial difficulties.
The bond scheme could serve as an initial step to such a fund. Asian central banks are expected initially to purchase about $4 billion to $5 billion of the bonds, officials said.
The Thai official said any two countries can go ahead with the plan once issues such as taxation and regulations are resolved.
Many of the debentures will likely be denominated in US dollars, as few investors would likely be attracted to bonds denominated in local currencies, at least in the short term, according to market observers.
Asian currencies plunged when Thailand de-linked its currency the baht from the US dollar on July 2, 1997. The subsequent sell-off of other regional currencies caused widespread economic chaos resulting in IMF bailouts for countries including South Korea, Indonesia and Thailand.
Some countries criticized the terms of the bailouts as being too harsh and hindering recovery.
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