The Asian Development Bank will soon issue local currency bonds in Thai baht and Philippine pesos, and a further Malaysian ringgit bond, as part of its drive to promote Asian bond markets, Haruhiko Kuroda, ADB president, said in an interview yesterday.
However, he also acknowledged that “technical issues” would have to be resolved before the launch of a proposed bond in Chinese renminbi.
The ADB, based in Manila, and the International Finance Corporation, the private sector arm of the World Bank, are each hoping to issue Rmb1bn ($121m, €94m, £64m) of bonds in China. But the plans have been delayed by Chinese demands that the institutions republish their accounts under Chinese accounting standards and agree to be assessed by a Chinese credit rating agency. Negotiations are continuing.
Mr Kuroda, previously a senior official at the Japanese finance ministry, took over as head of the ADB this year and is eager to push forward financial and economic integration in east Asia.
Asian finance officials accept that economic disparities between rich and poor nations, as well as a recent upsurge of nationalist feeling in Japan, China and South Korea, make any kind of monetary union impossible in the foreseeable future. Less ambitious forms of financial co-operation and integration, however, have made steady progress.
“I really hope that in the coming five years domestic and regional bond markets will be fully developed in this region,” Mr Kuroda said, noting that the lack of substantial, liquid bond markets outside Japan, Singapore and Hong Kong was a contributing factor in the Asian financial crisis of 1997-98.
Finance ministers of the 10 members of the Association of South East Asian Nations (Asean), along with Japan, China and South Korea a group known as “Asean plus three” are expected to discuss enlarging and improving financial co-operation when they meet nextmonth on the sidelines of the ADB's annual meeting in Istanbul.
They are expected to increase the total amount available for bilateral currency swaps, now about $40bn (€31bn, £21bn), under the Chiang Mai initiative, a safety net to help Asian countries protect themselves from currency crises. They may also relax a rule that allows only 10 per cent of the available money to be disbursed before the recipient must apply International Monetary Fund conditions to its policies.
The ADB's baht and ringgit bond issues are expected to be worth the equivalent of about $100m each, while the Philippine peso issue is likely to be closer to $50m. Last year the bank made its first issues in ringgit and Indian rupees.
According to the ADB, the value of outstanding local currency government bonds in east Asia, excluding Japan, grew by 32 per cent in dollar terms last year. For local currency corporate bonds, the rise was a more modest 10 per cent.
Mr Kuroda admitted that the political row between Japan and China, the region's two biggest economies, would not help integration in east Asia. But he added: “I'm hopeful that, in spite of recent setbacks and political upheavals between the two countries, economic integration will continue to accelerate.”
