Even though development of financial sector was an important policy to all the members of Association of Southeast Asian Nations (ASEAN), the urgency of it was realized after the 1997 Asian financial crisis. Later again in 2008 global financial crisis further enhance the importance of improving such financial market. According to Plummer and Click (2005), before the 1997 Asian crisis the ASEAN countries financial system was based on banking and furthermore it was the banking system that takes burden of such crisis. Thus ASEAN countries are focused on diversifying their heavy reliance on banking system into other financial intermediaries (Plummer and Click 2005). Various measurements have been taken to avoid such issues but the question is whether these were successful and/or to what extend did achieved the targeted goals. This report focuses on development of ASEAN Bond market, with an overview of the current structure and a summary of the main development in this area. Later these developments will be critically analyzed and presented with the future plan.
2. Overview of the current structure and status of Bond market After the Asia financial crisis in 1997, various activities have been taken over within the region. The ASEAN has acted as single regional body and/or as ASEAN+3, including the ten member’s addition with China, Japan and South Korea. Within the ASEAN members the big five Malaysia, Singapore, Philippines, Indonesia and Thailand has been showing a vast growth in the bond market as ASEAN5.
Figure 1: shows a significant growth in the Asian bond market from 1997-1998 onwards. Further it was stated in Asian Development Bank (2012) that Local Currency (LCY) bond market of ASEAN has a growth of US$ 5.7 trillion as in 2011 which was US$ 1 trillion in 2001. Even though there has been vast growth in the LCY bond market in a region level, some of the countries within ASEAN have not shown any significant growth in their LCY bond market. Myanmar, Cambodia, Laos and Brunei Darussalam are the countries which have not shown any momentous improvement. As stated in the Asian Development Bank (2012) there is no data available for these members (Appendix 1, Table 1). Further it was late 2005 in which Vietnam first government bond was issued (Asian Development Bank, 2012). After that it has been shown a success in the Vietnam LCY bond market as shown in Figure 2 and 3. In addition Asian Bond Online (2012) summarizes that as of July 2012, Vietnam LCY bonds outstanding has an increase 28.5% y-o-y.
As shown in figures 1 and later in figure 4 the majority of the LCY bond market is captured by the government bond with a minority of it is corporate bond. However, this applies differently when each member country is evaluated separately. Figure 4 shows the outstanding of the government versus the corporate for each country of ASEAN5. Further it concludes that among the ASEAN5 countries, Malaysia shows the highest percentage of Corporate Bond which is 47% from the total of government and corporate bond. Malaysia is followed by Thailand and Singapore with 26% and 20% respectively (Appendix 1, Table 2).
Kawai, M (2011) stated that one of the main reasons in increase of government bonds in the ASEAN is due to the attributes increased in fiscal financial institutions and stimulation of economic recovery after the Asia financial crisis. This further justifies because Indonesia and Thailand are among the most effected countries other than South Korea in the region. 3. Main developments in the ASEAN Bond market
According to Hyun and Jang (2008), the ASEAN Bond market development was initiated by the relevant countries government and also the central banks in the region. This was done through the diverse forum namely Asian Bond Markets Initiative (ABMI) and Asian Bond Funds (ABF). 3.1 - Asian Bond Markets Initiative (ABMI); Supply Side
AMBI funded by the Japan government was an initiative...