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ASEAN+3 backs firms with $700m credit guarantee
The Asian Development Bank (ADB) and ASEAN+3 nations have established a joint credit facility worth US$700 million to guarantee corporate bonds issued by firms in the region, the bank said in a statement issued Tuesday
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he Asian Development Bank (ADB) and ASEAN+3 nations have established a joint credit facility worth US$700 million to guarantee corporate bonds issued by firms in the region, the bank said in a statement issued Tuesday.
ADB’s board of directors approved the establishment of the Credit Guarantee and Investment Facility (CGIF), set to commence operations in 2011, with a capital contribution of $130 million. The ASEAN+3 governments will provide a combined $570 million.
The CGIF will be governed by an eight-member board drawn from participating countries, including one representative from the ADB, it said. Ownership rights will be proportionate to capital contributions.
ASEAN — Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — contributes a combined $70 million; while China will contribute $200 million, Japan $200 million and South Korea $100 million.
The CGIF will guarantee local-currency-denominated bonds issued by companies in the region, making it easier for firms to issue local bonds with longer maturities.
“This will help reduce the currency and maturity mismatches which caused the 1997-1998 Asian financial crisis, and make the regional financial system more resilient to volatile global capital flows and external shocks,” the ADB said.
It is also expected to boost investment in infrastructure and other key areas.
“The CGIF will make it possible for corporations to issue bonds in their domestic markets and in neighboring markets and across ASEAN+3,” said Noy Siackhachanh, an advisor with ADB’s Office of Regional Economic Integration.
“Channeling regional savings into regional investments will support economic growth, creating jobs and alleviating poverty,” he added.
Anggito Abimanyu, the head of the Fiscal Policy Office at the Finance Ministry, said Indonesia would contribute about $12.5 million to the CGIF, which could “guarantee the same amount of corporate bonds”.
Indonesia wants to boost infrastructure to achieve an economic growth of 7 percent by 2014, Coordinating Economic Minister Hatta Rajasa said.
According to the ADB, local-currency bond markets of emerging East Asia had expanded dramatically in recent years to stand at $4.4 trillion at the end of 2009. However, they still only account for 30 percent of outstanding local-currency bonds in the region, or about 7 percent of outstanding bonds globally.
