Malaysia shares experiences in building bond market into South East Asia’s largest SIDC co-hosts regional training programme with University of Sydney’s RIAP under auspices of AusAID

International experts, regulators and participants are meeting in Malaysia to discuss Asian bond market development in a training programme entitled ‘Strengthening Bond Market Development in APEC’.

Spanning five days from 14-18 November 2005, the programme is co-hosted by the Securities Industry Development Centre (SIDC) and the Research Institute for Asia and the Pacific (RIAP) of the University of Sydney, under the auspices of the Australian Agency for International Development (AusAID).

The aim of this programme is to promote a better understanding of bond market development among economies in the APEC region, as well as to provide a platform for international participants to discuss, identify and formulate policy measures that underpin effective functioning of bond markets.

The SC Deputy Chief Executive Dato’ Zarinah Anwar emphasised in her welcoming remarks that, “A strong and vibrant corporate bond market is a key factor for the growth of the economy as it is an important conduit for corporates to raise financing for their economic activities.”

Together with the banking system and equity market, it is one of the three main pillars of funding in any economy, she added.

She highlighted that the Asian bond market (excluding Japan) has grown exponentially at an impressive annual average rate of 19.8% since 1997 to reach the size of USD1.4 trillion as at end-2004.

In Malaysia, there has been tremendous growth in the bond market, which has more than tripled in size from USD36.3 billion as at end-1997 to USD115.6 billion as at end-September 2005 and now constitutes more than 80% of GDP. Inversely, reliance on banks as a source of financing has reduced from 150% of GDP in 1997 to 115% of GDP as at end-2004.

Corporate bonds currently account for 51% of Malaysia’s total outstanding bonds, a testimony of the extent of growth and importance of the bond market to Malaysian corporates. In dollar terms, a total of USD49 billion have been raised by Malaysian corporates from the bond market primarily for long-term development projects.

“A highly successful bond market can only come about with co-operation between the regulators, market players and intermediaries. Also important is the role of regulators to protect bond investors’ rights,” Dato ‘ Zarinah added.

A well-laid legal structure for the issuance of bonds, sound market practices, and timely disclosure of relevant information to investors remain vital for bond investor protection, and by implication, a successful bond market.

Senior SC executives, regulators from key jurisdictions and subject matter experts from international and local financial institutions will facilitate discussions to encourage participants to share and learn from each other’s experiences.

Participants from China, Indonesia, Malaysia, Vietnam and the Philippines are attending the programme, which is divided into two phases. Phase 1 is being held at the SC in Kuala Lumpur, Malaysia, while Phase 2 will be held in Hanoi, Vietnam from 12-16 December 2005.

The joint bond market programme will examine issues covering the development of bond markets in Asia and Malaysia, challenges for rating agencies, the development of the Islamic bond market and bond market opportunities in the primary and secondary markets. Participants will also take part in workshop sessions to identify impediments to bond market development and to formulate strategies that will help promote the bond market development in their respective countries.

This marks the second time that the SC has collaborated with RIAP to organise a regional training programme.

RIAP is a multi-disciplinary institute responsible for developing projects and implementing international aid and technical assistance funded by AusAID, APEC, United Nation bodies and other foreign donor agencies.

AusAID is the Australian Government’s official aid agency and its funds are utilised for a wide range of humanitarian, economic and development aid activities throughout Asia, including support for the Asia-Pacific Economic Cooperation (APEC) Forum and the Association of South-East Asian Nations (ASEAN).