YBhg Dato’ Zarinah Anwar
Chairman, Securities Commission
Second Asian Bond Markets Initiative (ABMI) Technical Assistance Workshop
Thursday, 7 December 2006
“Infrastructure Financing : Catalyst For Cross-Border Bond Issuance”
Yang Berhormat Tan Sri Nor Mohamed Yakcop, Minister of Finance II of Malaysia;
Mr Osamu Shimizu, Deputy Director-General of the Ministry of Finance, Japan;
Ladies and gentlemen.
1. The SC is honoured to be co-hosting with the Ministry of Finance, Japan, a second Technical Assistance Workshop under the auspices of the Asian Bond Markets Initiative or ABMI. As some of you may be aware, the first workshop, which was held in August last year, dealt with securitisation and cross border issuance. This year, we are looking at cross border issuance of bonds for Infrastructure Financing, because we believe that the regional bond market can play a critical role in meeting the huge financing needs of the region’s infrastructure projects.
2. I wish to thank the Honourable Minister of Finance II for his presence this morning and for agreeing to officiate the Workshop and deliver a Keynote Address. The Honourable Minister is especially interested in encouraging the ASEAn countries to examine innovative ways of mobilising the region’s high savings into infrastructure financing. The presence of policymakers and experts from many countries at today’s Workshop is a reflection that this vision is shared by many in the region. I am confident that this two-day Workshop will provide a useful platform for us to exchange views and explore ways make it a reality.
Role of Bond Market in Infrastructure Financing
3. According to the Asian Development Bank, the infrastructure funding needs for the East Asian countries will amount to USD1 trillion in the next five years. For some countries, it may not be easy to raise the huge amounts domestically. But we are fortunate that the region is also home to the world’s highest domestic savings and largest USD foreign exchange reserves. Cross-border bond issuances can therefore play a catalytic role in mobilising these savings and reserves to meet the region’s infrastructure financing needs.
4. With the growth of domestic bond markets, there is now increasing realisation of its appropriateness for financing projects with longer gestation period. The domestic bond market in MAlasyia has undergone significant growth as a result of financing demands for development in the construction, utilities, transportation and communications sectors. Of the total funds raised from the corporate bond market between 1997 and 2005, RM116 billion or 44.4%, was to finance projects in these sectors.
5. This year has seen a total RM11.5 billion worth of new issues in the corporate bond market for infrastructure projects. With some RM46.8 billion (almost USD 13 billion) worth of new projects to be implemented over the next 5 years under the Ninth Malaysia Plan, infrastructure financing will remain a key priority.
6. Bond markets in the region can play a critical role in disintermediating the region’s savings for financing these projects. The public sector in the region must therefore take the lead in establishing appropriate frameworks and removing impediments in the domestic bond markets to facilitate greater integration of our markets.
7. Under the leadership of the Asean+3 Finance Ministers, the ABMI Working Groups have over the last four years worked towards facilitating access to the region’s bond markets by a wider spectrum of issuers and investors.
8. Much has been accomplished by the ABMI Working Groups, such as the removal of withholding tax for investors of local currency-denominated bonds in a number of countries, and the facilitation of local currency-denominated bonds by multilateral development banks and multilateral financial institutions. Several technical assistance studies have also been conducted to identify appropriate frameworks for regional market infrastructure, including clearing and settlement as well as credit enhancement mechanisms.
9. The Securities Commission is privileged to co-chair, on behalf of Malaysia, the Technical Assistance Coordination Team of the ABMI together with Indonesia and the Philippines. Numerous capacity building and technical assistance programmes have been organised by the team and sponsored by the Japan-ASEAN Fund for Technical Assistance.
10. I wish to put on record our appreciation to our co-host, the Ministry of Finance Japan, for working with us in making this second workshop a reality. Finally, let me once again express our deepest appreciation to the Honourable Minister of Finance II, Yang Berhormat Tan Sri Nor Mohamed Yakcop for graciously agreeing to deliver the Keynote Address for this Workshop. We are indeed honoured by your presence this morning.