Y. Bhg. Dato’ Zarinah Anwar
Deputy Chief Executive, Securities Commission
at the
Programme on Strengthening Bond Market Development in APEC
Jointly-organised by

The Research Institute of Asia and Pacific (RIAP)
The Securities Industry Development Centre (SIDC)

Under the
Auspices of AusAID
14-18 November 2005
Securities Commission, Kuala Lumpur


Ladies and gentlemen,

1. A very good morning to all. Welcome to the Securities Commission and to our foreign guests, welcome to Malaysia. The Securities Industry Development Centre (SIDC) of the SC is honoured to co-organise this programme on Strengthening Bond Market Development in APEC with the Research Institute of Asia and Pacific (RIAP), of the University of Sydney.

2. I am particularly pleased to note that this is the second year that SIDC and RIAP are co-organising this programme. This is a clear reflection not only of a very effective collaboration between the two institutions, but more importantly of the appropriateness and relevance of the chosen themes. I note that this year’s programme on Strengthening Bond Market Development in APEC is very comprehensive with sessions on bond market development in Asia and Malaysia, in particular, as well as on the experiences of the more developed and mature economies. I am sure this will provide an invaluable platform for participants to exchange views on country specific experiences and challenges.

3. I do not wish to pre-ampt the many experienced speakers who will be resourcing this programme. However I do wish to reiterate the fact that a strong and vibrant corporate and sovereign bond market is crucial for economic growth. The corporate bond market in particular is an important alternative conduit for corporations to raise financing for their activities. Additionally, we have all learnt from the Asian financial crisis in 1997, of the adverse repercussions of over-reliance on the banking system for funding.

4. Infact I should add that we have clearly learnt our lessons well. The Asian bond market (excluding Japan) has grown 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 the bond market, has tripled in size from USD36.3 billion as at end-1997 to USD115.6 billion as at end-September 2005. The bond market now constitutes more than 80% of our GDP. Inversely, reliance on banks as a source of financing has decreased from 150% of GDP in 1997 to 115% of GDP as at end-2004. Corporate bonds currently account for 51% of our total outstanding bonds, testimony of the extent of the importance of the bond market to Malaysian corporates who have raised a total of USD49 billion primarily for their long-term development projects.

Ladies and gentlemen,

5. While we know that there is a lot more that we need to do to further strengthen our bond market, we are pleased that our efforts so far have shown results. The Malaysian bond market is now the largest in South-East Asia. The foundation for this was not built overnight. In fact it was established over the last one and a half decades. The market is now well-supported by an efficient electronic inter-bank funds transfer system and scripless book-entry system, a bond information and dissemination system, an electronic system for tendering of securities as well as two domestic credit rating agencies.

6. Nonetheless, there were structural deficiencies and inefficiencies that had until a couple of years ago, stifled the development of the corporate bond market. To overcome these, various key initiatives were pursued by the Government, the SC and the Central Bank. These include the establishment of a reliable government benchmark yield curve and the introduction of an efficient regulatory and legal framework for the issuance of corporate bonds. Minimum standards were also imposed on market intermediaries and bond documentation in order to enhance protection for bondholders, thereby promoting investor protection. In order to encourage the issuance of a wider range of financial instruments, the Government had also streamlined the regulatory framework and provided fiscal incentives to promote the issuance of particular types of bonds including asset-backed securities and Islamic bonds using widely accepted Syariah principles such as Musyarakah (partnership), Ijara (leasing) and Mudharabah (profit-sharing).

7. If I am asked to share one key lesson from our experience in developing our bond market, clearly it is the importance of proper articulation and sequencing of the developmental initiatives. We had done this, in 2000, with the release of the Capital Market Masterplan, a blueprint that provides an overall long-term strategic plan that identifies key areas and implementation time frames to ensure the orderly development and liberalisation of the entire capital market including the bond market, without compromising investor protection and market integrity. Sequencing is vital not only to ensure orderly growth of the market but also to ensure relevance, acceptability and appropriateness of each initiative. It also allows investors and intermediaries to move up their respective learning curves without being overwhelmed by drastic changes.

8. You will hearing more about the experiences of Malaysia and other economies over the next few days. At the end of this programme, you will no doubt be able to decide what lessons or experiences are the most appropriate ‘take-aways’ for your respective economies. I therefore applaud the efforts of RIAP and SIDC in organising this programme and in establishing a forum for the sharing of experience and expertise.

9. Building a strong and and well functioning bond market will take time and effort but with the cooperation and commitment of all parties as well as our willingness to share with and learn from each other, we will hopefully avoid the need to reinvent the wheels. Putting in place a sound and progressive regulatory framework, promoting appropriate market practices, building new institutions and infrastructure and ensuring availability of appropriate human capital, are indeed no mean tasks. However let me assure you that these are all achievable and the efforts are all well worth it.

10. In closing, I would like to thank RIAP once again for its efforts in collaborating and working together with the SC in conducting this programme. I wish you success in your deliberations.

Thank you for your attention.