Following the success of its yen-denominated “Samurai Bonds”, the Indonesia government says it will issue bonds denominated in the currencies of China and South Korea next year.
Representatives of ASEAN member nations, China, Japan, and South Korea are scheduled to discuss the cross-border bond issuance, to be done under the ASEAN+3 bond market initiative, at the Asian Development Bank’s (ADB) meeting this week.
“I believe 2013 is reasonable timing for it [ASEAN+3 bond] to be issued … The packages that we are going to offer will be similar to the Samurai Bonds in Japan,” the Finance Minister Agus Martowardojo told reporters last week.
Samurai Bonds have helped Indonesia reduce its cost of funds to plug budget deficits in previous years as the yen-denominated bonds offered coupons that were significantly lower than rupiah bonds.
The first Samurai Bonds were issued in July 2009, raising about ¥35 billion (US$435 million). The 10-year bonds offered coupons with a yield of 2.73 percent a year. The second issue was completed in November 2010, raising ¥60 billion, offering yields of 1.6 percent and a 10-year maturity.
In April 2011, the government canceled a planned third issuance on concerns of Japan’s needs for domestic financing after the March earthquake and tsunami disasters.
Hoping to capitalize on Indonesia’s cooperation with Japan, the ASEAN+3 Bond Market Forum (ABMF), in collaboration with the ADB, recently published its first bond-market guide to encourage more cross-border bond issuances and investment in the ASEAN+3 region.
The two-volume guide, accessible on the ADB’s and the AsianBondsOnline’s websites, contains information on bond market infrastructure, such as transaction flows, matching, settlement cycles and numbering.
The guide also describes the regulatory frameworks and market practices in individual ASEAN+3 countries.
The ASEAN+3 and the ADB are also slated to discuss increasing financing for the Chiang Mai Initiative, a multilateral currency swap arrangement for ASEAN+3 members.
“We want the financing to be increased, or at least doubled from the current amount, which stands at $120 billion,” he said.
Agus said that ASEAN+3 member representatives would also discuss establishing the ASEAN Infrastructure Fund’s (AIF) board of directors.
“The board of directors will be the representatives of ASEAN countries, while the ADB will be responsible for managing the operations of the AIF,” he said.
Agus said that establishing the board was essential as several member nations had a list of projects awaiting funding from the AIF.
Economists have said that encouraging a more active intra-regional bond and financing in the ASEAN+3 region was essential to channel regional resources to regional investments and would eventually lead to sustainable and balanced economic growth in the region.
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