Since the Asia and Tequila crises of the late 1990s, a growing number of emerging market countries have focused on developing local bond markets to lock in local currency, fixed-rate and long-term funding, and help governments and corporations better manage their financing risks. International organizations from Washington to Southeast Asia are pushing bond market development, to reduce global instability by improving domestic risk management. This book is part of the International Finance Corporation's efforts to assist countries in South Asia and other parts of the world to identify their need for local bond markets, the impediments to developing them, and how those impediments might be removed. The book is based on papers presented at the South Asian Debt Market Symposium held in Sri Lanka in October 1999. It provides valuable insights to emerging market nations wrestling with the issue of building local bond markets. This book will be of interest to bond market specialists, policymakers, and the private sector.

Local currency bond markets in ASEAN+3 play an important role in diversifying financial intermediary channels and mitigating the impacts of financial crises. They also have the potential to help mobilize developing Asia's significant savings to meet the region's enormous infrastructure investment needs. Drawing extensively on knowledge generated by the ASEAN+3 Bond Market Forum, the publication looks at the essential building blocks and the enabling environment for these markets, as well as the roles of government, relevant authorities, and market participants.

This guidance note was prepared by International Monetary Fund (IMF) and World Bank Group staff under a project undertaken with the support of grants from the Financial Sector Reform and Strengthening Initiative, (FIRST).The aim of the project was to deliver a report that provides emerging market and developing economies with guidance and a roadmap in developing their local currency bond markets (LCBMs). This note will also inform technical assistance missions in advising authorities on the formulation of policies to deepen LCBMs.

This conference report provides a unique overview of the development of local currency bond markets in the Asia-Pacific region and cross-border investment and issuance in these markets. It brings together insights of the region's leading capital market regulators, private sector market players, finance and central bank officials and experts from academe and international development organizations, who have gathered together to assess the extent to which the region's bond markets have developed, and map out a regional strategy based on public-private sector partnership that promises to address key policy reform and capacity-building issues.This report concludes that a few emerging markets in the region have made significant advances, but many others need to undertake fundamental reforms to achieve adequate market depth and liquidity and develop an enabling regulatory framework. Successfully undertaking these reforms requires intensive regional cooperation to help address obstacles in individual economies and facilitate greater cross-border activity in the region's bond markets. Coordination is also needed to ensure the consistency of parallel initiatives being undertaken within various regional bodies, particularly APEC, ASEAN Plus Three and EMEAP, to develop a regional bond market.

Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop local capital markets have had mixed success. This paper reviews the literature on the benefits and costs of developing local capital markets, and describes the challenges faced in the development of such markets. The paper concludes with a set of policy recommendations emerging from this literature.

Recent financial crises including the ongoing one caused by the COVID-19 pandemic have consistently drawn attention to the need to strengthen the quality of public debt management in emerging markets and developing countries. Deeper and more efficient domestic government debt markets—being, a key segment of the LCBM for many emerging markets and developing economies—play a key role in reducing financial vulnerability to shocks and enable governments to finance critical economic and fiscal policy measures in response to them. Policymakers and international organizations have long recognized that developing and strengthening LCBMs is a key policy prescription to sound public debt management. Robust legal and regulatory frameworks are recognized as being critical building blocks for the structure, development and functioning of LCBMs. This Working Paper seeks to outline a strategically anchored methodology that can be applied to design, build and implement the legal and tax foundations for the development of LCBMs that would adequately address common challenges and impediments.