Asian Bonds Online Website Project, Phase II

Transcription

1 Regional Technical Assistance Report Project Number: June 2008 Asian Bonds Online Website Project, Phase II (Financed by the Japan Special Fund) The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, Board of Directors, Management, or staff, and may be preliminary in nature.

2 ABBREVIATIONS ABM Asia Bond Monitor ABMI Asian Bond Markets Initiative ABO Asian Bonds Online ADB Asian Development Bank ASEAN Association of Southeast Asian Nations ASEAN+3 members of ASEAN and People s Republic of China, Japan, and Republic of Korea BIS Bank for International Settlements CRM Credit Risk Monitor OREI Office of Regional Economic Integration TA technical assistance TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification General intervention Sector Finance Subsector Capital markets and funds Themes Sustainable economic growth, regional cooperation, capacity development Subthemes Promoting economic efficiency and enabling markets, money and finance, institutional development NOTE In this report, "$" refers to US dollars. Head Director Team leader J. W. Lee, Office of Regional Economic Integration (OREI) S. Madhur, OREI M. Miyachi, Senior Advisor, OREI

3 I. INTRODUCTION 1. A key lesson from the Asian financial crisis is that mature bond markets are crucial for maintaining a better balance within financial sectors and thus building financial stability in the region. Regional and national initiatives have focused on removing obstacles and building up infrastructure to bond market development, including improving information asymmetry. Such barriers prevent effective and efficient direct interaction between multiple issuers and investors, by facilitating bond market information flows. The Association of Southeast Asian Nations (ASEAN)+3 1 Asian Bond Markets Initiative (ABMI) was endorsed at the meeting of the ASEAN+3 finance ministers in August 2003 to accelerate development of efficient and liquid bond markets in the region. The Asian Bonds Online (ABO) website started under the ASEAN+3 ABMI in May 2004 with the support of the Asian Development Bank (ADB). 2. This technical assistance (TA) 2 aims to continue ADB support in disseminating and improving information flow and to contribute to increasing the transparency, liquidity, efficiency, and depth of bond markets in Asia. The managing director general, under ADB s 3-year knowledge products and services work plan , approved the TA concept clearance on 28 April 2006 to address this need. The design and monitoring framework is in Appendix 1. II. ISSUES 3. A major cause of the Asian financial crisis maturity mismatches resulting from overreliance on short-term bank financing for long-term investment, as well as currency mismatches could have been reduced if well-developed bond markets were an alternative avenue for channeling the region s large savings into long-term investments. Consequently, after the crisis, development of bond markets became an important policy reform agenda item for many Asian governments. There have been a number of initiatives and concrete actions to facilitate bond market development in Asia at subregional and regional levels. These include the Asian Bond Fund and Asian Bond Fund II established by the Executives Meeting of East Asia- Pacific Central Banks, the regional bond market development initiative of Asia-Pacific Economic Cooperation, and the ABMI of ASEAN One of the critical requirements for efficient bond markets is to ensure that both issuers and investors can avail of an accurate informational framework on top of the contractual framework, the regulatory and supervisory framework, a diversified investor base, and issuing and trading processes based on pricing mechanisms. The need for improved information flows for bond markets in Asia is highlighted by the fact that investors outside the region are not always well acquainted with Asian bond issuers with high financial standings, and with the economic, social, and legal environment that underpins Asian bond markets. Therefore, developing bond markets in Asia requires improved flow of local information to global investors, as well as across borders to investors within the region. Some issuers known to be high quality and financially strong in one country in the region are often not recognized in other countries. 1 ASEAN+3 comprises the 10 members of ASEAN (Brunei Darussalam, Cambodia, Indonesia, Lao People s Democratic Republic, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Viet Nam), plus People's Republic of China, Japan, and Republic of Korea. 2 The TA first appeared in the business opportunities section of ADB s website on 22 August 2007.

4 2 5. The ABO website was launched in May 2004, supported by a previous TA. 3 It has successfully served as a one-stop clearinghouse for Asian bond markets. Similar websites 4 provide bond market information in Asia, but they have a different mandate using a different format or language, and varying information coverage. The ABO website is considered the only one-stop clearinghouse providing information on sovereign and corporate bond issues in the region, as well as the economic and legal circumstances surrounding these issues, to various stakeholders such as investors (institutional and retail), corporate issuers, brokers, underwriting houses, policy makers, market regulators, and academics in the region. 6. Currently, the ABO website has three categories of content: structural aspects of local currency bond markets (the market infrastructure, 5 rules and regulation, 6 market activities, 7 and market data 8 of each market) in the region, ASEAN+3 ABMI activities, and a large number of progress indicators; cover flow of research (market analysis and policy research) and news articles (commentary) related to the bond markets of each country in the region, and a knowledge center (bond glossary, data release, and how to buy bonds and bond funds); and market watch, which provides the major market-priced variables and year-to-date and month-to-date performance figures for each country, updated twice daily. 9 The website has also extended its content to information such as a new features alert, new issues and issues change, 10 and Islamic finance Initially, the focus of the ABO website was to provide links to information available on other websites. However, it has since generated its own content on bond market development in the region in response to viewer demand. The Asian bond indicators section presents graphs, tables, and downloadable spreadsheets of 42 indicators which allow viewers to analyze the level of activity in each market and how it has progressed since 1995 (in most cases). This section covers a range of categories: the size (government bonds, corporate bonds, and securitization); liquidity; yield, and returns of local currency bond markets including the composition and profiles of issuers and investors; indicators of currency mismatch; and key economic variables (including credit-rating history). These indicators are drawn from data provided by local agencies and issuers, as well as several data vendors. They are a useful analytical tool for various stakeholders in dealing with these vigorous bond markets. The graphs and spreadsheets assist prospective investors in managing suitable risk assets in their portfolios, academics in analyzing how issuance patterns and local risk factors contribute to the development of local currency bond markets, and market regulators and policy makers in learning how governments can shape the public good of local currency bond markets to facilitate economic development. 3 ADB Technical Assistance for the Asian Bonds Online Website. Manila (Japan Fund for Information and Communication Technology 9041-REG, for $2,400,000, approved on 26 December). 4 Commercial websites are mainly journalistic, data vendors, or hybrids (combining news, data, and trading services). Noncommercial websites include public institutions; nonprofit, self-regulatory, and academic institutions; and industry lobbies. 5 Includes market overview; key market participants; exchange and trading platforms, registries, clearing, and settlement; and rating and rating agencies. 6 Includes supervisory framework, market regulation, securitization, protection of investors, and investor participation. 7 Includes instruments, bond identification, benchmark, reference rate, funding and hedging, indices, and street conventions. 8 Includes major issues, trading statistics, government auction calendar, and auction results. 9 Market Watch is linked to Reuters, and the information is updated automatically. 10 This provides links to several sources for new issuance of bonds in the region. 11 This section covers structural aspects such as market infrastructure, rules and regulations, market activities, market data, and (v) government polices and initiatives.

5 3 8. During the last 4 years, the ABO website has progressed from a familiarization site on local currency bond markets in the region to a one-stop clearinghouse that supports all bond market users and participants by disseminating information. It will further facilitate regional financial market integration by enhancing its function as an information portal. The increased significance of the website is reflected by the steady rise in user activity. Average daily visitor numbers have increased gradually and continuously from 538 in the fourth quarter (Q4) of 2004; 1,746 in Q4 2005; 1,593 in Q4 2006; 2,740 in Q4 2007; to 3,981 in Q This rapid increase suggests that a high proportion of users are first-time visitors whose visits are shorter check-in visits. Those who find the site useful return and begin to spend more time. 12 Throughout these cycles, the most popular sections (in order) are market watch, Asian bond indicators, market analysis, and commentary. 9. The Asian Bond Monitor (ABM) is a knowledge output that uses data and analysis from the ABO website. It started in November 2004 and reviews developments in East Asian local currency bond markets twice a year, featuring a theme chapter that discusses relevant bond market development issue. 13 The ABM has been a useful tool for ADB support to regional economic policy dialogue mainly for the ASEAN+3 ABMI Focal Group Meeting. So far, the ABM covers the 10 ASEAN member countries plus People s Republic of China; Hong Kong, China; and Republic of Korea. III. THE TECHNICAL ASSISTANCE A. Impact and Outcome 10. The objective of the TA is to improve information flow for Asian bond markets by managing the ABO website. This will help increase the transparency, liquidity, efficiency, credibility, and depth of bond markets in the region; lower funding costs for Asian bond issuers; and facilitate cross-border capital flows. It will support the streamlining of organizational and regulatory procedures for bond market access, and enhance corporate governance and higher disclosure standards. More developed and mature bond markets will enable the private as well as public sector of Asian countries to raise and invest long-term capital with effective management of credit, maturity and currency risks, thereby reducing their economic and financial vulnerabilities. The TA will facilitate monetary financial cooperation and integration by developing robust local currency bond markets in the region, and thus support key result areas of the Office of Regional Economic Integration (OREI) based on the regional cooperation and integration (RCI) strategy. 14 B. Methodology and Key Activities 11. The TA will have four components: Managing and maintaining the ABO website. The TA will finance the operation of ABO to make the website more accessible to investors and issuers as an information portal for regional bond markets. It will assist policy makers, 12 The average user session length was 17.5 minutes (min) in Q4 2004, 18.6 min in O4 2005, 21.7 min in Q4 2006, and 16.6 min in Q The ABM featured Monitoring Financial Integration in East Asia in November 2005; Financial Deepening in Emerging East Asia An International Perspective in March 2006; Bond Market Liquidity Empirical Analysis, Market Survey, and Policy Options in November 2006; Securitization Concepts and Development in East Asia in April 2007; and The Indian Bond Market Developments and Challenges Ahead in April ADB Regional Cooperation and Integration Strategy. Manila.

6 4 regulators, and journalists (who may influence market development significantly) in understanding how policies, rules, and market participants behavior affect the markets in the short and long term both in local markets and in an integrated system. It will also support academics and students by providing an updated bond market database and indicators. Accessibility improvements will include upgrading to an easy and user-friendly interface for first-time and nonexpert users, establishing a relational link between all sections of the site to make spontaneous and comparison analysis of topics, and linking the glossary function to every aspect of the site content. Enhancing the website content. The TA plans to improve and enhance the content on the regional bond markets comprising the securitization market data and research tool; repurchase agreement (repo) markets; risk management instruments that are developing in the region, including interest rate and bond derivatives; currency and credit derivatives; and performance indicators for bond market development. Developing the securitization market data and research tool will include the following subcomponents: defining user projects, developing agreement with data suppliers such as global and domestic credit rating agencies in the region and data vendors, designing the data architecture, creating user interface tools, loading and validating data, working through trial analysis with the initial trial user to refine the analysis-and-delivery steps, and promoting wider use of tools for regulatory planning. Collaboration with the Bank for International Settlements (BIS) and other entities experienced in handling complex archives will further refine the architecture and the interface tool. On a request basis, the TA will provide a monthly briefing to ADB staff in the ADB library and a weekly highlights newsletter to ABO website clients. Expanding the coverage of the Credit Risk Monitor. The TA will include analysis of market pricing mechanisms (especially in the ASEAN+3 markets), how they respond to various external and market pressures and changes in institutions, the market cycle, new information, and regulations. This can be achieved by collecting country-specific and regional information and data, and making credit-specific analysis of changes in the cost of funds. Credit risk assessment is the core function of credit-rating agencies, and this will provide indirect support of ABMI and OREI initiatives with regional rating agencies. As more traditional public sector financing is moved from the central government to local government and private sector operators, improved understanding by officials and outside investors in the factors affecting local credit risk can lead to both better governance of and lower funding costs for local infrastructure. Publishing ABM. The TA will finance the publication of the ABM, a knowledge output that uses ABO data and analysis. The ABM reviews recent developments in East Asian local currency bond markets twice a year with a theme chapter, which features a special topic relevant to the bond market development issue. C. Cost and Financing 12. The TA will be financed on a grant basis by the Japan Special Fund, funded by the Government of Japan. It is estimated to cost the equivalent of $900,000 to cover remuneration, travel, and per diem for international and national consultants. It will also cover the cost of the

7 5 workshops, seminars, and publicity activities of the ABO website. Details of the cost estimates and financing plan are in Appendix 2. D. Implementation Arrangements 13. ADB will be the Executing Agency of the TA. OREI will administer the TA, implement the TA in close consultation with ASEAN+3 ABMI officials, and supervise the work of the TA consultants International and national consultants will be engaged for implementing the TA about 21 person-months of international and 138 person-months of national consulting services. The TA will be implemented over 12 months, starting in June 2008 and ending in May All consultants and resource persons will be engaged in accordance with ADB s Guidelines on the Use of Consultants (2007, as amended from time to time). Consultants will be engaged as individual consultants. The scope of work and outline terms of reference for consultants are in Appendix 3. IV. THE PRESIDENT'S DECISION 15. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance not exceeding the equivalent of $900,000 on a grant basis for Asian Bonds Online Website Project, Phase II, and hereby reports this action to the Board. 15 The proposed continuation and refinement of the ABO website was discussed and endorsed at the 1 November 2007 meeting of ABMI officials in Tokyo.

8 6 Appendix 1 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Promoting monetary financial cooperation and integration by developing robust local currency bond markets in the region Performance Targets and/or Indicators Higher trading volume of local currency bonds from $6 trillion in 2007 to at least double in 5 years Increased size of local currency bond issuances from $3.7 trillion in 2007 to at least double in 5 years Data Sources and/or Reporting Mechanisms Bond market data via the internet (e.g., ABO) ABM Assumptions and Risks Assumption Governments are committed to capital market development Risk Macroeconomic and financial instability Outcome Improve information flows of bond markets, which will help increase the transparency, liquidity, efficiency, credibility, and depth of bond markets For each of the 10 ASEAN+3 countries (with bond markets): Increase the government bond turnover ratio by 25% and corporate bond issuance by 50% within 2 years Sovereign benchmark yield curve to have 5 liquid maturity points in 1 15 year span, in 2 years Bond market data and indicators prepared by BIS and other institutions Country strategy and program Assumptions Policy makers are committed to bond markets Financial supervisors are committed to improve the regulatory framework Risk Macroeconomic and financial instability Outputs 1. Managing and maintaining the ABO website 2. Enhancing the ABO website regional bond market content on the following issues: securitization markets data and research tool, repurchase agreement (repo) markets, risk management instruments, and performance indicators for bond market development 1. Within 12 months, increase number of ABO visitors by 50% 2. Within 12 months, number of total visits hits 1.3 million ABO website technical support ABO website technical support Assumptions Coordination within and among ASEAN+3 ABMI countries Highly qualified consultants are maintained in the ABO website operations team Risk Resource person is not available

9 Appendix 1 7 Design Summary Performance Targets and/or Indicators Data Sources and/or Reporting Mechanisms 3. Expanding the 3. Within 12 months, number of ABO website coverage of the CRM total visits to this section hits technical support 50, Publishing the ABM 4. At least two issues of the ABO website ABM published during the TA implementation period Activities with Milestones 1.1 Daily maintenance activities collecting, filtering, and organizing written and numerical data on the 13 countries covered by the website. 2.1 Enhancing the securitization market information and data, and introducing the research tool. 2.2 Collecting the repurchase agreement (repo) market information and processing for posting. 2.3 Collecting the risk management instruments information (interest rate and bond derivatives, and currency and credit derivatives) and processing for posting. 2.4 Preparing performance indicators for bond market development and processing for posting. 2.5 On a request basis, providing a monthly briefing to ADB staff in the ADB library and a weekly highlights newsletter to ABO website clients. 3.1 Expanding the coverage of the CRM to include analysis of market pricing mechanisms (especially in the ASEAN+3 markets), how they respond to various pressures, and changes in institutions and new regulations. 3.2 Collecting country-specific and regional information and data. 4.1 Organizing relevant data into tables and charts for the ABM. 4.2 Preparing theme and country chapters. Assumptions and Risks Inputs ADB staff ASEAN+3 ABMI government officials Visitors and users of the ABO website (investors, issuers, policy makers, regulators, academics, and students) International consultants (21 person-months, $366,000) National consultants (138 person-months, $265,000) International and local travel ($41,000) Reports and communications ($20,000) Workshop ($30,000) Others ($85,000) Contingency ($93,000) ABM = Asia Bond Monitor; ABMI = Asian Bond Markets Initiative; ABO = Asian Bonds Online; ADB = Asian Development Bank; ASEAN+3 = Association of Southeast Asian Nations plus People s Republic of China, Japan, and Republic of Korea; BIS = Bank for International Settlements; CRM = Credit Risk Monitor; TA = technical assistance.

10 8 Appendix 2 COST ESTIMATES AND FINANCING PLAN ($'000) 85 Total Item Cost A. Asian Development Bank Financing a 1. Consultants a. Remuneration and Per Diem i. International Consultants 366 ii. National Consultants 265 b. International and Local Travel 41 c. Reports and Communications Training, Seminars, and Conferences b Miscellaneous Administration and Support Costs c 4. Contingencies 93 Total 900 a Financed by the Japan Special Fund, funded by the Government of Japan. b This includes a workshop to survey the interest of regional regulators to promote wider use of the securitization research tool. c This includes required data feed services (Reuters, Bloomberg, and Thomson Datastream). Source: Asian Development Bank estimates.

11 Appendix 3 9 OUTLINE TERMS OF REFERENCE FOR CONSULTANTS A. Bond Market Specialist/Team Leader (international, 12 person-months) 1. The bond market specialist/team leader will take overall responsibility for developing and maintaining the Asian Bonds Online (ABO) website. Specific tasks include the following: (v) (vi) (vii) (viii) (ix) Identify detailed information content for each of the five broad areas of the website: market infrastructure, legal and regulatory framework, market activities (including bond issuing and trading), market data, and key indicators of market movements; as well as government policies and initiatives, as outlined in the project document. Review and supervise daily revision of the information market analysis, policy research, and market commentary contents. Review and identify the presentation of updated market information in the market watch pages of the website. Identify sources of information for each of the Association of Southeast Asian Nations (ASEAN)+3 countries and other Asian Development Bank (ADB) member countries as required, including talking to key participants in bond markets. Establish an ABO project database as a reliable alternative to the data from each country national database or the Bank for International Settlements (BIS) database. Extend the data and coverage from government and corporate bonds to securitization of all kinds, and establish a resource within ADB s Office of Regional Economic Integration (OREI) for improving securitization bond markets in the region. Supervise web designers and programmers to design and program all pages of the website, following basic requirements outlined in the project document and set out by ADB s Office of Information Systems and Technology. Identify the best way to improve the ABO website to become more interactive among policy makers, regulators, investors, and other stakeholders in the region. Publicize the website, including presentations to targeted or potential users. Prepare quarterly progress reports and a final report on the ABO website, including its technical specifications and operational procedures. Prepare a draft of the semiannual Asian Bond Monitor (ABM) under the supervision of and in consultation with relevant staff. B. Financial Market Analyst (national, 90 person-months) 2. The consultant will help the team leader develop and operate the ABO website. He/she will be familiar with capital markets and policy issues in the participating countries, have extensive experience in financial data analysis, have strong communication skills, and be proficient in using standard computer applications software. Specific tasks include the following: Compile information on sovereign and corporate bonds issued in ASEAN+3 countries and other ADB member countries, including market activities, legal and regulatory frameworks and market infrastructure, and government policies and initiatives. Manage the collection and organization of all data on the region s securitization markets; supervise data integrity checks and consistency with source databases. Take the lead in organizing the structure and output tools for the securitization research database to support policy analysts, who will be its main clients. Help prepare write-ups on key topics of Asian bond markets.

12 10 Appendix 3 (v) (vi) (vii) Help guide the ongoing redevelopment of the website s functions and design. Maintain various sections of the website, primarily the regional market, and other country sections that may be assigned by ADB staff and the team leader. Assist in supervising the ABO team members in carrying out the daily operations of the website particularly by reviewing, editing, and approving their work on website updates for relevance and accuracy of data and content. Provide research support to staff and general administrative support. C. Web Developer (national, 30 person-months) 3. The consultant will assist in redesigning the ABO website, including database structure. Specific tasks include the following: (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) Maintain and redesign the existing database schema for improved performance, data integrity, and maintenance; analyze and document the impact of such migration to existing programs, processes, and users; and plan, implement, and test the steps in migrating to minimize disruption and data loss. Conceptualize, pilot, and implement site navigation and layout improvements based on user feedback and conventional web usability principles and practices. Create automated systems and/or improve existing ones to make the back-end (data loading, cleaning, and extracting) operations faster and more accurate. Assist ADB staff and the ABO team leader in designing the securitization database and/or data warehouse for conceptualization and data definition and gathering purposes. Maintain the ABO contact list and feedback/information accounts. Design, develop, and operate survey and newsletter transmission and reception systems. Create and continually update functional and technical documentation pertaining to the site and data architecture and processes. Administer and maintain the Asia Bond Indicators and market watch databases. Administer and maintain the task management system and content management system databases. Administer, monitor, and configure the Reuters Investor Service data and news feed services. Diagnose and repair errors encountered in the website and back-end processes. Prepare weekly, monthly, and yearly site statistics reports and aid in analyzing the results based on site developments and external events. Administer resources used by the ABO team on the ABO server such as data repositories, programs, and security systems. Perform other tasks not mentioned above related to the website as assigned by the ABO team leader. D. Web Graphics Designer (national, 12 person-months) 4. The web and graphics expert is responsible for creating and designing web pages as required by the Project. Web page design includes information design, layout, color, typography, and HTML programming. The consultant must have expert knowledge of digital design software and languages: Adobe Photoshop and PageMaker, CorelDRAW, Adobe Flash, HTML, and JavaScript programming. Specific tasks include the following:

13 Appendix 3 11 (v) Design and render superior quality web pages; oversee and preserve the integrity of the website s design. Design new web pages, icons, and thumbnails; suggest modifications to designs of existing web pages. Provide advice and opinion on the information design, architecture, interactivity, and usability of the website. Create and design project materials such as brochures, leaflets, banners, and book cover design. This should conform with the One ADB, One Look standards. Carry out other tasks related to web graphical design as assigned by ADB staff. E. Economics Editor (international, 3 person-months) 5. The consultant will review and edit the contents of the ABO website and the ABM to ensure coherence and readability, based on sound economic arguments, and conform to the highest publication standards. Specific tasks include the following: Examine the economic arguments to assess if they are logical and are based on accepted economic theory and principles. Rewrite, add, or delete information, and help revise various pages or sections, if necessary, to tighten economic arguments, fill in gaps in the discussions, and ensure the smooth flow of ideas. Examine the tables, figures, and charts to ensure data consistency within pages and documents; and suggest deletions and additions to ensure that they are useful. Edit the ABO website pages for publication, the ABM, or other documents related to the ABO project. F. Bond Market Economist (international, 3 person-months) 6. The consultant will conduct an in-depth evaluation of bond market development and financial sector reforms for preparing the ABM. Specific tasks include the following: By using a comparative framework, determine how economies are coping with the challenge of carrying out bond market development and financial sector reform, and how priorities are determined for the implementation of further development of bond market and financial sector reforms. Analyze whether gaps in expertise and capacity building efforts exist and need to be filled to ensure the progress of bond market development and financial sector reforms. G. Securitization Deal Specialist (international, 3 person-months) 7. The consultant will specify research and data support for delivery to clients for the securitization data and research tool, both from third-party data systems and from the proposed internal data warehouse. Specific tasks include the following: Identify the design and architecture of the data warehouse. Identify and implement input elements to the data warehouse. Guide the design of the (internal) user interface research tool (used by analysts to extract data for client teams). Devise promotional material for discussions with regional regulators and involvement of securitization professionals.

14 12 Appendix 3 H. Securitization Credit Analyst (national, 6 person-months) 8. The consultant will assist the securitization deal specialist in specifying research and data support for delivery to clients for the securitization data and research tool. Specific tasks include the following: Guide user candidates in specifying their research data needs (output of database tool). Support the securitization deal specialist in the data warehouse design process, along with the financial market analyst. Design the (internal) analyst-user interface. Produce promotional material for discussions with regional regulators.