This is the report of a conference convened by the APEC Business Advisory Council (ABAC), the Asian Development Bank Institute (ADBI) and the Pacific Economic Cooperation Council (PECC) Finance Forum on 21–22 June 2005 in Tokyo, Japan. This conference focused on promoting private sector participation in the development of local currency bond markets and in facilitating the emergence of a regional bond market in the Asia-Pacific region.

Building on the conclusions of a previous ABAC/PECC conference on the necessary conditions for attaining these objectives (see Appendix B), public and private sector participants conducted an assessment of the extent to which such conditions are met in individual emerging markets and in the APEC region. The conference yielded the following assessment:

1. • There are wide disparities among developing APEC economies, but they may be broadly classified into two groups — a number of more developed emerging markets that have made significant advances, and a second group of markets that are still in the early stages of development.

2. • In the first group, only 5 per cent of all the key objectives for promoting private sector participation in bond market development in the region remain largely unmet, while in the second group, 80 per cent remain substantially unattained, indicating that a considerable amount of work remains to be done in a number of emerging markets.

3. • For the first group of economies, the main focus of concern is on enhancing market depth and liquidity. For the second group, the focus is on fundamental issues related to the depth and liquidity of capital markets (including benchmark yield curves, the investor base, savings) and the regulatory framework (such as disclosure, protection of creditor rights, enforcement).

4. • Of central importance for the proper pricing of risk is bond market liquidity, which requires a sound institutional framework and market infrastructure, as well as a robust investor and issuer base, a sufficient number of market makers, a wide variety of financial instruments, sound macroeconomic policies and an open economy and financial sector.[…]