The Chiang Mai Declaration on Asian Bond Market Development issued on June 22 by the second ministerial meeting of the Asia Cooperation Dialogue forum marks the first tangible step on the long journey towards building such a market.

With the newly launched US$1 billion Asia Bond Fund and within the dialogue forum framework, Asian countries will bring their financial ties closer in developing the regional bond market, in an effort to build up their strength to jointly resist possible future financial crises.

The fund is to buy sovereign and quasi-sovereign US dollar bonds issued by any of the forum members except Japan, Australia and New Zealand.

Thai Prime Minister Thaksin Shinawatra said in Chiang Mai on Sunday at the ministerial meeting's closing session that Asian countries have never managed to utilize their foreign-exchange reserves to create their own wealth.

He said: "We have never transferred our wealth through either the fixed assets or debt instruments of the West. In turn, these reserves were used to create and add more wealth to the Western hemisphere. Sometimes they become loans given to us by the West, even if they derived from our own money."

The prime minister stressed that Asia must try to manage its own assets, resources and strengths in such a way that the creation of Asian financial instruments would serve Asia best.

Experts in Chiang Mai said they believed that the launch of the bond fund has laid the cornerstone for the Asian Bond Market.

On June 2 this year, 11 central banks participating in the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP) agreed to set up the Asian Bond Fund with starting capital of US$1 billion. The central banks involved are those from Australia, the Chinese mainland, China's Hong Kong Special Administrative Region, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore and Thailand.

The Chinese Government decided to invest in the bond fund in an effort to advance regional financial co-operation.

The Asian Bond Fund is denominated in US dollars and managed by the Bank for International Settlements.

Experts in Chiang Mai said they believed that the fund will basically empower the less well-off. It will not merely benefit Asia but, together with the US and European bond markets, will support a more balanced and stable financial market globally.

Describing the newly launched bonds as the Asian Bond Fund 1, Thai Foreign Minister Surakiart Sathirathai said the success of the bond fund already represents a great stride towards the development of regional bonds.

He said he believed that the Chiang Mai Declaration will act as a catalyst to spur the development of a solid, efficient and sustainable Asian bond market and open up ways to co-operate in the creation of the Asian Bond Fund 2.

The declaration also encourages a wide variety of issuers, including international organizations and government agencies in the region, to issue bonds denominated in Asian currencies to contribute to the stability of the financial markets.

Although all dialogue forum members fully recognized the importance of building the Asian bond market and pledged to contribute towards it, they know clearly that "Rome cannot be built in a day."

An official with the dialogue forum's Working Group on Financial Co-operation previously told the press that the EMEAP is to study the possibility of investing in debt instruments denominated in local currencies between July 2003 and December 2004.

He said that a number of Asian countries will also consider technical and operational issues, and that finance ministers of various countries also have to consider the appropriate infrastructure to develop Asian bond markets. And it is believed that the research programmes will last between two and five years.

Some experts from Pakistan and Japan agreed that investment in US dollars may encourage currency mismatches, which is a major reason for the outbreak of the 1997 Asian financial crisis.

Facing various difficulties, all the Asia Co-operation Dialogue (ACD) forum members are decisive and confident about the establishment of the regional bond market.

Thaksin echoed the views of the other forum members when he said: "I believe in Asia. I believe in our future. I believe that a strong Asia is for the strength of the world. And I believe that, with the ACD, Asia and the world will be a better place for all of us to live in, now and always."