However – with the spirit of regional financial cooperation for development of Asia as a whole in mine – countries with more advanced financial systems may decide to offer these guarantees for a limited period of time. Proposals for development and integration: enhancing market infrastructure Currency arrangements Issuing bonds under a basket of Asian currencies may achieve a slightly lower cost of funding, given that the currency risk of a basket is lower than the sum of the risk of the underlying currencies. This lower risk should be reflected in a lower cost off capital for borrowers. With regards to liquidity, if bonds in the region were to be issued in a basket of currencies that could be traded in many Asian bond markets, liquidity of such a bond should be better than that of any individual bond. In this regard, deep and liquid bond markets should also reduce transaction costs, making the regional market more attractive than issuing locally. Such a basket of currencies may enhance the natural hedging ability of market participants in each country in the region. Given the importance of intra-regional trade, exporters cold better match the currency exposures of their assets with their liabilities. Cooperative actions needed to facilitate growth of regional bond markets The use of these mechanisms to promote development of bond products must not detract countries from taking serious steps to developing their bond markets.
The world is undergoing dynamic shifts The world around us is shifting dramatically. To understand this shift, we should pay attention to five megatrends. The first is the shift in global economic order with the rise of Asia, including the rising prominence of ASEAN. The gravity of the global economy is moving to the East. Being the sixth largest economy and home to around 650 million people, there is an abundance of opportunity, hope and dynamism in this region. The financial sector will no doubt, be a key player in further catalysing the growth of ASEAN countries. The second is the risks brought about by climate change. Tackling climate change may be one of the biggest challenges for humanity in building a sustainable and prosperous future. It could lead to devastating, wide ranging and irreversible damage to our economy, society and the way we live. Economic losses in itself could be very significant, as high as USD20 trillion. Insured losses from effects of climate change have already increased five-fold in the past 30 years. The third is the rising income inequality that can threaten the fabric of our society. Consider this. The top 1% of the population has captured twice the global income growth of the bottom 50% since 1980. Worse still, inequality has persisted despite large transfers of public to private wealth in many countries. The fourth is the rising populism and protectionist policies. This can be seen in inward looking policies and anti-establishment views that have become more entrenched in parts of the world.