Some Asian cities urged to fund infrastructure with municipal bonds
Asian local governments searching for funds to pay for a slew of infrastructure projects may need to contemplate municipal bonds as an alternative funding source, according to a new report by Standard & Poor's Ratings Services.
Entitled "The Development Of Municipal Bond Markets, And Credit Cultures, May Help Fix Asia’s Infrastructure Conundrum", the report discusses some of the region's infrastructure needs, as well as the key challenges facing Asia's policymakers as they attempt to find funding solutions and address long-standing investor concerns about the region's bond markets. It also examines what needs to be done to kick-start the region's municipal markets.
"Economic and market conditions are probably ripe for many countries in emerging Asia to contemplate new funding solutions such as municipal bonds," Standard & Poor's Executive Managing Director Thomas Schiller said.
"Indeed, we believe the development and deepening of local municipal markets alongside other bond markets will go a long way to help Asia solve its massive infrastructure-funding needs, as well as mobilise its wealth on behalf of regional development and provide a better investment opportunity for investors."
He added that although many policymakers across the region are encouraging more diverse and liquid local bond markets through regulatory changes and other reforms, immense challenges remain. Among the biggest is developing a "credit culture" and debt-management practices that are robust enough to enable investors to make informed risk-and-return decisions. "There's much work that needs to be done in this regard, and many markets are not yet ready," he noted.
