Credit guarantee facility for ASEAN firms

"Now the fund is ready to guarantee corporate bonds issued by Asean firms that want to raise funds in local currencies to finance |their business expansion," Chakkrit said.

The Credit Guarantee and Investment Facility (CGIF) will start to offer private firms bond guarantees in July, Chakkrit Parapuntakul, director-general of the Public Debt Management Office, said yesterday on the sidelines of the 45th annual meeting of the board of governors of the Asian Development Bank in Manila. The fund, with capital of US$700 million (Bt216 billion), was established last year by the 10-member Asean and China, Japan and South Korea in collaboration with the ADB.

Fox example, Thai companies that invest in Indonesia and want to raise funds in that country will be able to ask for a credit guarantee when they plan to issue rupiah-denominated bonds, he said.

"The CGIF will give Thai firms a $140-million quota for credit guarantee in the initial year of operation of the facility." He added that the quota would be expanded in later years.

The facility would lower the cost of fund-raising as private corporate bonds are likely to get the top credit rating of "AAA", Chakkrit said.

So far, about 80 firms have applied for such a guarantee from the CGIF, he said.

Both listed and non-listed firms are eligible. However, they must obtain a credit rating on their debts by local or international rating agencies.

The facility will take into account key indicators such as corporate good governance, management and business feasibility before granting the guarantee, he said.

It will work closely with commercial banks in Asean as they are invited to choose their clients and forward the lists to the CGIF.

When a credit guarantee is granted, a bank will be assigned to be lead underwriter of the bond, Chakkrit said.

International rating agencies currently assign CGIF credit rating "AA+" for its hard-currency debts, he said.

Meanwhile, Haruhiko Kuroda, president of the ADB, said the Asia-Pacific region should be able to maintain its growth momentum despite ongoing troubles elsewhere in the world.

The ADB has forecast healthy growth of gross domestic product for developing Asia-Pacific, at 6.9 per cent in 2012 and 7.3 per cent in 2013.

However, the region faces stiff long-term challenges. High among these is the issue of rising inequality, he told news conference.

"Unfortunately, while the region has made remarkable progress in reducing poverty, the benefits of growth have yet to reach several hundreds of millions of Asians who continue to struggle on less than $1.25 a day," Kuroda said.

He also announced that the ADB had secured a fresh fund of $12.4 billion to finance its soft-loan scheme to support the region’s poorest countries.

However, the bank has not yet made it clear when it will resume new lending to help Myanmar. Kuroda said the ADB had not provided loans to that country for almost 25 years partly because of substantial accumulated debts unpaid.

He said the World Bank and the ADB had recently established rules to resolve debts that the Myanmar government owed to the two international institutions.

The ADB will not offer new lending unless accumulated debts are cleared.

There are about 4,000 participants, including delegates, businesses, media and civil groups attending the 45th ADB annual meeting, which ends on Saturday.

The highlights of the meeting include the region’s economic prospects and inclusive growth to reduce inequity and fight poverty.