Once an international financial crisis occurs, it is important to take appropriate steps for managing the crisis. At the same time, it is equally important to put in place an institutional framework which will work to prevent crises before they occur. Here are some of JBIC's activities to develop an international finance system leading to the prevention of financial crises.

Advancing the ASEAN+3 Asian Bond Markets Initiative

Seminar on Partnerships for Advancing Asian Bond Markets

Drawing lessons from the experience of the Asian currency crisis, Asian countries have cooperated with each other to strengthen Asia's regional financial system to prevent the recurrence of the crisis. In this process, JBIC has played a major role in building institutional capacity and providing knowhow.

Since December 12, 2002, ASEAN countries plus Japan, China and Korea have been advancing the ASEAN+3 Asian Bond Markets Initiative (ABMI).

Behind the Asian currency crisis was a double mismatch of long-term financial needs funded by short-term debt, and domestic investments in local currencies funded by foreign currencies. ABMI aims to develop efficient and liquid bond markets in Asia where bonds with diverse currencies and maturities may be issued and traded. At the same time, ABMI seeks to recycle abundant Asian savings into Asian investment which will contribute to medium- and long-term development.

As Japan's official financial institution, JBIC has been actively moving forward ABMI and has contributed to bond market development through local currency bond issues and guarantee provision. In December 2004, JBIC provided a guarantee for \7.7 billion Korean collateralized bond obligations (Pan-Asian Bonds) secured on corporate bonds issued by 46 Korean small- and medium-sized enterprises (SMEs), in cooperation with the Industrial Bank of Korea (IBK). Since then, local currency bond issues and guarantees have been on the rise in Southeast Asian countries. From 2005 to 2007, JBIC issued \50 billion equivalent bonds in Thai baht, while issuing or guaranteeing bonds in Malaysian ringgit and Indonesian rupiah.

A series of these activities have contributed to Asian financial infrastructure development. Stable financial markets in Asia will lead to greater business opportunities for locally operating Japanese subsidiaries and affiliates.

A Schematic Illustration of This Facility

Note: Case 3 occurs only when the issuer is wholly owned subsidiary

Transferring Financial Knowhow

As Japan has achieved economic growth ahead of other Asian countries, the knowhow drawn from this experience has been accumulated in various areas. JBIC is itself a senior member among Asian official financial institutions, and its predecessors--the Export-Import Bank of Japan (JEXIM) and the Overseas Economic Cooperation Fund (OECF)--have accumulated financial knowhow over the years. JBIC is therefore looking ahead to share such knowhow with those Asian countries going through similar experiences going forward, as its "knowledge transfer" activities.

JBIC has provided loans to SMEs in Thailand and Malaysia which have transactions with Japanese firms through local intermediary financial institutions. Its objective was to support the development of supporting industries, which are primarily SMEs, and the building of a structure of supply chains for developing local business firms. These efforts will serve as indirect support for the locally-operated Japanese plants, and will lead to improving the international competitiveness of Japanese businesses.

From 2006 to 2008, JBIC offered knowhow on a wide range of subjects to Asian EXIM banks, including environmental and social considerations, integrated risk management, project finance and the clean development mechanism (CDM).

JBIC intends to transplant advanced knowhow such as project finance integrating environmental considerations into Asian countries.

Strengthening Partnerships with Asian Government Agencies

JBIC has been contributing to building a stable Asian financial system in partnership with foreign government agencies to enable Japanese firms to develop their business.

At the Japan-ASEAN Commemorative Summit in December 2003, the Japanese Government launched the New Concept of Mekong Region Development, setting out the expansion of cooperation in the Mekong region through an integrated approach of economic cooperation, and trade and investment facilitation. Following this government policy, JBIC has provided various kinds of support. In May 2006, JBIC signed a memorandum of understanding (MOU) with the Export-Import Bank of Thailand (TEXIM) to promote comprehensive partnership and cooperation for the common goal of developing the Greater Mekong Subregion (GMS). The MOU aimed to strengthen partnership and cooperative efforts with the Thai government agency, as it seeks to provide effective support for development in the neighboring countries through economic cooperation, and trade and investment promotion.

During the Asian EXIM Banks Forum in November 2006, JBIC signed an agreement (Tokyo Consensus) with eight participating export credit agencies. They agreed on further partnership among the participating EXIM banks in Asia, where economic interdependence is increasing. The Tokyo Consensus placed emphasis on (1) the consolidation of regional energy security, including energy conservation and improving energy efficiency; (2) the promotion of small- and medium- sized enterprises (SMEs) and supporting industries; (3) partnerships among members to promote trade and investment with third countries; and (4) collaboration and outreach in capacity building with human resource development. In these areas, the member institutions agreed to continue discussions to realize concrete collaborative activities.

A stable financial order is a prerequisite to economic activity. To this end, many experts and organizations have devoted their efforts to putting in place institutional arrangements which can prevent and manage a "potential systemic emergency" in international finance. Being prepared for financial crises and providing knowhow and knowledge for other countries--these invisible, low-profile efforts of JBIC--are helping maintain a stable financial order in Asia and the world.