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Study of IT Infrastructure and System for Bond Market Development in Lao PDR .Go.Kr Ksp 2014/15 Knowledge Sharing Program with Lao PDR II Sharing Program 2014/15 Knowledge 2014/15 Knowledge Sharing Program with Lao PDR II: Study of IT Infrastructure and System for Bond Market Development in Lao PDR .go.kr ksp Ministry of Strategy and Finance Government Complex-Sejong, 477, Galmae-ro, Sejong Special Self-Governing City 30109, Korea Tel. 82-44-215-7762 www.mosf.go.kr www. Korea Development Institute 263 Namsejong-ro, Sejong Special Self-Governing City 30149, Korea Tel. 82-44-550-4114 www.kdi.re.kr Koscom Corporation 76 YEOUINARU-RO (YEOUIDO-DONG), YEONGDEUNGPO-GU, SEOUL, KOREA 150-080 Tel. 82-2-767-7777 www.koscom.co.kr ? ? Tel. 82-2-? www.kcmi.re.kr Knowledge Sharing Program MINISTRY OF STRATEGY AND FINANCE Center for International Development, KDI ● ‌263 Namsejong-ro, Sejong Special Self-Governing City 30149, Korea ● Tel. 82-44-550-4114 ● cid.kdi.re.kr ● www.ksp.go.kr 2014/15 Knowledge Sharing Program with Lao PDR II 2014/15 Knowledge Sharing Program with Lao PDR II Project Title Study of IT Infrastructure and System for Bond Market Development in Lao PDR Prepared by Korea Capital Market Institute (KCMI) Koscom Corporation (KOSCOM) Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea Korea Development Institute (KDI) Prepared for The Government of the Lao People’s Democratic Republic In cooperation with Lao Securities Commission Office (LSCO), Lao PDR Lao Securities Exchange (LSX), Lao PDR Program Directors Siwook Lee, Executive Director, Center for International Development (CID), KDI Hong Tack Chun, Dean of KDI School of Public Policy and Management, Former Executive Director, CID, KDI Kwangeon Sul, Research Fellow, CID, KDI Program Officer Daehyun Song, Research Associate, CID, KDI Millim Yeo, Research Associate, KCMI Hyejin Lee, Research Associate, KCMI Senior Advisor Youngkwa Kim, Visiting Fellow, KCMI Project Manager Suk Hyun, Research Fellow, KCMI Authors Suk Hyun, Research Fellow, KCMI Millim Yeo, Research Associate, KCMI Changmin Chun, Research Fellow, KCMI Hyejin Lee, Research Associate, KCMI Honghee Yang, Deputy General Manager, KOSCOM Seokbae Lee, Senior Manager, KOSCOM Wansung Kim, Senior Manager, KOSCOM English Editor Jeong Sun Ku, External English Editor Jin Yim, English Editor, KCMI Junhyeong Kim, Assistant Manager, KOSCOM Government Publications Registration Number 11-1051000-000623-01 ISBN 978-89-8063-956-4 94320 978-89-8063-827-7(set) Copyright ⓒ 2015 by Ministry of Strategy and Finance, Republic of Korea Government Publications Registration Number 11-1051000-000623-01 2014/15 Knowledge Sharing Program with Lao PDR II: Study of IT Infrastructure and System for Bond Market Development in Lao PDR MINISTRY OF STRATEGY AND FINANCE Preface The main purpose of the Knowledge Sharing Program (KSP) lies in contributing to the social and economic development of partner countries by sharing the experience of Korea. This program was first introduced in 2004 by the Ministry of Strategy and Finance (MOSF) of Korea and is managed by the Korea Development Institute (KDI). For the last ten years, 46 countries from all around the globe have become KSP partner countries and 606 policy recommendations have been proposed as KSP consulting subjects. In 2014, the Korea Capital Market Institute (KCMI) offered policy consultation regarding “Study of IT Infrastructure and System for Bond Market Development in Lao PDR”, focusing on sharing Korea’s experience in developing the government bond market in addition to providing tailored policy recommendations, which address the Lao bond market’s current situation. The 2014/15 KSP with Lao PDR II, which consists of three sub-topics requested by LSCO, (i) provide policy research and advice on IT infrastructure and system for the bond market and necessary components to boost the well-functioning and efficient bond market in Laos, (ii) improve capacity building including onsite training on bond issuance, trading, market monitoring and supervision and so on both in Laos and Korea, (iii) assist technical consultation on study of IT system being compatible with the ASEAN and international bond markets as well. Research was conducted through systematic process proposed by KDI as follows: demand survey and pilot study in April of 2015; additional pilot study in June of 2015; final reporting to deliver reports and discuss further potential projects in August of 2015. Over the course of the KSP projects, there have been great many contributions from highly dedicated local partner institutions. Furthermore, the Lao Securities Commission Office (LSCO), the Bank of Lao PDR (BOL) and the Lao Securities Exchange (LSX) continued their active participation in the KSP. Also noteworthy is support from KOSCOM, with expertise and experience in implementing IT infrastructure for the Korean and overseas capital markets. We hope that the research carried out through this KSP will contribute to the government bond market development of Lao PDR and promote mutual friendship between the two countries. I extend my sincere gratitude to Suk Hyun, Hyejin Lee from KCMI’s Center for Global Financial Collaboration as well as Changmin Chun and Milim Yeo, and all staffs from KOSCOM for self- sacrificing devotion to producing an outstanding report. I also wish to thank Youngkwa Kim for participating in the senior policy dialogue to share his valuable experience in Laos. To conclude, the contents of this report are the subjective opinions of experts who have participated in the program and do not necessarily reflect the official views of KCMI. Inseok Shin President Korea Capital Market Institute Contents 2014/15 KSP with Lao PDR II …………………………………………………………………………………… 011 Executive Summary ……………………………………………………………………………………………… 017 Study of IT Infrastructure and System for Bond Market Development in Lao PDR Section 1. ‌Current State of the Lao Capital Market 1. Introduction …………………………………………………………………………………………………… 026 2. Lao Capital Markets ………………………………………………………………………………………… 027 2.1. History …………………………………………………………………………………………………… 027 2.2. Lao Capital Market Authorities and Players ………………………………………………………… 028 3. Lao Bond Market ……………………………………………………………………………………………… 030 3.1. Overview of Government Bonds ……………………………………………………………………… 030 3.2. Types of Lao Government Bonds ……………………………………………………………………… 030 3.3. T-Bill Auction Process …………………………………………………………………………………… 031 3.4. Secondary Market and Taxation ……………………………………………………………………… 032 4. Problems in the Lao Bond Market and Development Strategy ………………………………………… 032 4.1. Problems in the Lao Bond Market …………………………………………………………………… 032 4.2. Roadmap for the Lao Bond Market ………………………………………………………………… 033 4.3. Strategic Plan on Capital Market Development (2016-2025) ……………………………………… 034 4.4. Collaboration with the ABMI ………………………………………………………………………… 035 Section 2. ‌Korea’s Experience of Bond Market Development and Securities Deposit and Settlement Infrastructure 1. Introduction …………………………………………………………………………………………………… 036 2. Korea’s Experience of Bond Market Development ……………………………………………………… 037 2.1. Early Stage of the Government Bond-driven Market and Beginning of Agency Bond Issuance (1950~1980) ………………………………………………………………… 37 2.2. Era of Monetary Stabilization Bond …………………………………………………………………… 40 2.3. Korean Bond Market after the Asian Financial Crisis (1998~Now) ………………………………… 43 3. Korea’s Experience of Establishing Securities Deposit and Settlement Infrastructure ………………… 49 3.1. Concept and Significance of Securities Deposit and Settlement Infrastructure …………………… 49 3.2. Historical Evolution of Korea’s Securities Deposit Infrastructure through Stages of Capital Market Development ………………………………………………………………………… 62 3.3. Economic Functions of Securities Deposit and Settlement Infrastructure ………………………… 69 Section 3. ‌IT Infrastructure for Korean Capital Markets 1. Introduction …………………………………………………………………………………………………… 073 2. IT Infrastructure Development for the Capital Markets ……………………………………………… 074 2.1. Overview ………………………………………………………………………………………………… 074 2.2. IT Infrastructure for the Capital Markets by Economic Development Stage …………………… 074 3. Current IT Infrastructure for the Bond Market …………………………………………………………… 079 3.1. Business Process Flow of the Bond Market ………………………………………………………… 079 3.2. Key Components of IT Infrastructure for Korea’s Bond Market ………………………………… 081 3.3. Current IT Infrastructure for the Bond Market in Laos …………………………………………… 083 4. Economic Effects of IT Infrastructure on the Korean Capital Markets ……………………………… 086 4.1. Overview ………………………………………………………………………………………………… 086 4.2. Economic Effects of IT Infrastructure Development………………………………………………… 086 Section 4. ‌Policy Recommendations for Bond Market Development and IT Infrastructure Development 1. Introduction …………………………………………………………………………………………………… 090 Contents 2. Policy Recommendations for Bond Market Development ………………………………………………… 90 2.1. Financial/Capital Market Development Phases and Bond Market Development Plan …………… 90 2.2. Recommendations for Establishing Securities Deposit and Settlement Infrastructure in Laos ……………………………………………………………………………………………………… 94 3. Policy Recommendations for IT Infrastructure Development …………………………………………… 96 3.1. Recommendations for the Markets Newly Adopting IT Systems …………………………………… 96 3.2. Direction for Establishing IT Infrastructure …………………………………………………………… 97 3.3. Implications for Bond Market IT Infrastructures …………………………………………………… 101 References ………………………………………………………………………………………………………… 104 Contents | List of Tables <Table 1-1> Lao Capital Market Authorities and Major
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