Asia must look to set up a comprehensive, region-wide bond markets if it wants to avoid a repeat of the 1997 financial crisis, a high-level conference here over the weekend was told.

These markets should by set up "by Asia, for Asia and in Asia" delegates attending the "AsEAN plus 3" meeting heard.

While financial experts have long argued that the weak development of capital markets, particularly bond markets, was a key factor in the economic woes of the late 1990s, delegates said hopes of developing such markets had yet to be realised.

The Japanese government is now promoting what it has termed the Asia Bond Markets Initiative in a bid to correct past mistakes.

In an address to fellow officials from finance ministries and central banks from the ten countries in the Association of southeast Asian Nations (AsEAN) along with affiliates from Japan, south Korea and China, Tokyo's vice-minister of finance Takayoshi Taniguchi set out the proposals.

"It is desirable for the savings of the Asian region to be effectively utilised within the region itself," said Taniguchi.

"We believe that well-developed Asian bond markets would serve to prevent the recurrence of a currency crisis and would also make a major contribution to attaining economic stability in the region, including stable currency values."

According to Doctor Olarn Chaipravat, a senior adviser to the Thai government who works at

Bangkok's shinawatra University, the solution is "regional bonds by Asia, for Asia and in Asia."

Professor Takatoshi Ito of the University of Tokyo and Olarn are the brains behind the initiative to create Asian-wide bonds, which would involve the participation of governments and private enterprises in the issuance of Asian Basket Currency (ABC) bonds to be traded, managed, rated, guaranteed and recognised by regional institutions throughout Asia.

The Asian paradox, underlined during the 1997 troubles, is that financial intermediation of Asia's massive savings is largely done outside the region, in New York and London, and in a non-Asian currency, the Us dollar.

As was seen in 1997-98, potentially deadly mismatches of maturities and currency exposures

result from short-term borrowings in dollars to fund long-term investments in local currencies. The objective of the Asian bonds, according to Takatoshi Ito, is precisely "to provide a tool to avoid or mitigate the risks."

The other positive contribution would to provide a badly needed instrument of reference for domestic bond markets across Asia.

"These bonds will play the role of a benchmark in the region," he explained.

For Chaipravat, there was no contradiction between developing a regional bond market and the necessary strengthening of national markets.

"The trade off between domestic and regional markets is one like breakfast and dinner," said the Thai economist.