ADB to diagnose Azerbaijan’s capital market, set priorities for development

The Asian Development Bank (ADB) has allocated $700,000 on a grant basis to help the Central Asia Regional Economic Cooperation (CAREC) Program and its members complete the groundwork for the formal establishment of the nascent CAREC Capital Markets Regulators Forum (CMRF) and launch its activities, Report informs referring to the ADB website.

The technical assistance, which will run until December 2025, will support the process of resuming, organizing, formalizing, and institutionalizing the CMRF sustainably and preparing a road map of next steps.

The project will facilitate an agreement by CAREC member countries to pick up where the forum left off because of the COVID-19 pandemic interruption and provide logistical support for its work to resume. The activities will include establishing an overall CMRF governance and secretariat structure. A road map to be developed by the TA will provide well-sequenced policy actions based on required resources and include new regional initiatives; studies on piloting regulatory harmonization and climate-responsive capital markets; and working groups to focus on regulatory frameworks, infrastructure, supply and demand, and other topics key to developing regional and climate-responsive capital markets in the CAREC region.

The forum is designed to enhance regional cooperation and integration (RCI) efforts to develop the capital markets of CAREC developing member countries (DMCs) by promoting knowledge exchange, building capacity, and piloting regional initiatives such as the harmonization of legal and regulatory frameworks.2 The CMRF will deepen, diversify, and help stabilize the region’s financial system. This, in turn, will enable it to function more efficiently as an important source of long-term financing needs, especially for infrastructure development.

The activities will include analyzing and developing knowledge products such as policy briefs and reports on overall capital markets development in the CAREC Program region and the diagnostic study of individual country-level capital markets as well as on initiatives taken by similar regional associations to develop their capital markets.

The TA team will identify the priorities for regional capital markets development for the forum’s attention, and design pilot initiatives to address key issues. These may include developing climate-responsive capital markets, harmonizing legal and regulatory frameworks among CAREC members to promote cross-border capital flows for investment, developing a private equity and venture capital industry, cross-listing, and mutually recognizing and setting joint internationally accepted capital market standards.

The TA will also develop a pilot CAREC regional capital markets information portal to be linked to the CAREC website where information on the members’ capital markets and regulatory and supervisory frameworks will be consolidated and made available.

Although the CMRF held an initial meeting in 2019, the coronavirus disease (COVID-19) pandemic interrupted efforts by CAREC members and ADB to institutionalize and formally launch the forum and begin its work. Further discussion and agreement on the forum’s precise purpose, direction, and priorities were also deferred.

Regional cooperation and individual steps for CAREC DMCs and regulators to remove barriers to regional capital markets development have remained fragmented and ad hoc.

The lack of reliable up-to-date capital market data and information needed to discuss and plan the RCI that the CMRF might provide is another obstacle.