Commercial bond market to open up

Many financial experts are full of optimism about the growth rate of the commercial bond market that should provide a boom for Vietnamese businesses in the near future.

According to Truong Hung Long, Deputy Director of the Finance and Banking Department under the Finance Ministry, the commercial bond market is on the cusp of huge gains.

The department’s director Pham Phan Dung said that Vietnamese businesses have an opportunity to expand their capital mobilisation both inside and outside the country through bond issuances.

According to the Finance Ministry, a legal framework has been made for businesses to issue bonds to the public. Both the Laws on Business and Securities, and Decree No. 52 holds regulations that create conditions for businesses to issue bonds for capital mobilisation.

Kicking off in 1994, it wasn’t until 2006 that the market showed signs that it may flourish. Decree No. 52 was issued last year to allow businesses to issue bonds separately. Under the decree, not only State-owned businesses but also private, joint stock and foreign-invested companies were permitted to issue bonds.

In 2006, local businesses raked in more than 8 trillion VND through bond issuances. Five trillion of which was scoffed up by the Electricity of Viet Nam (EVN), 800 billion VND by the Viet Nam Shipbuilding Industry Group (Vinashin) and 260 billion VND by the Song Da Corporation.

Close to 7 trillion VND worth of bonds were issued by local businesses over the first seven months of the year.

However, according to a representative from Citibank at a conference on the developing bond market in August, foreign investors are cautious of bonds issued by local businesses due to low confidence in domestic business transparency.

In order to issue bonds effectively, Dung proposed that Vietnamese businesses improve their business efficiency, competitive edge and make financial reports transparent to earn trust from investors.

Hisatsugu Furukawa, a consultant with the Japanese International Cooperation Agency (JICA), agreed with Dung that transparency on financial issues is the only way to earn investors’ trust.

In a bid to support bond issuance by local businesses, the Finance Ministry has hooked up with the Secretariat of the Association of Southeast Asian Nations (ASEAN) and the Japan-ASEAN Financial Technical Assistance Fund to draft business bond handbooks to supply essential information for local businesses to issue bonds abroad. They are scheduled to be released by the fourth quarter of this year.