Vietnam Encourages State firms to issue bonds

Vietnam’s Ministry of Finance, or MOF, is encouraging Vietnamese companies to issue international bonds to raise funds for their domestic investment projects, senior ministry officials said Monday. The MOF, which held a meeting Friday to review its first sovereign bond issuance of $750m and prepare for new issues in 2006, has told state-owned firms to immediately pursue issuance plans, Deputy Finance Minister Le Thi Bang Tam told the official Vietnam Financial Times newspaper.

State firms such as the Vietnam Cement Corp, which want to borrow from global markets, should speed up their plans because "it’s an appropriate time for them to go," Tam said. In October, the MOF sold US$750m of 10-year bonds, with an order book of $4.5 billion, and the proceeds have been invested to boost the country’s shipbuilding industry.

"We understand that foreign investors would be ready to invest US$4 billion in Vietnam if we continue issuing bonds," Tam added. In 2006, Vietnam will start its five-year development plan which will require huge investment funds, so more state firms should look for foreign loans.

"Many industries which will speed up their key projects will prepare to issue their own international bonds from 2006," Pham Phan Dung, director of the MOF’s banking & credit organization department, told Dow Jones Newswires. Dung said that because PetroVietnam will finance its $2.5 billion Dung Quat oil refinery, and EVN will continue building various power plants, they "are proactive in finding their own funds, instead of relying on the MOF."

Vietnam law allows domestic firms to directly issue bonds to foreign markets, or to issue bonds under the MOF’s guarantee, Dung emphasised.

Vietnam targets an economic growth rate of eight per cent in 2006 and the country plans total investment of VND375 trillion (US$23.6bn), of which 35 per cent is expected to funded by foreign sources such as official development assistance, foreign direct investment and foreign loans, according to MOF figures.