At the seminar “Government bond market 15 years: Imprints and prospects”, organized by the Ministry of Finance on the afternoon of December 5 in Hanoi, Mr. Ketut Ariadi Kusuma, senior financial expert of the World Bank (WB) in Vietnam, expressed his impression of the strong growth rate of the Vietnamese government bond market.

In particular, from 2011 to present, the scale of outstanding government bonds increased from 6% of GDP to 23% of GDP (nearly 4 times), while Vietnam's GDP grew very rapidly.

However, the size of Vietnam's government bond market (about 100 billion USD) is still small compared to many ASEAN countries. For example, in the Philippines, the size of the government bond market is twice that of Vietnam.

In particular, the level of attracting foreign investors to participate in the Vietnamese government bond market is still very limited.

TPCP Dam.jpg
Speakers shared at the seminar. Photo: Ministry of Finance

“Foreign investors have many types of government bonds from different countries to choose from. When comparing risks and interest rates, Vietnamese government bonds are not very attractive. Vietnam's national credit rating is rated by S&P and Fitch at BB+, still lower than the investment threshold of many foreign investors; while they all want to target safe investment tools, low risk and higher yield,” Mr. Ketut Ariadi Kusuma frankly acknowledged.

Participating in international bond index baskets is expected to be a solution to attract more foreign investors to pay attention to Vietnamese government bonds.

However, the WB expert noted: “Some organizations such as JP Morgan require a bond code of VND25 trillion. Vietnam also has a government bond code of VND20 trillion, but it requires a large number of codes with a minimum size of USD1 billion (VND25 trillion). If we want to include Vietnamese government bonds in the global bond index, we must solve the problems of liquidity, scale and pre-transaction margin risks.”

To facilitate more foreign investors to participate in the secondary stock market, Mr. Bui Hoang Hai, Vice Chairman of the State Securities Commission, emphasized that it is necessary to diversify risk prevention tools for foreign investors (for example, exchange rate risk prevention tools), contributing to increasing the depth and excitement of the market.

Taking note of the above opinions, Ms. Phan Thi Thu Hien, Director of the Department of Finance of Banks and Financial Institutions - Ministry of Finance, said: In the coming time, Vietnam needs many investment capital sources to grow the economy. For example, the National Assembly has just passed a Resolution on the development of the North - South Expressway, with a total investment capital of 1.7 million billion VND, which must be basically completed within 10 years, which means that each year, 170 thousand billion VND is needed.

“Government bonds are the main channel to mobilize capital to meet the needs of the State budget. Implementing the mechanism to mobilize capital both domestically and internationally, the Ministry of Finance will study and find solutions to attract foreign investors to diversify investors in the coming time,” said Ms. Hien.

In the immediate future, the Ministry of Finance will focus on implementing a number of solutions. For the primary market, regularly issue bond products associated with restructuring the government bond debt portfolio in a sustainable manner, ensuring sufficient maturities from 3-30 years.

For the secondary market, continue to improve the information and transaction reporting regime, move towards building a standard interest rate curve for the financial market; expand investors, and encourage the participation of foreign investors.

“In recent years, the Government has had many large projects, with a scale of up to billions of dollars. We hope to have specific Government bonds for these projects so that commercial banks can participate, balancing the capital source for the State Bank.

On the other hand, the Ministry of Finance should study the opening of more types of short-term government bonds to create a standard yield curve; at the same time, there should be more products such as government bonds linked to inflation risks... " - Mr. Vu Quang Dong, Vice Chairman of the Vietnam Bond Market Association, proposed.