Moody's fuel Vietnam bond hopes
HONG KONG - Vietnam's plan to make its debut on international bond
markets this year moved a step closer to realisation on
Tuesday after Moody's Investors Service raised the outlook on
its credit ratings for the country.
The ratings agency said it was lifting the outlook to positive
from stable on its "B1" sovereign rating for Vietnam, citing
improved macroeconomic conditions and advances in
structural reforms "beyond a point that was previously
considered politically acceptable". The rating is four notches below investment grade.
The government has said it is planning to launch the country's first international bond
issue in the second half of this year. The proceeds of the transaction, expected to be
in the range of US$300m-US$500m, will be used to help finance an ambitious poverty
reduction plan.
Backed by the World Bank, the government is planning to spend US$70bn between
2001 and 2005 on the plan, with about US$5bn to come from offshore development
assistance and private investment.
State-owned companies, such as oil monopoly PetroVietnam, are believed to be
queueing up to launch their own international bonds once the government completes
its debut issue.
A resource-rich country with a dynamic small business sector, Vietnam's economy
has been growing rapidly in recent years on the back of surging exports.
The World Bank estimated Vietnam's GDP grew 4.8 per cent last year and is
forecasting growth of 5.2 percent in 2002.
After stalling on reform in the 1990s, Vietnam's communist government in the past
two years has moved towards greater recognition of private enterprise. In December,
it passed an amendment to the constitution calling for private companies to be treated
equally to the state sector.
The constitutional amendment followed the signing by Vietnam and the US of a
long-waited bilateral trade agreement, ending years of enmity between the two. As
part of this agreement, the US has pledged to help Vietnam prepare for entry to the
World Trade Organisation, which Hanoi hopes to accomplish by 2005.
"Vietnam has accepted the private sector - both ideologically and out of necessity as it
recognizes the benefits this sector is already providing in terms of employment and
output," Moody's said.
Ratings agencies, however, have been careful to emphasise the risks facing
Vietnam's economic outlook.
Standard & Poor's, which began assigning ratings to Vietnam last month, said the
country's monetary system is "hamstrung" by the central bank's lack of independence,
an inconvertible currency, and an undeveloped capital market.
It said restructuring inefficient state enterprises and the banking sector would also
prove difficult and expensive - non-performing loans are estimated at more than 30
per cent of total loans in the system.
"To facilitate a smooth transition to a market economy, and to raise its low income
level of US$440 GDP per capita, Vietnam needs to pursue further reforms, market
liberalisation, institutional strengthening and integration into the global market," S & P
said.
By Joe Leahy - The Financial Times - June 18, 2002.
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