The participants at a recent online workshop on credit and capital market held by Fitch Ratings and The Asset journal all agreed that Vietnam is benefiting from multi-national groups’ strategy on relocating their production bases out of China.
In order to receive the new investment wave triggered by the strategy, Vietnam needs to develop its infrastructure system as soon as possible.
However, this is a "which came first: the chicken or the egg?" story. To develop infrastructure, each locality will need huge amounts of capital, which is is a big challenge as public investment cannot satisfy demand and resources are limited as economic stimulus packages have been used by the government to cope with Covid-19.
According to Allan Redimerio from Mizuho Bank, large corporations in Vietnam such as the Electricity of Vietnam will need to call for a huge amount of international capital to build large-scale items such as the 500 KV transmission line which connects the North and the South.
Though EVN has been given a credit rating by Fitch, it still cannot raise foreign funds because the bond interest rate is not attractive enough.
In order to successfully issue international bonds, the state-owned enterprises like EVN need to offer interest rates with the minimum gap of 100 basis points (compared with the domestic market) to call for capital by issuing 5-year bonds in the international market.
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The participants at a recent online workshop on credit and capital market held by Fitch Ratings and The Asset journal all agreed that Vietnam is benefiting from multi-national groups’ strategy on relocating their production bases out of China. |
Muralidharan Ramakrishnan from Fitch Ratings estimated that the capital EVN needs to develop infrastructure may amount to $4-5 billion in the next 2-3 years.
Experts said that Vietnam needs to solve problems related to the legal framework, foreign currency swap and the regulations on protecting lenders to be able to lure capital from the international market.
Moreover, in order to develop the capital market, Vietnam will need to have independent institutions given credit ratings to issuers to develop the corporate bond market and attract more investors.
Vietnamese enterprises, which want to issue bonds in the international market, will need the services of international credit rating firms such as Moody’s, Fitch, or S&P at high costs.
Experts suggested establishing joint ventures between foreign credit rating firms and Vietnamese firms, which would help solve the current problems and create confidence in the market.
The ratio of total value of issued corporate bonds to GDP is just 2 percent, which means that Vietnam still has opportunities to develop the bond market in order to seek low-cost capital for investment and development.
Chi Mai
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HCM City to spend $41 billion for transport infrastructure
HCM City needs more than VND950 trillion (US$41 billion) to invest in transport infrastructure from 2020 to 2030.
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Transport infrastructure works progress slowly, official admits
Lack of funds is the main reason for the slow progress of several major transportation works in HCM City, the city People’s Council heard at a session last week.