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BANGKOK: Vietnam's communist authorities have given the go-ahead for the country's first dollar-denominated sovereign bond, ending nearly 10 years of internal debate over the wisdom of plunging into international capital markets.
The country's state controlled newspapers, which announced the latest cabinet's decision, did not say how much the issue was intended to raise but people close to the deal said the issue would be at least $500m if not more. An international road show is due to begin soon, and authorities hope to conclude the issue by the end of October or early next month.
Dominic Scrivens, director of Dragon Capital, a local investment bank, said Hanoi's decision to proceed reflects its growing comfort with its market-oriented reforms and deepening integration with the global economy.
Hanoi has long toyed with borrowing commercially to create a benchmark for itself, despite relatively easy access to low interest loans from multilateral financial institutions. Several years ago, a prospectus for a potential issue was drawn up but Hanoi's politburo -- unsure whether it could spend the money -- called off the move.
But with its economy growing at about 8.0 per cent a year, Vietnam requires vast sums of capital to overcome worsening infrastructure bottlenecks, and much of that money will have to come from external commercial borrowings.
Prospects for the issue received a further boost in July, when Moody's Investors Services raised Vietnam's credit rating for the first time in seven years to Ba3 from BI, citing the country's surging exports due to a US trade deal.
Money raised from the sovereign bond is planned for capital investment by state enterprises, with those familiar with the deal suggesting that the shipbuilding industry and ports, to facilitate surging exports, would be big recipients.
Analysts believe the first sovereign bond may soon be followed by large state enterprises pursuing their own international bond offerings, possibly with government guarantees.
The country's draft five-year plan for 2006-10 sets out an ambitious target for investment of more than $57bn by the central government and state-owned enterprises, though some question whether state companies -- some of which have been dogged by corruption scandals in recent years -- will be able to invest efficiently.
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