Government Bonds Market of
Vietnam: Experiences and
Challenges for Development
Pham Van Hoang
Ministry of Finance of Vietnam
Overview
Vietnam has been implementing Renovation policy
The aim growth for GDP during 2000-2020 is 78%/year
Government bonds: important instruments to
offset the State Budget’s deficits and mobilize
capital for development
Types of Government Bonds
Treasury Notes
Treasury Bonds
Investment Bonds
Subjects in the Government Bonds
Market
Government: Central Government and Provincial
Authorities
Investors: Private investors and Organized
investors
Financial Intermediaries: Commercial banks,
insurance companies, investment funds,...
Forms of Government Bonds
issuance
Retailing through State Treasury system
Bidding through the State Bank of Vietnam
Bidding on the Centrally-organized securities
market
Results of Government Bonds
issuance
Retailing through State Treasury system
• Treasury Notes: Total value of issuing is $US
866 millions
• 1 year Treasury Bonds: Total value of issuing is
$US 540 millions
• 2 years Treasury Bonds: Total value of issuing is
$US 1.4 billions
Results of Government Bonds
issuance
Bidding through the State Bank of Vietnam: Total
value of issuing is $US 1.5 billion
Bidding on the Centrally-organized securities
market: Total value of issuing is 92 million US
Dollars
Result of Government Bonds
issuance
64%
2%
34%
Retailing through
Treasury
Bidding through State
Bank
Bidding on the
Securities market
Achievements
Capital attraction for investment, savings
increase in GDP, prevention from issuing money
to offset State budget’s deficits
Key role in controlling money market
Considered as an important goods on the capital
and securities market
Active role in creating farvourable conditions for
allocating capital for development
Deficit balance percentage
through Government Bonds
79,4
80
67,1
70
58,2
60
50
40
30
20
10
0
0,3
86-90
91-94
95-97
98-2000
Difficulties
Capital mobilization through Government Bonds is
rather low
Problems of legal framework for issuing Government
Bonds
• Interest rate defined is somewhat to objective side, not
close to the market signals
• Methods of issuing Government Bonds are not
diversified
• Difficulties of issuing Government Bonds by bidding
through the StateBank still due to limited and irregular
attendances
Government Bonds percentage
per GDP
Year
Percentage
Year
Percentage
1991
0.15
1996
0.93
1992
0.83
1997
2.20
1993
1.71
1998
2.39
1994
1.98
1999
3.17
1995
2.21
2000
3.76
Difficulties
Difficulty of Provincial authorities bonds issuance
because of Government’s strict management mechanism
Difficulties for listed and traded Government Bonds on
the centrally-organized securities market
• The interest rate of Government Bonds is rather low
• Many big commercial banks don't participate in the
secondary market
• A few organized investors take part in the market
Demand for Government Bonds
Market
Needs for investment capital: nearly 30% of GDP
for the period 2001-2010 (equal to $US 180-200
billions)
Investment capital from the Gorvernment: 30% of
total investment capital (equal to 9-10 % of GDP)
Prospect for Government Bonds
Market
Advantages: Political stability, high economic
growth and controlled inflation rate
Difficulties:
• Legal framework is not perfect; Insufficiency of
Banking, accounting and information systems
• Citizen’s understandings
market is not high
about
the
capital
• Abilities of economic managers have some
limitation
Macroeconomic Solutions
Improve the effectiveness of the national finance
market
Set up policies; Implement methods to strengthen
the Gorvernment Bonds market
Consolidate the primary market
Improve legal framework on issuing, listing as
well as trading Gorvernment Bonds
Make plans for trading bonds on the OTC (over
the counter) market.
Specific Solutions
Improve the effectiveness of offering
Gorvernment Bonds
Make plans and schedule for Gorvernment Bonds
issuance
Develop financial intermediaries
Upgrade the role of bond market management
(MOF, SSC...)
Thank you!