Vietnam lawmakers deem overseas bond issuance plan 'risky'

Thanh Nien News

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Vietnam plans to issue US$3 billion worth of sovereign bond overseas to refinance debt in 2015-2016. File photo Vietnam plans to issue US$3 billion worth of sovereign bond overseas to refinance debt in 2015-2016. File photo


As the government awaits the legislature's approval of its plan to issue US$3 billion worth of bonds overseas with maturities of 10-30 years to refinance debt in 2015-16, many legislators have voiced concern.
News website VnExpress quoted Huynh Ngoc Son, vice chairman of the National Assembly, as saying at a meeting Thursday that he "does not totally disagree" but the plan needs to be "carefully considered."
He cited "the lesson" from the issuance of international bonds by former state-owned shipbuilding giant Vinashin a few years ago.
In 2007 Vinashin got the government's permission to issue $600 million worth of bonds overseas to raise funds for projects unrelated to its core business. Three years later when the bonds matured, the company pleased inability to pay due to bad business.
In 2013 Vinashin was allowed to sell another $600 million worth of international bonds with the government's guarantee to refinance the overdue debt. The same year the company filed for bankruptcy, and was restructured and renamed the Shipbuilding Industry Corporation or SBIC, following a financial and management crisis.
"If we issue more bonds, not only it will be very risky, but it will possibly make subsequent generations resent us," Son said. "If we sell 10-year bonds our children will have to repay the debt. If it is 30 years our grandchildren will."
Nguyen Kim Thuy, a legislator from the central city of Da Nang, was also worried about the fact the government wants to issue the bonds to refinance debt, warning it would increase Vietnam's public debt, the website reported.
At another meeting that same day Pham Huy Hung, a Hanoi representative, also expressed concern about the plan's impact on public debts, suggesting the government should borrow domestically instead.
According to the government's estimates, around $16 billion worth of bonds will mature in 2015-16, but public revenues will not be enough to repay them.
It said the planned bonds, if issued, would not affect public or foreign debts, assuring both would remain under safe limits by 2020 – 65 percent and 50 percent of GDP.
Public debts are estimated at 61.3 percent of GDP as of this year end, and foreign debts at 41.5 percent.
Bui Duc Thu, a member of the House’s Finance and Budget Committee, is among legislators who support the bond proposal.
In an interview with news website Saigon Times Online, he said it is "necessary" to go abroad to issue sovereign bonds since the domestic situation is "extremely difficult."
The government originally planned to raise VND436 trillion ($19.24 billion) this year, more than half of it from bond sales, to offset its budget deficit and refinance debt and for public spending, he said.
As of September end, it managed to achieve just 51 percent of the bond issuance target of VND226 trillion ($9.97 billion).
Thu believed that with longer terms and lower coupon rates, international bonds are more attractive.
However, since Vietnam's existing laws do not allow the government to issue bonds overseas to refinance its domestic debt until 2017, the National Assembly would have to pass a resolution allowing it, he said.
He warned that the need for the bond issuance is "urgent," not only because the money is for refinancing debt due in 2015-16, but also because the US would likely hike interest rates, which would increase Vietnam's borrowing cost.

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