亚开行-越南境内信用评级机构中外国投资的潜力（英文）-2020.9-34页

Summary of "The Potential for Foreign Investment in a Domestic Credit Rating Agency in Viet Nam"

Core Content

This report evaluates the potential for foreign investment in a domestic credit rating agency in Viet Nam from the perspective of a global credit rating agency. It outlines the economic and regulatory environment in Viet Nam, the development of its bond market, and the implications for credit rating agencies.

Main Points

Economic Overview

• Viet Nam's Economic Position: Viet Nam is the sixth largest economy in ASEAN and the region's fastest-growing economy.
• GDP Growth: Annual GDP growth has consistently been over 6% since 2014, well above that of other ASEAN countries.
• Population: As of 2019, Viet Nam had a population of 96.5 million, third largest in ASEAN.
• Economic Structure: The economy has shifted from agriculture to industry and services, with urbanization increasing to over 36%.
• Foreign Investment: Annual FDI flows increased from $12 billion in 2012 to $20 billion in 2019, reflecting the country's growing attractiveness as a manufacturing hub and consumer market.
• Impact of Trade War: The US-PRC trade war accelerated the shift of manufacturing activity from the PRC to Viet Nam.
• Impact of COVID-19: Viet Nam was less affected by the pandemic compared to other ASEAN countries. Its GDP growth slowed in 2020 but is expected to return to its growth trajectory in 2021.

Bond Market Development

• Growth Trends: The corporate bond market has grown rapidly since 2017, with $12.8 billion in issuances in 2019, surpassing Indonesia and the Philippines.
• Market Components: The bond market includes government bonds, government-guaranteed bonds, municipal bonds, and corporate bonds.
• Private Placements: In 2018 and 2019, private placements accounted for 94% of corporate bond issuances due to eased disclosure requirements.
• Public Offerings: Public bond offerings require registration with the State Securities Commission and extensive disclosures. The approval process can take up to 30 days.
• Regulatory Changes: Decree #163 (2018) streamlined the issuance process for private placements, reducing requirements such as minimum capital and profit track record.
• Cooling Measures: Decree #81 (2020) introduced restrictions on private placements, aiming to shift issuance activity to public offerings. It also increased the limit for noncredit institution bond issuances to five times the equity.
• Market Outlook: The corporate bond market is expected to continue growing, with a target of 7% of GDP by 2020 and 20% by 2030. It already exceeded the 2020 target in 2019.

Regulatory Environment

• Regulatory Bodies: The Ministry of Finance, State Bank of Viet Nam, and State Securities Commission oversee the bond market and credit rating activities.
• Credit Ratings Regulation: Decree #88 (2014) outlines the licensing and operation of domestic credit rating agencies, based on IOSCO principles. It allows full foreign ownership and requires a minimum of 10 analysts with at least 3 years' experience.
• Credit Rating Mandates: The 2019 Securities Law (effective January 2021) requires some public bond issuers to be rated by domestic agencies, but not private placements.
• Future Regulations: A new decree is being drafted to replace Decree #163 and #81, expected to be issued before the end of 2020, to guide the implementation of the 2019 Securities Law.

Domestic Credit Rating Agencies

• Licensed Agencies: Two domestic credit rating agencies have been licensed by the Ministry of Finance, but they are not yet operational.
• Challenges: The lack of a credit culture and limited demand for ratings have hindered the development of a robust domestic rating agency.
• Policy Support: Viet Nam's policymakers are supportive of a healthy bond market and have shown a strong commitment to establishing a domestic credit rating agency.
• Investment Opportunities: A technical service agreement is seen as a low-risk entry point for foreign credit rating agencies. Collaboration with local institutions is preferred to combine global best practices with local insights.

Key Information

• Market Attractiveness: Viet Nam's bond market is attractive for foreign investment due to its strong economic fundamentals and growth potential.
• Regulatory Framework: The regulatory environment is evolving to support the development of the corporate bond market and the establishment of credit rating agencies.
• Investor Landscape: Individual investors currently own almost a fourth of all bond issues, posing risks to the market due to the lack of a credit culture.
• Future Prospects: As the bond market becomes more rated, the case for foreign equity investment in a domestic credit rating agency will strengthen.
• Collaboration Benefits: Foreign agencies entering through collaboration with local institutions can enhance the credibility and acceptance of domestic ratings.

Conclusion

The report concludes that the business case for a global credit rating agency to enter the Vietnamese market through a technical service agreement is compelling. The regulatory environment is conducive to market development, and the growing corporate bond market presents opportunities for foreign investment. Collaboration with local institutions is recommended to ensure the successful integration of global standards and local practices.