HANOI – The Vietnam Bond Market Association (VBMA) representing 60 members active on the bond market has written to the Ministry of Finance asking for a loosening of rules in a forthcoming decree on corporate bond sales.
The Ministry of Finance is composing a draft decree replacing Decree 52 issued in 2006 on corporate bond issuances. The association suggests that the ministry consider allowing enterprises to issue corporate bonds for whatever legal purposes, rather than to comply with a set of rigid conditions that confine areas of permission.
“At other bonds markets, enterprises can even issue bonds to raise funds for hostile takeovers of other companies, in order to increase its manufacturing capacity,” the association says, giving a comparison.
In addition, the association says big enterprises can issue bonds including short-term valuable papers to mobilize funds for working capital.
In the draft decree, the Finance Ministry regulates that bond sellers can only issue the debt paper if they have been established for at least one year, a provision harshly criticized by the association which calls for the ministry to scrap it.
If this provision stays, many enterprises that have been operational on the market for years will be stripped of the right to issue bonds if they have merged with others to create a new entity, according to the association.
The association also asks the ministry to take off the condition of profitability for issuers because it is not suitable with enterprises operating in the infrastructure and manufacturing sectors which can only earn profits after a long time of operation.
“As the bond market is a market for professional investors, we think investors can absolutely appraise the risks and payment ability of issuers,” the association said.
In addition, the draft decree should not ask issuers, auditors, and credit rating agencies to be held responsible for the accuracy of information published as “this goes against international practices… and neither auditor nor credit rating agency will be willing to give comment due to this regulation,” the association said.
VBMA and International Finance Corporation (IFC) will jointly issue a guidebook for their members on Vietnam’s bond market in the fourth quarter this year. The guidebook will help members refer and apply international standard bond trading models with detailed instructions and methods for bond trading.
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