Debt market still in infancy, must develop faster

VIETNAM, November 30 - HÀ NỘI — Việt Nam's debt market was still in its infancy and sound policies were required to bolster growth, said policymakers and financial experts during a conference in Hà Nội on Tuesday.

Deputy governor of the State Bank of Vietnam (SBV) Nguyễn Kim Anh said while there have been some debt-trading activities in recent years, the market largely remained primitive with a number of shortcomings and limitations.

Anh said a strong market is crucial in reducing risk and boosting liquidity for businesses and financial institutes. In addition, it can play a key part in the development of Việt Nam's financial market, credit systems and institutions.

She said in the last two decades the SBV has been focusing on the construction of numerous legal frameworks for debt-exchange activities with a clear goal to building a model for future development. The introduction of a debt-exchange platform, under the management of the Vietnam Asset Management Company (VAMC), last year has provided businesses and financial institutes with an official method to handle bad debts.

As the market was still taking its first steps, however, there was still much work to do. Major issues included inconsistency in current financial regulations, sub-par auditing quality, inadequate IT infrastructure and a lack of participation by stakeholders in debt-exchange activities.

The deputy governor said the SBV's objective to bring down the bad-debt ratio across the financial system to under 3 per cent in 2025 depends heavily on active participation from businesses and financial institutes, domestic and international alike, and the maturity of the market in the remaining years.

She urged the Government to make it a top priority to support the development of the market.

Economist Cấn Văn Lực said a major issue remained as there were still no methods to handle debts not under the management of VAMC and Debt and Asset Trading Corporation (DATC), both being State-managed.

In addition, currently, there were only two available protocols for debt-exchange: direct negotiation and licensed bidding. Meanwhile, there were only a handful number of companies specialised in debt management and inadequate capital investment.

He urged the government to consider the implementation of proven international debt-exchange protocols, support the development of the secondary market, strengthen the financial infrastructure and encourage the private sector to participate in the market. VNS