Debt market still in infancy, must develop faster

Panel speakers discuss Vietnam's debt market ongoing issues during the event. (Photo: VNA)

Hanoi (VNS/VNA) – Vietnam’s debt market was still inits infancy and sound policies were required to bolster growth, saidpolicymakers and financial experts during a conference in Hanoi on November 29.

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

Anh said a strong market is crucial in reducing risk and boosting liquidity forbusinesses and financial institutes. In addition, it can play a key part in thedevelopment of Vietnam’s financial market, credit systems and institutions.

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

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

The deputy governor said the SBV's objective to bring down the bad-debt ratioacross the financial system to under 3% in 2025 depends heavily on activeparticipation from businesses and financial institutes, domestic andinternational alike, and the maturity of the market in the remaining years.

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

Economist Can Van Luc said a major issue remained as there were still nomethods to handle debts not under the management of VAMC and Debt and AssetTrading Corporation (DATC), both being State-managed.

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

He urged the government to consider the implementation of proven internationaldebt-exchange protocols, support the development of the secondary market,strengthen the financial infrastructure and encourage the private sector toparticipate in the market./.

VNA