The Vietnam Bond Market Association (VBMA) made its debut in Hanoi on August 14, setting the stage to further spur the development of the bond market and other financial tools in the country.

“The establishment of VBMA is aimed at boosting the bond market to grow more strongly and in a more diverse manner,” Deputy Governor of the State Bank of Vietnam Nguyen Dong Tien said at the inaugural ceremony.

Tien emphasised that when a well-performing bond market is established and developed, it will not only create a channel to mobilise mid- and long-term capital quickly and efficiently for the national economy but also help the Government effectively enforce its management and distribution of financial sources and provide orientations for investments.

Simon Andrews, the International Finance Corporation (IFC)’s Regional Director for Vietnam, Cambodia, Laos and Thailand, said to boost the development of the bond market is an essential move to further fortify Vietnam’s capacity to supply financial services.

“The bond market will provide an important supplementary source of capital in addition to capital flows coming from banks and foreign direct investment,” the IFC official said.

The bond market has made impressive progress in recent years.

According to the Asian Development Bank (ADB), the total value of government bonds in circulation on the market hit 12.4 billion USD by late 2008 from just 4.2 billion USD in 2005.

Corporate bonds have also recorded remarkable growth, reaching 500 million USD in value by late 2008, a five-fold surge from 2005.

However, the chief of a board that lobbied for the establishment of VBMA, Hoang Huy Ha, pointed to a host of limitations facing the Vietnamese bond market given that it’s still in the initial phase of development.

According to Ha, the ratio of capital mobilised from bonds to GDP remains low in comparison with that of other regional countries. Corporate bonds made up a small proportion of the total circulated on the market. Also, the liquidity of the bond market remains low and a set of standards and practices for the market has yet to be developed.

By the end of 2008, the total bonds in circulation accounted for just 14.2 percent of Vietnam’s GDP, while the rate was 52.4 percent in Thailand, 34.2 percent in the Philippines, and 66.8 percent in Singapore.

At this ceremony, the IFC and VBMA signed a memorandum of understanding detailing their cooperation in introducing international practices in the field in a bid to contribute to boosting the development of the domestic bond market and expanding the scope of mechanisms to mobilise capital for infrastructure development projects and other urgent priorities.

IFC pledged to provide consultancy to the VBMA in the course of formulating market practices in the initial phase.

As planned, the VBMA will carry out a series of programmes from now through 2012. These programmes will cover the development of market practices, professional regulations, and database management, in addition to providing professional training courses and bond business support services for its members./.