Vietnam postpones inaugural global bond

Vietnam postpones inaugural global bond

HANOI, Vietnam - Communist Vietnam has postponed its first-ever global bond issue until next year at the earliest, a senior central bank official said Monday.

Analysts had expected the bond — worth probably between US$300 million and US$500 million — would be issued in the third quarter of this year.

The official, who spoke on condition of anonymity, declined to comment on why the offering was postponed, saying only that "under these conditions" a bond offering is considered unwise.

Tussles between the central bank and Finance Ministry had already delayed the bond issue, which was first discussed several years ago before being dropped and then resurrected earlier this year.

Finance Ministry officials say the bond is designed to raise the country’s profile in the international market and provide a benchmark for future government and corporate borrowing.

To that end, the government decided to issue the bond this year to take advantage of low global interest rates and growing investor appetite for a Vietnamese offering.

But the central bank has long opposed the proposed bond, saying Vietnam should not borrow money at international commercial rates but should instead tap locally held dollar savings and low-cost international official development assistance.

Development aid is very long-term — making it ideal for many of the infrastructure projects Vietnam hopes to finance — and comes at highly concessional rates, often interest-free with a "management fee" of less than 1 percent a year.

The state-controlled Tuoi Tre Youth newspaper Monday quoted a Finance Ministry official as saying that Vietnam’s four main state-owned commercial banks now hold US$3.8 billion in overseas bank accounts. The banks are starting to bring their foreign exchange back home to provide funding for large development projects, it said.

The bond’s postponement may also be due to government fears that a U.S.-led war on Iraq could disrupt global capital markets and make its first sovereign bond more expensive.

The central bank official, interviewed Monday by Dow Jones Newswires, declined to comment on that possibility.

AP