Socialist Republic of Vietnam

Ministry of Finance answered question from Reuters correspondent: Could I ask your assistance in obtaining comment from the Finance Ministry on Standard & Poor's assignment of credit ratings for Vietnam and ask what implications this has for Vietnam's plans to issue bonds overseas. Given this rating, does the ministry plan to go ahead with plans to issue bonds internationally this year?

Answer:

The Ministry of Finance of the Socialist Republic of Vietnam has recently extended official invitations to the world's three major credit rating agencies (Fitch, Standard & Poor's and Moody's) to provide sovereign ratings on the country. The Ministry of Finance of the Socialist Republic of Vietnam today received Standard & Poor's ("S&P") decision to award Vietnam the foreign currency long-term debt rating of BB minus and local currency long-term debt rating of BB. The outlook on the long-term ratings is stable. These results are especially significant as this is S&P's inaugural rating on Vietnam and especially since the only other rating on Vietnam has been Moody's Investor Services ("Moody's), which is one notch, lower at 'B1'. Moody's revised its outlook from negative to stable in April 2001.

According to the Ministry, the S&P rating is a major accomplishment for Vietnam and represents a significant step towards Vietnam's commitment to becoming more open, transparent and fully integrated into the global financial community. S&P was impressed by Vietnam's prudent policy management and strong commitment to reform, excellent export-led growth prospects, modest external debt position and moderate debt stock. "The S&P rating is another step in the improvement of investor confidence in Vietnam", added an official from MOF. Vietnam is the sixth nation in the Association of Southeast Asian Nations ("ASEAN") to be rated by S&P. Credit Suisse First Boston ("CSFB") acted as advisor to the Socialist Republic of Vietnam on the sovereign rating assignment.

The latest and most successful restructuring of Vietnam's Russian debt in September 2000 was considered a major achievement for Vietnam. According to MOF, strict prudence shall be exercised in the management of external debts with the focus on the efficient use of proceeds. Vietnam will maintain a conservative profile in its public finances.

"Vietnam has excellent export-led growth prospects, thanks to its diversified, open, and resource-rich economy. But in order to facilitate a smooth transition to a market economy and to raise its low income level, of US$440 GDP per capita, Vietnam needs to pursue further reforms, market liberalization, institutional strengthening, and integration into the global market. The road ahead is bumpy, but Vietnam has already demonstrated its commitment through key legislation such as the Enterprise Law in 2000, as well as ratifying the U.S.-Vietnam Bilateral Trade Agreement (USBTA). Future rating actions will hinge on progress made on public sector and fiscal reforms and on maintaining Vietnam's credit strengths," said Ping Chew, sovereign credit analyst at Standard & Poor's.

One of the major factors which affects a country's sovereign rating is its GDP per capita. Vietnam's modest per capita GDP (at USD 440 in 2001) keeps Vietnam's rating to BB range. Even on a purchasing power parity basis (PPP), Vietnam ranks as S&P's lowest BB rated sovereign so the BB- rating on its own is impressive from that point of view. As a comparison, S&P rates Jordan, Bulgaria and Peru at BB-, but their respective per capita GDPs, PPP basis are US$4,040, US$5,530 and US$4,720 (Source: 2001 World Development Indicators) compared to Vietnam's US$2,380. This suggests the extent of S&P's confidence about the upside potential of Vietnam's ratings outlook and Vietnam could expect an S&P upgrade in the coming future./.