In a talk with Saigon Investment, Mr.Truong Thanh Duc, a lawyer and director of the ANVI Law Firm and arbitrator of the Vietnam International Arbitration Center (VIAC), spoke of his support for this move by the Government.
JOURNALIST: - Sir, what do you think is the main bottleneck that needs to be removed immediately from Decree 65?
Mr. TRUONG THANH DUC: - I think that in this amendment of Degree 65, it is necessary to loosen some provisions, especially those provisions regulating capital mobilization. Besides, it is also necessary to loosen the provisions that are restricting investors who are considered unprofessional when buying corporate bonds.
Decree 65 is confusing in expressing the nature of the capital market today because there are very few so-called professional investors, and so many customers who buy corporate bonds in the market will be greatly reduced by this move. Or even the regulation that says when buying and selling corporate bonds they must be about VND 100 million or more. This does not reflect the true nature of the market. In the long run, we can have such regulations, but we will need a roadmap, and with the current characteristics of Vietnam's capital market, this will take at least five years or even ten years.
In fact, professional investors will not or very rarely buy bonds, as they prefer to buy stocks. Businesses often only sell bonds to raise capital but do not buy them. Banks are also just issuing channels, but they do not or rarely buy corporate bonds. This is unreasonable in some provisions of Decree 65. Therefore, the main point is to change the mindset and look directly at the current situation of Vietnam's capital market in order to set appropriate policies without having to apply a management framework with rigid regulations.
- Sir, regulations on credit ratings for bond issuers in Decree 65 are currently considered too strict. What is your opinion on this?
- Currently, the Ministry of Finance has submitted to the Government a draft Decree amending and supplementing a number of articles of Decree 65. According to the draft, the Ministry of Finance has proposed to the Government to allow the postponement of the regulations on mandatory credit rating requirements for one year, which will be implemented from 1 January 2024, instead of 1 January 2023, as recommended in Decree 65. Previously, Decree 65 required that from 1 January 2023 the bonds offering dossier of the issuing company must have a credit rating result, applicable to enterprises whose total value of bonds mobilized in 12 months and greater than VND 500 bln and greater than 50% equity, or total outstanding bonds greater than 100% equity.
There have been many opinions that a fund to stabilize the market should form a bonds market stabilization fund, like China and South Korea, or a program to buy secondary bonds like in the US. However, this model is not feasible in the conditions prevalent in Vietnam. I think that the key to dealing with the current bond issue is a story of trust. Solutions for information transparency will be fundamental in the long term.
In the long term, professionalism and honesty will be the key prerequisites to help the market develop well. In particular, boosting the credit ratings of bond issuers is one important solution. Instead of managing thousands of issuers and millions of investors, just focus on managing and closely monitoring credit rating companies, increasing credit rating quality, and promptly correcting any violations as they occur.