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Bond Market Development in Vietnam

Project Development Objective (PDO)

This project aims to support the Ministry of Finance and relevant authorities in implementing the government’s Bond Market Development Roadmap. Specifically, the project will help implement reforms in the government bond market and the corporate bond market.

Background

The World Bank Group supported the Ministry of Finance of Vietnam (MOF) in preparing a roadmap for bond market development through 2020. The roadmap outlines the major challenges and gaps that exist and provides recommendations to remedy these deficiencies for the government and the corporate bond markets. 
This project seeks to (a) reform the fragmented and illiquid government bond market; (b) improve the segmented regulatory framework and low transparency in the corporate bond market; (c) strengthen market infrastructure, including the clearing and settlement system for government bonds; (d) enable more timely and reliable information on corporate bond markets; and (e) enhance the capacity and awareness of both MOF and market participants about the procedures for regulating and participating in the bond market.

Activities

The main activities in the proposed technical assistance will encompass five specific areas of implementation under the Bond Market Development Roadmap.
Government Bonds—Primary Market
In this component, the project provides issuance mechanisms and builds benchmarks through a toolkit and training on bond issuance processes to develop a liquid yield curve. It delivers guidelines for a gradual approach to develop a primary dealer system for government bonds. In addition, the project helps develop new products and techniques to increase activities in primary and secondary markets. 
Corporate Bonds—Primary Market
In this component, the project improves the regulatory enabling environment for the corporate bond market. Also, it develops standard documentation of corporate bonds to improve transparency.
Repo and Money Market
The aim for this activity is to introduce a standard repo (repurchase) agreement and process among market makers (key members of the Vietnam Bond Market Association) and between the market makers and MOF for government bond liquidity. 
Secondary Market  
The aim of this component is to help establish a market making arrangement by which the market makers must quote firm prices.
Investor Base
The aim of this component is to advise on the design of an investor communication strategy—particularly a web-based investor relation program—to improve transparency for investors.

Expected Outcomes

The expected outcomes in the government bond market are as follows:
1.  Improved operations through new regulations on the primary dealer system and auction
     processes 
2.  Increased transparency and predictability that will enable bond issuances and a benchmark yield
     curve
3.  Fewer and larger securities that will help build benchmarks and enable the secondary market
4.  Increased investor participation—including institutional and retail investors—in government
     bonds 
The expected outcomes in the corporate bond market are as follows: 
1.  Improved regulatory framework through the establishment of new regulations and guidelines
2.  Improved transparency through better disclosures and more timely corporate bond information 
3.  Improved capacity and efficiency in bringing transactions to the market by introducing and
     implementing new standards in bond market operations