Experience in developing the corporate bond market in ASEAN+3 countries and lessons for Vietnam

Abstract

Vietnam is viewed as having a banking-dependent financial system. The population's idle capital is mainly used to serve the investment needs of the economy indirectly through the banking system. Therefore, developing the stock market, particularly the corporate bond market, enables the economy to minimize its dependence on the banking system and generate capital for the economy. Issuing bonds is considered a method of raising money that has a number of advantages, including the ability to mobilize capital from all economic sectors. On the other hand, several comments in the research on promoting long-term capital financing suggest that the issuance of bonds also provides the market and investors with a financial tool, assisting in the diversification of investment portfolios and risk reduction. Developing the corporate bond market is not only in Vietnam but also becomes an urgent task than ever when the domestic, regional and world economies face numerous difficulties stemming from crises. According to the Asian Development Bank (ADB), one of the main reasons behind the 1997 Asian financial crisis was the excessive dependence of Asian economies on commercial banks for domestic financing. Asian countries have almost failed to diversify financial sources to finance businesses because these economies mainly rely on banks instead of other financial instruments, in particular. The bond market is still underdeveloped and quite small in size. Moreover, Asian countries need a substantial long-term source of capital (US$750 billion per year 2010–2020) to develop infrastructure connectivity within and between economies in the region. Therefore, the restructuring of the financial system, in which the diversification of capital funding sources, specifically promoting the bond market in general and the corporate bond market in particular, becomes an indispensable need not only of especially in Vietnam but also in Asian countries, especially since the 1997 Thai currency crisis and the 2008 global financial crisis, through the bond market in general and the corporate bond market in particular, sources local and regional capital can be channeled into infrastructure projects and other productive investments over the long term. Having a well-developed local currency bond (including corporate bonds) market can enhance the resilience of domestic financial markets to external shocks and facilitate better intermediation between savings and investment. invest in production in Asian countries, including Vietnam. Therefore, learning about the experience of developing the corporate bond market in a number of countries in the ASEAN+3 region, thereby drawing lessons from experience for Vietnam is critical for the country's development of the corporate bond market.