Bond mobilisation needed for Ho Chi Minh City infrastructure

Ho Chi Minh City
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To realise its ambition of becoming Southeast Asia and Asia’s leading hub in multiple sectors, Ho Chi Minh City must bolster its infrastructure. With the city’s budget only covering 30-40 per cent of infrastructure costs, amidst an economic slump, there is an urgent need to devise strategies to entice international financing, potentially through bonds. A future financial centre could also be instrumental in this endeavour.

Vietnam’s bond market is feeling the heat, with defaults, particularly among real estate developers, taking centre stage. A worrying 23 per cent of all real estate-linked bonds have been defaulted on. Data from financial information provider FiinGroup, as of March, revealed that 69 bond issuers with outstanding bonds missed their maturity obligations, representing an aggregate value of VND94.43 trillion ($3.93 billion).

This includes $173.22 million from 2022 bonds, or 8.15 per cent of the market’s total outstanding bond value.

While 65 issuers defaulted entirely, four successfully renegotiated terms, extending their maturities and adjusting interest rates. Sectoral analysis indicates that real estate companies are the main culprits, with 43 issuers defaulting on bonds worth approximately $3.29 billion, making up 83.6 per cent of the entire default value. Given its economic stature, Ho Chi Minh City is bearing a significant brunt of this crisis.

Mechanisms to gain trust in investments are paramount, especially in light of recent real estate bond defaults that threaten to impact other bonds. To restore this trust, companies might consider leveraging Independent Ratings. While optional, these ratings can mitigate the principal-agent problem between investors and real estate firms, potentially leading to reduced interest rates and borrowing costs.

Additionally, introducing investment guarantees for defaults, promoting greater transparency in infrastructure or real estate bonds, and ensuring clear governance with robust anti-corruption measures, efficient dispute resolution, and explicit property rights can further solidify confidence. Adopting such measures could also enhance Ho Chi Minh City’s appeal for funding infrastructure projects.

The issue of sustainable development is also an important driver for investment. For example, the promotion of sustainable construction projects can increase Ho Chi Minh City’s attractiveness for foreign investors. Incentives should be created here, especially for sustainable infrastructure development projects.

In addition, cooperation with green or sustainable bond initiatives is highly recommended in order to create a framework within which infrastructure development bonds can be placed as green or sustainable bonds. Because the global sustainability trend among investors is definitely not interrupted, Ho Chi Minh City should jump on this bandwagon.

The government needs to improve the institutional, legal, and regulatory framework that integrates regional and international standards into its regulatory framework to create confidence and reassurance for investors.


To draw in capital to the region in the long term, a well-functioning financial centre is of crucial importance (also outside of infrastructure development projects). Based on the Global Financial Centres Index, Ho Chi Minh’s stock exchange is ranked last in the Asia-Pacific region and ranked 112 of 120 worldwide. However, Ho Chi Minh City should not be discouraged by these figures either. Rather, it is a challenge for policymakers to set the right course to create an own financial hub in Vietnam.

Dr. Andreas Stoffers, FNF Vietnam, Country Director
Prof. Dr. Andreas Stoffers, FNF Vietnam Country Director

The idea that Vietnam as a future industrialised country can also host a financial centre is not new. However, discussions have yet to bear fruit. Ho Chi Minh City and the provinces surrounding the city, such as Binh Duong, already offer excellent conditions for foreign investors. Banks and fintech companies are well represented in the city.

Creating a financial haven alongside other sectors in Vietnam holds significant allure. For one, it promises a boost in the Vietnamese banking system’s competitiveness. As plans for a financial centre get underway, there will be an imperative to bolster efficiency, confront the currently concerning non-performing loan ratio, overhaul the market landscape, professionalise both equity and bond markets, and roll out a credible rating system.

Moreover, a well-oiled banking system, featuring a blend of international and national credit institutions, naturally sets a more favourable stage for local investors. This drive towards a financial nucleus would also provide robust momentum for the development of a central bank digital currency, something that institutions like the State Bank of Vietnam are already delving into.

Lastly, Vietnam, having showcased its appeal for foreign direct investments, would further solidify its international cachet with a financial centre in its portfolio.

There are other approaches to attracting international capital to Ho Chi Minh City. These include increasing transparency, especially in the bond and stock market, granting tax incentives in accordance with the global minimum tax, reducing regulatory and administrative burdens, streamlining approval processes and providing investment protection on a large scale.

In addition to private foreign investors and large foreign investment firms, the support of development banks can also be enlisted. Especially, the collaboration with the latter can increase the credibility and confidence in infrastructure bonds issued.

Creating a financial hub in Ho Chi Minh City is a Herculean task, but can certainly be considered feasible. However, the time horizon is not to be seen in the short term, but is at least 10 years. The example of Dubai shows that this is possible. In this context, Ho Chi Minh City offers even better starting conditions. An emerging country like Vietnam deserves its own financial centre.

The article was additionally featured in the Vietnam Investment Review on August 16, 2023.