Luận văn thạc sĩ UEH developing the domestic government bond market, country experiences and

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

FULBRIGHT ECONOMICS TEACHING PROGRAM

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VO CHAU THUY TRIEU

DEVELOPING THE DOMESTIC GOVERNMENT BOND

MARKET: COUNTRY EXPERIENCES AND SUGGESTIONS

FOR VIETNAM

Major: Public Policy

Code: 60340402

MASTER OF PUBLIC POLICY THESIS

SUPERVISOR

Dr. Jonathan R. Pincus

Ho Chi Minh City – 2013

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CERTIFICATION

I hereby certify that

- I wrote the thesis by myself.

- the study has not been submitted for any other degrees.

- any help I received as well as all sources used have been acknowledged in this thesis with

the best of my knowledge.

- the study does not necessarily reflect the views of the Ho Chi Minh City Economics

University or Fulbright Economics Teaching Program.

Author

Vo Chau Thuy Trieu

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Table of Contents

CERTIFICATION ..............................................................................................................................1

ABBREVIATIONS ............................................................................................................................4

LIST OF GRAPHS .............................................................................................................................5

ABSTRACT........................................................................................................................................6

Chapter 1 INTRODUCTION..............................................................................................................7

1.1 Background ...............................................................................................................................7

1.2 Policy questions ......................................................................................................................10

Chapter 2 LITERATURE REVIEW.................................................................................................11

2.1 Financial repression is ineffective for the economy................................................................11

2.2 Benefits of a developed domestic government bond market ..................................................13

Chapter 3 COUNTRY EXPERIENCES ...........................................................................................16

3.1 How did Malaysia develop their domestic bond markets? .....................................................16

3.1.1 Situation and motivation for reform.................................................................................16

3.1.2 Key policies......................................................................................................................18

3.1.3 Achievements...................................................................................................................21

3.2 How did Thailand develop its bond market? ..........................................................................23

3.2.1 Situation and motivation for reform.................................................................................23

3.2.2 Key policies......................................................................................................................25

3.2.3 Achievements...................................................................................................................29

Chapter 4 VIETNAM........................................................................................................................31

4.1 Developing the bond market is important for Vietnam...........................................................31

4.2Vietnam government debt market overview ............................................................................32

4.3 Types of government debt securities.......................................................................................36

4.3.1 Government bonds...........................................................................................................36

4.3.2 Government-guaranteed bonds ........................................................................................37

4.3.3 Municipal bonds...............................................................................................................37

4.4 Investors base..........................................................................................................................37

4.5 Factors hinder Vietnam’s domestic government bond market................................................38

4.5.1 Interest rate cap ................................................................................................................41

4.5.2 Statutory liquidity ratios of banks....................................................................................43

4.5.3 Primary dealers.................................................................................................................43

4.6 Suggestions for Vietnam’s bond market .................................................................................44

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Chapter 5 CONCLUSION ................................................................................................................46

REFERENCES..................................................................................................................................48

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ABBREVIATIONS

BTH: Thailand Bath

HNX: Hanoi Stock Exchange

HSX: Ho Chi Minh City Stock Exchange

MOF: Ministry of Finance

OMO: open market operations

SBV: State Bank of Vietnam

USD: U.S. dollar

VND: Vietnam dong

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