ADB Approves US$135 Mln Loan Program to Aid Vietnam

The Asian Development Bank (ADB) has approved a $135 million loan program to support the development of Vietnam’s capital markets, in line with efforts to create a deeper and more resilient financial sector in the country.

 

“There is a need to foster a diversified financial sector in Vietnam to sustain high investment and growth by developing the capital markets,” said Pradeep Srivastava, an economist for regional cooperation of ADB’s Southeast Asia Department.

The state-dominated financial sector in Vietnam remains underdeveloped, inefficient and fragmented. The banking system still dominates the sector and is limited in its ability to transform its short-term liabilities into long-term financing. While domestic savings rates are high and are likely to continue to improve, and foreign direct investment into the economy is increasing, the ability to sustain economic growth will require increased financial intermediation and improved efficiency.

 

Given the complexity of developing capital markets, the Third Financial Sector Program Loan will comprise two subprograms, the first of which will be supported by a $75 million loan. The financial sector development and reform agenda of the entire program is structured around four components – enhanced market liquidity by lowering transaction costs; an improved institutional framework for securities issuance; stronger investor and consumer protection; and improved regional cooperation in securities market regulation.

 

After 30 months, ADB will evaluate the first part of the program before authorizing continued funding.

 

The loan program supports the government’s 2006-2010 Socio-Economic Development Plan, which not only targets a middle income status for Vietnam by 2010, but also an industrial country status by 2020. The development plan emphasizes business development, private investment and a continuing transition to a market-based system and greater integration with the global economy.