A long way ahead to make credit rating a culture in Vietnam: Saigon Ratings chairman

By Dinh Vu, Minh Hue
Mon, October 16, 2023 | 12:14 pm GMT+7

Credit rating in Vietnam is like “putting the cart before the horse”, so to make it part of the culture will be really challenging, said Phung Xuan Minh, chairman of Saigon Ratings, the first credit rating agency in Vietnam.

Becoming a pioneer in a certain field is not simple. Could you please share the reason why you chose the credit rating field so early and the difficulties you have faced?

In 2005-2010, Vietnam was still in the early stages of economic reform. Basically, the Vietnamese financial market at that time was very primitive, limited and underdeveloped in many aspects. The capital market serving the needs of economic development and the business system was mainly based on the bank credit channel although the number and scale of commercial banks participating in the market remained very limited. The stock market had just been born while the corporate bond market was not yet formed.

With personal knowledge, understanding and experience in several areas such as corporate financial consulting, investment funds, securities and real estate business, and after a period of research and forecasting the development trends of the national financial market in general and the corporate bond market in particular in the medium and long term, at the beginning of 2010, we began to focus on credit rating and decided to establish the first independent credit rating agency (CRA) in the Vietnamese financial market.

We faced a lot of difficulties at that time. Firstly, the market was unfamiliar with corporate bonds and there was no credit rating activity in the country. When establishing Saigon Ratings, someone told me to "sell porridge and tea rather than credit rating because this field has never been heard of". Meanwhile, the stock market was only a few years old, so the awareness, thinking, and understanding of the market were very limited, let alone credit rating.

Secondly, when Saigon Ratings started operations, there was no legal framework to apply for an official operation license. At that time, a few businesses offered credit ratings for some businesses and banks online, but they were criticized. However, no one "blew the whistle" because there was not a legal corridor. From 2010 to 2012, Saigon Ratings began studying this field and at the end of 2014, the Ministry of Finance issued Decree 88, allowing credit rating organizations to be established.

The third difficulty came from the actual implementation process. Because we were the pioneer, there were no models in Vietnam for us to learn from, so we had to rely on experience of credit rating agencies in the region. At that time, I went to Japan, South Korea, Thailand and Malaysia which had been developing a credit rating culture 20-30 years before Vietnam. In South Korea, the president of a credit rating group shared that: "I had 15 years of suffering, called “putting the cart before the horse”, until the state issued a regulation mandating credit rating. Before that, no one cared about it." After hearing his story, I was very discouraged.

However, we still managed to maintain the system and personnel quality according to the regulations of the Ministry of Finance until 2017, when Saigon Ratings was licensed. But even after we had the license, for the first two years, there were no phone calls to order our services. When we proactively called businesses, we received the same answer: "What's credit rating for? There's no need."

Having gone through these difficulties, Saigon Ratings has gradually asserted its position. Currently, we lead in the number of rated issuers in Vietnam. The company has provided services to nearly 30 issuers (financial and non-financial) in different economic sectors and industries in the country.

What do you and Saigon Ratings expect in the near future with credit rating in the corporate bond market?

Credit rating is an international practice, applied by most developed countries towards sustainable capital markets. However, after 10 years, organizations such as the IMF and the ADB still assess that Vietnam does not have and has not yet developed a credit rating culture, making it difficult to develop the capital market. Even some regulations mandating credit rating only apply to a very small group.

In Vietnam, there are too many experts and individual investors that take a herd mentality and focus on interest rates, while in developed countries, investors only look at rating results to make investment decisions. In particular, their regulators are clearly aware that corporate bonds are an important part of the capital market.

To promote strong economic development, in the current integration conditions, it is necessary to develop the corporate bond market, together with the credit and stock markets. In the next 2-3 years, the rebound of the corporate bond market will create momentum to develop the whole economy and support businesses.

However, to do this, the state must resolutely protect investors, form a credit rating culture to minimize information asymmetry, and provide full information for investors so they can make their own investment decisions and take responsibility themselves.

According to recommendations from many international organizations, Vietnam should issue a decree, like many countries, stipulating that issuers must have mandatory credit ratings for the first three years if they want to issue bonds. It’s like wearing a helmet - if it is mandatory for three years, then it becomes a habit and a culture. Hopefully credit rating will be a driving force to protect investors and become a culture in Vietnam.

In addition, international practices show that it takes 3-4 years for rating businesses to compile enough resources. Vietnam also needs 3-5 years for domestic organizations to be strong enough to meet the rating needs of the country.

Comments (0)
  • Read More
Vietnam shares sink on extended foreign selloffs

Vietnam shares sink on extended foreign selloffs

Vietnamese equities fell for a fourth consecutive day on Tuesday as foreign traders extended their selling spree.

Finance - Tue, November 19, 2024 | 5:10 pm GMT+7

Germany’s household product firm QuickPack to invest $32 mln in Vietnam

Germany’s household product firm QuickPack to invest $32 mln in Vietnam

Germany’s QuickPack, a specialist for household goods and hygiene products, will invest €30 million ($31.8 million) in Vietnam’s Mekong Delta province of Long An.

Industries - Tue, November 19, 2024 | 4:24 pm GMT+7

Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers

Malaysian millionaire willing to invest in convicted Vietnamese tycoon’s property project: lawyers

Malaysian millionaire Vincent Tan has evinced investment interest in a residential project owned by convicted tycoon Truong My Lan, chairwoman of Van Thinh Phat Group, lawyers for the latter have disclosed.

Real Estate - Tue, November 19, 2024 | 4:17 pm GMT+7

‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects

‘Bottleneck of bottlenecks’ continues to dog Vietnam's property, infrastructure projects

Limited consultations between state agencies and the parliament’s primary focus on wording are issues with Vietnam’s legal framework adversely affecting property and infrastructure projects, say experts and corporate leaders.

Economy - Tue, November 19, 2024 | 3:40 pm GMT+7

President Xi Jinping hastens construction of 3 Vietnam-China rail routes

President Xi Jinping hastens construction of 3 Vietnam-China rail routes

Chinese President Xi Jinping has called for more substantial cooperation between China and Vietnam, including the pacier implementation of three railway routes linking the two nations.

Infrastructure - Tue, November 19, 2024 | 3:08 pm GMT+7

Vietnam developers offer deferred principal payments, interest support to boost year-end sales

Vietnam developers offer deferred principal payments, interest support to boost year-end sales

Vietnamese housing developers are offering several incentives including deferred principal payments and interest support to stimulate demand and boost liquidity as the year nears its end.

Real Estate - Tue, November 19, 2024 | 2:29 pm GMT+7

Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory

Australia's EQ Resources acquires TMG Group with Vietnam-based ferrotungsten factory

Australia-based EQ Resources Limited has acquired its fellow firm Tungsten Metals Group (TMG), which owns and operates the largest ferrotungsten (FeW) factory outside China.

Companies - Tue, November 19, 2024 | 11:00 am GMT+7

Techcom Securities becomes largest broker in Vietnam by capital base

Techcom Securities becomes largest broker in Vietnam by capital base

Techcom Securities JSC (TCBS) has become the largest securities company in Vietnam by charter capital after finishing a rights offering last week.

Finance - Tue, November 19, 2024 | 9:11 am GMT+7

Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec

Vietnam airport operator ACV looks to better exploit non-aviation service potential: exec

Vietnam's airports operator ACV expects to earn $145 million from non-aviation services this year, accounting for around 18.83% of its total revenue, which is modest compared to other countries, said deputy general director Nguyen Duc Hung.

Companies - Tue, November 19, 2024 | 7:45 am GMT+7

The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment

The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment

A seminar themed “Removing legal bottlenecks for infrastructure and property investment” will be organized by The Investor in Hanoi on Tuesday.

Companies - Tue, November 19, 2024 | 7:00 am GMT+7

Indonesia promises Asia-Pacific investors more incentives

Indonesia promises Asia-Pacific investors more incentives

Indonesian President Prabowo Subianto recently told the press that he will create more incentives and expand special economic zones (SEZs) so as to lure investors from Asia-Pacific.

Southeast Asia - Mon, November 18, 2024 | 11:01 pm GMT+7

Indonesia, Brazil enhance aviation cooperation

Indonesia, Brazil enhance aviation cooperation

Indonesia's state-owned aircraft manufacturer, Dirgantara Indonesia (DI), and Brazilian aerospace company Embraer have signed a memorandum of understanding (MoU) to expand collaboration in the commercial aviation sector.

Southeast Asia - Mon, November 18, 2024 | 11:00 pm GMT+7

Indonesia eyes to become member of BRICS

Indonesia eyes to become member of BRICS

Indonesian President Prabowo Subianto has shown his country’s desire to become a member of the BRICS - the alliance of major emerging economies initiated by Brazil, Russia, India, China, and South Africa.

Southeast Asia - Mon, November 18, 2024 | 10:57 pm GMT+7

Former Party chief, chairman of Vinh Phuc province face disciplinary action

Former Party chief, chairman of Vinh Phuc province face disciplinary action

Vietnam’s Central Inspection Committee has proposed disciplining Pham Van Vong, former Party chief of Vinh Phuc, and Phung Quang Hung, former chairman of the northern province, for violations related to Phuc Son Group.

Politics - Mon, November 18, 2024 | 9:17 pm GMT+7

Shaping a waterway into a key shipping channel: Viconship gets dredging nod

Shaping a waterway into a key shipping channel: Viconship gets dredging nod

A major dredging project will allow safer ship navigation and increased cargo transportation capacity on the Hai Phong shipping channel, thereby enhancing competitiveness of Vinconship’s port system, says the company.

Companies - Mon, November 18, 2024 | 7:08 pm GMT+7

Former assistant to State President appointed general director of state-owned financial firm HFIC

Former assistant to State President appointed general director of state-owned financial firm HFIC

Truong Tuan Anh, an official at the State President Office and former assistant to a state president, has been appointed general director of Ho Chi Minh City Finance and Investment Stated-owned Company (HFIC).

Companies - Mon, November 18, 2024 | 5:35 pm GMT+7