Vietnam’s debt market has grown to a scale that is highly attractive to foreign investors, but it is in need of a legal framework and incentives to encourage participation, according to economists and industry experts.

 

A recent report by the State Bank of Việt Nam showed total non-performing loans (NPLs) across the banking sector exceed VNĐ227 trillion (around US$8.9 billion). In recent years, many foreign investors, including OK Debt Trading Co., Welcome Debt Trading Co. and the Korea Asset Management Corporation (KAMCO), have actively explored opportunities in Việt Nam’s debt trading market.

 

However, debt transactions mostly take place between domestic institutions such as the Vietnam Asset Management Company (VAMC), the Vietnam Debt and Asset Trading Corporation (DATC) and debt trading subsidiaries of commercial banks. Although efforts to attract foreign investors to the debt market were introduced early, implementation has remained ineffective.

 

Nguyễn Quốc Hùng, secretary general of the Vietnam Banks Association, said that several factors have hindered the growth of the debt trading market. One key issue is the limited participation of market players, as credit institutions mainly sell debts to VAMC and DATC.

 

Credit institutions also face difficulties in determining whether debts purchased from non-credit entities can be processed under Resolution 42/2017/QH14. Market-supporting tools and services remain insufficient, and administrative hurdles in registering changes to secured creditors after debt sales pose significant risks to investors.

 

A representative from a bank-affiliated debt trading company stated that information on debts is now clear and transparent. However, the main obstacle to market expansion is the lack of a robust legal framework, which has yet to create strong appeal for foreign investors.

 

Economist Dr Nguyễn Trí Hiếu said that successful debt resolution in other countries requires a well-functioning debt trading market with strong foreign capital participation. While Việt Nam’s debt market is large enough to be attractive to international investors, the current legal framework has yet to offer the necessary incentives.

 

"Việt Nam must develop a comprehensive legal framework to attract foreign investors to the debt trading market. Providing clear and accessible information on collateral assets and bad debts would enhance market efficiency and boost investor confidence," said Nguyễn Quang Huy, lecturer at Nguyễn Trãi University's Faculty of Finance and Banking.

 

Currently, VAMC’s Debt Exchange has developed a diverse data repository and established connections with multiple investors, including some from foreign countries.

 

Director of the VAMC Debt Exchange Vũ Ngọc Minh said that since its inception, the exchange has actively engaged foreign investors, offering maximum support for evaluating debt opportunities.

 

“Recently, investors from South Korea and China have shown strong interest in Việt Nam’s debt trading market. We have introduced a large portfolio to Korean investors, and they are currently reviewing several major debt transactions,” Minh said.

 

Through KAMCO, many South Korean investors have expressed interest in Việt Nam’s debt market. Previously, KAMCO requested that VAMC provide a list of borrowers and collateral assets for South Korean investors to assess within the framework of Vietnamese law.

 

South Korean investors have been particularly focused on incomplete real estate projects and potentially viable businesses facing short-term liquidity challenges. By acquiring debts, these investors aim to expand their footprint in Việt Nam’s real estate sector and other industries.

 

Beyond South Korean investors, those from China and ASEAN have also shown strong interest in Việt Nam’s debt market. — VNS

 

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