S&P;’s Initial Rating for Vietnam Moves It Closer to Bond Sale

HANOI —  Vietnam received a sovereign debt rating from Standard & Poor’s on Tuesday, moving the nation closer to a chance to tap world debt markets for the first time since it began opening its economy in the mid-1980s.

The Communist-ruled country of 80 million people received a BB-minus sovereign credit rating. The initial S&P; rating on Vietnam’s long-term foreign currency debt puts the country three notches below the lowest investment-grade level, on par with Bulgaria and Peru and one notch below India.

Vietnam is moving toward a market-based economy, under which it opened a stock market in 2000, reached a trade agreement with the U.S. last year and is trying to join the World Trade Organization.

The country’s per capita income doubled over the last decade and could do so again over the next decade, the World Bank said.

“Governments throughout the region are very worried about Vietnam because they’re such a strong competitor,” said John Chambers, deputy head of sovereign ratings at S&P.; “You’re going to see this country emerge as the next Asian tiger economy.”

Still, the country needs to open its markets further to win upgrades, S&P; said.

The current rating balances Vietnam’s “excellent export-led growth prospects” with the challenges “of transition to a market-led economy, weaknesses in public finances and limited monetary flexibility,” the rating firm said. “Despite success in achieving moderate levels of inflation, Vietnam’s monetary flexibility is hamstrung by the central bank’s lack of independence, the inconvertibility of the Vietnamese dong, the high level of foreign currency deposits and an undeveloped capital market.”

The rating is another key step for Vietnam in its plans to borrow via U.S. dollar-denominated bonds for the first time. The government hopes to sell the bonds this year.

Vietnam also has invited Fitch Ratings Inc. to give the country a credit rating, and representatives of Moody’s Investors Service began meeting with government officials last week to assess its rating on Vietnam, the Vietnam Investment Review reported Monday. Moody’s has a B1 rating on Vietnamese foreign currency bonds and notes and changed its outlook to stable from negative in April 2001.

Receiving credit ratings from Moody’s, S&P; and Fitch “is one of the very important conditions to enable us to issue international bonds,” said Tran Xuan Gia, Vietnam’s minister of planning and investment.

Though the government hasn’t announced a figure for the bond sale, bankers bidding to manage the sale expect $300 million to $500 million.