Laos preparing to issue 1st foreign bonds this year
Thursday, April 01, 2010 6:59 AM
 
 
SINGAPORE, Apr. 1, 2010 (Kyodo News International) -- Laos hopes to
raise nearly $80 million from global investors by issuing its first
ever foreign bonds later this year, international financial sources
said Thursday.
 
The Asian Development Bank has been working closely with the Lao
government in preparing to issue, possibly in September in Thailand,
bonds denominated in Thai baht with a term of seven to 15 years.
 
Issuing bonds in Thailand is more likely to attract the attention of
global investors than if Laos were to issue it at home, the sources
said.
 
The sources said it is a ''pilot project'' under the Asian Bond
Markets Initiative, originally proposed by Japan under the framework
of ASEAN-plus-three cooperation involving the 10 members of the
Association of Southeast Asian Nations plus Japan, China and South
Korea.
 
The initiative is aimed at helping the region reduce its dependence on
short-term dollar-denominated financing which had made it highly
vulnerable during the 1998 Asian financial (NYSE:DYP) crisis.
 
Finance ministers from these countries agreed at their meeting in 2003
to promote the initiative to encourage countries in the region to
issue bonds in local currency to meet the region's need for long-term
financial resources.
 
A thriving Asian bond market could also spur the region toward its
goal of financial integration, having its own common currency and even
an Asian monetary fund in the future.
 
The Lao government will guarantee the bonds based on royalties from
two hydropower plants -- Theun Hinboun in central Laos and Houay Ho in
southern Laos -- that have agreements to sell electricity to the state-
run Electricity Generating Authority of Thailand.
 
The Lao government is planning to use profits from the bond issuance
for the development of infrastructure inside Laos.
 
The ADB is working with Laos on the structure of the bonds, including
overcoming any legal hurdles arising from cross-border issue of bonds.
One option is for the Export-Import Bank of Thailand to issue triple-A
grade for the bonds.
 
The ADB has been closely involved in developing energy infrastructure
in Laos as part of an overall plan to develop the Greater Mekong
Subregion.
 
Laos, Myanmar and Cambodia all have big potential to harness
hydroelectric power to supply other countries such as Thailand, to
which Laos is already supplying hydroelectric power, and Vietnam,
where demand for power is rising due to rapid economic growth.
 
ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand and Vietnam.