The Ministry of Finance of Lao PDR ready to issue THB 3.61 billion bonds to fund national development

Bangkok, Thailand: The Ministry of Finance of Lao PDR is prepared to issue THB 3.61billion bonds to fund the state’s national development towards a sustainable future.

The subscriptions of two tranches of Thai baht-denominated bonds, known as Baht Bonds, are scheduled on 31 July and 2-3 August 2023, respectively, with a combined amount of not more than THB 3,610.3 million. The first tranche carries a 3-year term with a fixed interest rate of 6.1% per annum maturing in 2026 while the second batch offers 6.6% interest maturing in 2027, with interests from both tranches payable every three months. The bonds are unsubordinated and unsecured with bondholders’ representatives. The bonds are being offered to high net worth and institutional investors at 1,000 baht per unit with a minimum subscription of 100 units. Proceeds from this bond offering, The Ministry of Finance of Lao PDR will specifically go towards refinancing the bonds due in 2023.

Soulivath Souvannachoumkham, Director General of Public Debt Management Department of the Ministry of Finance of Lao PDR, is upbeat about prospects of the bonds being enthusiastically embraced by investors in Thailand, thanks to Lao PDR’s growth potential and its long-standing track record of honouring interest and principal payments of bond issuances in Thailand.

“Indeed, bonds of the Ministry of Finance of Lao PDR have since 2013 been well received by investors in Thailand, and we believe they will uphold their confidence in our credibility this time around,” he said.

According to Mr Soulivath, the country’s trade account has since the third quarter of 2020 transformed from being in deficit to surplus. Its export value in 2021 was US$7,695 million and leaping to $8,198 million a year later, a notable step-up. The key drivers are export of electricity, minerals, wood products, wood pulp and paper and agricultural products comprising rubber, cassava, banana, sugarcane and coffee to countries such as Thailand, China, Vietnam, Australia and Singapore. The improvement is a result of infrastructure and large utility developments that are gradually being completed, such as the Laos-China Railway, the New Special Economic Zone Construction (Tha Bok-Tha Nalang Project, Vientiane Logistics Park) and the Vientiane-Boten Expressway. The expressway helps reduce the transport costs by about 30-40%, saving delivery time and adding convenience, thus facilitating more exports from Lao PDR to China and ASEAN.

Subscriptions of the bonds are through arrangers consisting of DAOL Securities (Thailand) PCL, Globlex Securities Co Ltd, Kingsford Securities PCL, Beyond Securities PCL, UOB Kay Hian Securities (Thailand) PCL, ASL Securities Co Ltd, and AIRA Securities PCL. Lao PDR is endowed with geographical advantage with a vast water catchment area covering 202,000 square kilometres, accounting for 85% of the country’s total area. That has a positive effect on its economy in many ways, especially for hydropower generation that enables the country to export electricity to neighbouring countries including Thailand, Cambodia, Vietnam, Myanmar, Malaysia and Singapore, thus being dubbed the ‘Battery of ASEAN.’ By the year 2030, Lao PDR is expected to possess a combined installed generation capacity of 20,000 megawatts, an increase of 80% from the current total of 11,000 MW. Power is Lao PDR’s top exporter.

Meanwhile, the country is also becoming a gateway between China and Southeast Asia, a logistics hub and an important link in the region made possible through large-scale infrastructure developments which are attracting more foreign investment. The country has adopted prudent financial management to attune with its strategic plan to create long-term growth and strength. It has accelerated its economic development to enhance its trade link with the ASEAN in gaining greater access to the international markets. Lao PDR is expected to achieve a GDP growth of 4.5-5% per annum between 2023 and 2025.