Local currency bond markets: Recent trends in asia and vietnam

Nội dung text: Local currency bond markets: Recent trends in asia and vietnam

1. LOCAL CURRENCY BOND MARKETS: RECENT TRENDS IN ASIA AND VIETNAM THỊ TRƯỜNG TRÁI PHIẾU NỘI TỆ: NHỮNG XU THẾ GẦN ĐÂY TẠI CHÂU Á VÀ VIỆT NAM Hervé B. BOISMERY University of Aix-Marseille and University of La Reunion (France) Abstract: This paper provides a descriptive analysis of financial systems in emerging Asia, assessing the dimensions of the current state of bond markets. In particular, local currency bond markets have expanded dramatically since governments took steps to end the currency and maturity mismatches that savaged borrowers in the region’s financial crisis nearly twenty years ago. Encouraged by regional cooperation and programs such as the Asian Bond Markets Initiative, the value of local currency government and corporate bonds sales has grown decisively in the past decade, helping to fund much needed infrastructures development and protect business from global financial shocks. In this framework, Vietnam recently developed a local currency bond market, especially in the segment of government bonds, and has greatly reduced its reliance on foreign currency bonds. Nevertheless, further progress on creditor-friendly policies and institutions will likely be necessary before Vietnam is able to borrow long-term in its own currency. Keywords: bond markets; financial systems; financial integration; local currency bonds; financial repression. JEL Classification: G1O; G11; G18; F30. Tóm tắt: Bài báo phân tích mô tả những hệ thống tài chính ở các quốc gia châu Á mới nổi và đánh giá các phương diện của thực trạng các thị trường trái phiếu. Cụ thể là, thị trường trái phiếu nội tệ đã mở rộng nhanh chóng nhờ các chính phủ đã từng bước giải quyết các điểm bất cập giữa đồng tiền và thời điểm đáo hạn gây khó khăn cho người đi vay trong cuộc khủng hoảng tài chính trong khu vực gần 20 năm trước. Nhờ sự hợp tác và các chương trình mang tính khu vực như Sáng kiến Thị trường Trái phiếu Châu Á, giá trị của đồng nội tệ cũng như doanh số bán trái phiếu chính phủ và trái phiếu doanh nghiệp đã tăng trưởng đáng kể trong một thập kỷ qua, giúp huy động nguồn vốn cho việc phát triển cơ sở hạ tầng cần thiết and bảo vệ doanh nghiệp trước những cú sốc tài chính toàn cầu. Trong khuôn khổ này, Việt Nam gần đây mới phát triển thị trường trái phiếu nội tệ, đặc biệt là trái phiếu chính phủ, cũng như đã giảm đáng kể sự lệ thuộc vào trái phiếu ngoại tệ. Tuy nhiên, cần phải có thêm những bước tiến trong việc xây dựng những chính sách và thể chế có lợi cho người cho vay trước khi Việt Nam có thể huy động các khoản vay dài hạn bằng đồng nội tệ. Từ khóa: Thị trường trái phiếu; Hệ thống tài chính; Hội nhập tài chính; Trái phiếu bằng đồng nội tệ; Áp lực tài chính. JEL Classification: G1O; G11; G18; F30. 32
2. “After thirty years of reform, our country has overcome social and economic crisis and the state of underdevelopment Nevertheless, we are also faced with many challenges and difficulties: a developing yet unstable economy , mounting public debt, gradually reducing bad debts that remain at a high level Strengthening comprehensive reforms will allow us to speed up national development in a sustainable way”. His Excellency TRAN DAI QUANG - President of the Socialist Republic of Viet Nam (Singapore - 30 August 2016) (Institute of Southeast Asian Studies - ISEAS) 1. Introduction The development of local currency bond markets became a policy priority for many Asian economies following the region’s financial crisis nearly two decades ago. The crisis exposed the damage that using local currency assets to pay maturing foreign-denominated debt can lead to massive bank failures and wreak the national economies. As an effort to better channel regional savings for investment and prevent such risks from mounting again with unstable exchange rates risks, in 2003 and in the framework of the ASEAN, was introduced the Asian Bond Market Initiative (ABMI), aiming to develop efficient and liquid local currency bonds in member countries. National policy efforts coupled with the regional initiatives of the ASEAN +3 focused on developing local debt markets, reducing heavy reliance on foreign debts, and mobilizing the region’s excess savings more effectively for development finance (Moon & Rhee - 2012). In this context, many emerging Asian economies have seen local currency bond markets grow dramatically in the past two decades. Total outstanding local currency bonds in East Asia, including India, were about $10,228 billion as of December 2015, up from $2,568 billion in 2005. The main drivers of this growth have been China and Korea, but most ASEAN economies, including Viet Nam, have also contributed. China has the largest local currency bond market in emerging Asia, with bonds outstanding $6,150 billion in 2015, followed by Korea, with $1,720 billion. In comparison, the Vietnamese market remains modest, but significant with bonds outstanding $47 billion in September 2016. Asian local currency bonds have emerged as a new asset class in part because many traditional assets have lost their shine in the wake of the global financial crisis. Nevertheless, while progress in Asian currency bond markets is remarkable, growth has not been universally strong. The growth in local currency bond markets (LCYBM) across the region has been largely concentrated in government bonds, leaving room for substantial improvement for emerging Asia’s corporate borrowers. Hurdles to developing the market for local currency corporate bonds remain in the shape of market structure and institutions, inconsistent policies and regulations, and more broadly in poor corporate governance. 33
3. This paper reviews different topics related to the complex problematic of the emerging bond markets in Asia and Vietnam. In the following section 2, our study is focusing on the regional initiatives taken to develop local currency bonds within ASEAN + 3 countries since the 1997-1998 Asian crisis. Section 3 provides an assessment of various dimensions of local currency bond market development (savings liabilities, size, development and depth of the market), referring to the public sector and corporate financing. Section 4 empirically investigates the particular situation of the Vietnamese bond market, considering the factors affecting its growth and its impact on the socio- economic development (political objectives; size and composition; bond issuance and public debt financing ). Nevertheless, despite its dynamism, the Vietnamese market is still affected by several structural handicaps (foreign currency versus local currency, maturity profiles, weak presence of corporates, predominance of short-term instruments, insufficient liquidity, persistent and repressed inflationist tensions), which requires permanent and sustained efforts of the political power. 2. Regional Cooperation within ASEAN and Asian Bond Market Initiative (2003- 2016) The experience of Asian crisis of 1997-1998 and the 2008-2009 global crisis further demonstrated the need of strengthening regional financial cooperation by the establishment of institutions to safeguard stability and build economic and financial resilience. In this context, ASEAN+3 governments introduced several initiatives for regional financial cooperation, including the Chiang Mai Initiative, as a regional support facility, and the Asian Bond Market Initiative (ABMI) to help develop local currency markets. Table 1 - Steps of Financial Cooperation and Bond Market Development in Asia (ASEAN + 3) Years International Agreements 2003 -Asian Bond Market Initiative (ABMI) is launched under ASEAN+3 to develop a liquid and well-functioning bond market. 2003 - Asia Bond Fund 1 (ABF1) is launched by central banks of the Executive Meeting of East Asia and the Pacific (EMEAP) countries to invest pooled savings in the region’s (sovereign and quasi-sovereign) bond markets. 2005 Asian Bond Fund 2 (ABF2) starts channelling investment local-currency bonds as a follow-up to ABF1. The primary goal is to reduce market barriers for investors and to improve liquidity in sovereign bond markets. 2008 ASEAN + 3 ministers sign the new ABMI Road map to set up task forces to address specific issues in local bond market development. 2010 ASEAN + 3 establishes the Asia Bond Market Forum (ABMF) as a platform to foster standardization of market practices and the harmonization of regulations relating to cross-border bond transactions in the region. 2013 ASEAN + 3 establishes the Cross-Border Settlement Infrastructure Forum 34
4. (CSIF) to discuss the preparation of a road map and an implementation plan for the improvement of regional cross-border settlement infrastructures. 2015 ABMF releases implementation guidelines for the ASEAN + 3 Multi-Currency Bond Issuance Framework (AMBIF), which helps facilitate intraregional transactions through standardized bonds and investment processes. Sources: Levinger and Li (2014); ADB (2008, 2012, 2015 and 2015). In this framework, to take the initiative forward, four task forces were created to: (i) promote the sale of bonds denominated in local currencies - (ii) facilitate demand for local currency-denominated bonds issued - (iii) improve the regulatory framework and (iv) improve related infrastructure for the bond markets with view to encouraging domestic issuance and increasing secondary market liquidity. The new road map also aims to encourage member economies to take voluntary actions to develop their local currency bond markets and national efforts are expected to help create a more accessible regional bond market. 3. Tendencies and Insights into Developing Asia’s Bond Markets Why do some emerging countries have larger LCYBM than others? According to the ‘original sin’ hypothesis, some economies are just naturally larger than others. Nothing other than sheer size distinguishes one economy from another and the bond markets of smaller economies would forever be inconsequential. Nevertheless, the evidence is not consistent with this hypothesis. Economies can (and have) put in place institutions and policies that foster the development of debt markets (Burger & Warnock - 2006). Economies with better inflation performance have more developed local bond markets, both private and government, and rely less on foreign currency-denominated bonds. Moreover, countries, with rules of law associated with strong creditor rights, are able to issue a larger share of bonds in their local currencies (Burger, Warnock & Warnock - 2015) and many studies corroborate these results (La Porta et al. - 1997; Claessens & Schmuckler - 2007; Jeanne & Guscina - 2006; Eichengreen & Luengnaruemichai - 2006; Burger et al. - 2015). On this topic, Claessens, Klingebiel & Schmuckler (2007) find that government bond markets are larger in large economies with deeper domestic financial systems, lower inflation, larger fiscal deficits, stronger legal origins, and greater capital openness. Eichengreen & Luengnaruemitchai (2006) find that larger size, stronger institutions, less volatile exchange rates, and more competitive banking sectors tend to be positively associated with bond market capitalization. At those different socio-economic factors, it is relevant to add the savings liabilities, a very significant factor in the Asian context. 3.1. Savings Liabilities in Asian Countries and Potential Impact on Financial Markets Asian countries are characterized by high levels of savings, as consequence of a strong growth, important gains in living standards, an emergence of a middle-class and of course a pre-eminent influence of cultural values. This socio-economic phenomenon appears as a structural parameter of the Asian development process. 35
5. Table 2 - Gross Savings in percentage of GDP Countries 2000 2015 Countries 2000 2015 Brunei 43 % 56 % Canada 23 % 20 % Darussalam 14 % 15 % France 24 % 21 % Cambodia 36 % 49 % Germany 22 % 28 % China PRC 32 % 25 % Italy 21 % 19 % Hong Kong SAR 25 % 32 % Japan 28 % 25 % Indonesia 34 % 36 % United 17 % 12 % Korea Rep. 2 % 14 % Kingdom 21 % 19 % Lao PDR 36 % 28 % USA Malaysia 41 % 43 % 22 % 21 % Philippines 46 % 46 % G-7 Average 26 % 25 % Singapore 29 % 32 % World Thailand 28 % 27 % Average Viet Nam Source: World Bank - World Development Indicators As we can see in Table 2, the savings rates in Asia are especially high, higher than in most developed countries, if we consider for instance the G-7 countries. In this regard, Vietnam, even with an estimated low GDP per capita of $2111 in 2015, presents a savings rate of 27-28 %, really more important than France, Italy, United Kingdom or USA and comparable to Germany. This phenomenon contributed to a huge accumulation of long-term savings in East Asia and transformed some Asian countries from being capital importers to capital exporters, highlighting the potential of the asset management industry and the growing role of financial markets and sometimes of pension funds. Along with the growth of the long- term capital markets and the need to manage long-term financial assets, opportunities for cross-border investment is becoming greater. For these reasons and after witnessing the rapidly growth long-term capital markets in Asia, many institutional investors and life insurance companies are eagerly looking for new long-term investments abroad. The development of the asset management industry including pension schemes requires large bonds allocations and all these recent developments explain the increasing interest of Asian countries in local bond markets (Yam -2004; Moon & Rhee- 2013). 3.2. Asia Bond Markets: Sizes and Recent Growth Data for the larger Asian economies are available from Asia Bonds Online (Asian Development Bank -ADB) along several dimensions. In the Table 3, it appears that twenty year ago, all over Asia, the LCY markets were small and some of them irrelevant, before the 1997-1998 crisis. Then, during the following decade, the value of LCY government and corporate bond sales has grown fourfold, as a decisive contribution to the development process (Cyn-Young Park - 2016). 36
6. Table 3 - Bonds Outstanding in Local Currency Debt Markets 1995-2015 ($ billion) As of December 2015 As of December 2005 As of December 1995 Countries Govern. Corp. Total Govern. Corp. Total Govern. Corp. Total USA 18,901.7 21,019.4 39,921.1 9,801.2 16,629 1 24,430.3 5,499.4 6,102.9 11,602.3 Japan 8,274.0 656.0 8,930.0 6,301.6 743.7 7,045.3 2,763.5 1,093.6 3,857.1 Emerging Asia 6,431.5 3,796.5 10,228.0 1886.4 681.9 2,568.3 244.2 36.5 280.6 China 4,067.0 2,083.0 6,150.0 835.2 64.5 899.6 57.7 0.0 57.7 Hong Kong 120.0 90.0 210.0 16.3 69.2 85.6 7.6 18.2 25.8 India 832.5 288.2 1,120.7 376.7 84.7 461.4 87.1 6.8 94.0 Indonesia 109.0 18.0 127.0 48.3 5.9 54.2 0.0 2.8 2.8 Korea 700.0 1,020.0 1,720.0 392.9 360.8 753.7 67.0 0.0 67.0 Malaysia 142.0 118.0 260.0 61.3 45.6 107.0 - - - Philippines 84.0 17.0 101.0 41.1 1.0 42.1 - - - Singapore 129.0 91.0 220.0 46.9 36.2 83.1 13.1 7.8 20.9 Thailand 208/0 70.0 278.0 64.9 14.1 79.0 11.5 0.9 12.4 Vietnam 40.0 1.3 41.3 2.7 0.0 2.7 - - Source: Asia Bonds on Line Moreover, the first months of 2016 were characterized by an exceptional dynamism of the amounts capitalized on the Asian LCY Bonds Markets, especially in China, Indonesia and Vietnam, as we can see in the Table 4. In Vietnam, the amount remains modest but with a strong increasing, comparatively to the others Asian countries. In this context, the development of financial products by mobilisation and lending networks has huge impacts on the overall economic development. In particular, savings through the banking system should play a very important role in balancing and ensuring the liquidity of the financial markets, especially in the bond market. Table 4 - 2016: Size and Composition of Local Currency Bond Markets in ASEAN + 3 Countries Q3 2016 Q3 2015 Q3 2016 Q3 2016 Growth rate y- Countries Amount USD Amount USD Growth rate y-o-y o-y (USD base billion billion (LCY base %) %) China -PRC 5,978 7,178 26.0 % 20.1 % Hong Kong 200 241 20.4 % 20.3 % Indonesia 115 165 27.2 % 42.9 % Korea Rep. 1,687 1,886 3.9 % 11.8 % Malaysia 245 282 8.6 % 15.3 % 37
7. Philippines 101 99 1.6 % (2.0 %) Singapore 223 231 0.7 % 3.6 % Thailand 269 306 8.4 % 14.0 % Vietnam 38 47 22.3 % 23.3 % Emerging East 8,856 10,435 19.2 % 17.8 % Asia Total 9,125 11,110 2.9 % 21.8 % Japan ( ): negative; Q3: third quarter; y-o-y: year-on-year. Source: Asia Bonds on Line. 3.3. Depth of Local Currency Bond Markets (1995-2016) The Asian crisis of 1997-1998 played a catalytic role in creating active local currency bond markets. However, it was the global financial crisis of 2008-2009 that fuelled growth in the region’s local currency bond markets as a new source of funds for both government and corporate issuers. The region’s governments turned to the local currency bond markets to finance their fiscal stimulus packages in the post crisis economic slowdown (Cyn-Young Park - 2016). As consequence of severe fiscal deficits, the LCY bond markets have deepened in a significant way. In the emerging East Asian countries, the total outstanding, as a share of gross domestic product (GDP) increased to almost 70 % in September 2016, from 50.2 % in 2005. Korea posted the highest bonds-to-GDP share, at 136.3 %, followed by Malaysia (96.9 %), Thailand (77.8 %) and Singapore (77.7 %). Table 5: Depth of Local Currency Bond Markets (1995-2016) (Outstanding bonds, % of GDP) As of Dec. As of Dec. Countries Q3 2016 As of Dec.2015 2005 1995 China -PRC -Total 66.3 % 59.0 % 39.1 % 6.0 % -Government 45.9 % 39.0 % 36.3 % 6.0 % -Corporate 20. 4 % 20.0 % 2.8 % 0.0 % Hong Kong-Total 76.0 % 68.6 % 47.0 % 17.8 % -Government 43.4 % 39.2 % 9.0 % 5.3 % -Corporate 32.6 % 29.4 % 38.0 % 12.6 % Indonesia-Total 17.7 % 15.2 % 19.2 % 2.4 % -Government 15.3 % 13.0 % 17.1 % 0.0 % -Corporate 2. 4 % 2.2 % 2.1 % 0.0 % Korea Rep.-Total 136.3 % 129.6 % 82.8 % 12.6 % -Government 56.2 % 52.7 % 43.2 % 12.6 % -Corporate 80.1 % 76.9 % 39.6 % 0.0 % Malaysia-Total 96.9 % 96.7 % 74.4 % - -Government 52.4 % 52.9 % 42.7 % - -Corporate 44.4 % 76.9 % 31.7 % - 38
8. Philippines-Total 34.0 % 35.8 % 39.4 % - -Government 28.0 % 29.7 % 38.5 % - -Corporate 6.0 % 6.1 % 0.9 % - Singapore-Total 77.7 % 77.7 % 65.2 % 23.7 % -Government 57.4 % 45.5 % 36.8 % 14.9 % -Corporate 20.4 % 32.2 % 28.4 % 8.8 % Table 5: continued As of Dec. As of Dec. Countries Q3 2016 As of Dec.2015 2005 1995 Thailand-Total 77.8% 74.0 % 42.6 % - -Government 57.4 % 55.4 % 35.0 % - -Corporate 20.4 % 18.6 % 7.6 % - Vietnam-Total 23.7 % 22.2 % 5.1 % - -Government 22.8 % 21.5 % 5.1 % - -Corporate 0.9 % 0.7 % 0.0 % - Emerging East 69.9 % 62.9 % 50.2 % 12.2 % Asia-Total 44.6 % 39.6 % 36.9 % 10.6 % -Government 25.2 % 29.4 % 2.8 % 1.6 % -Corporate Japan-Total 223.7 % 215.2 201.9 % 85.5 % -Government 207.9 % 199.4 % 147.3 % 61.3 % -Corporate 15.8 % 15.8 % 17.4 % 24.2 % Source: Asia Bonds on Line. Government bonds continue to dominate in most emerging Asian markets, except in Korea. Government bonds in the region account for about 60 % of total currency bonds outstanding. The Republic of Korea is the only market where more corporate bonds are sold than government bonds In Vietnam, a country where the financial development is recent, the size of the LCY Bond market is increasing significantly but remains limited, compared to most of the emerging Asian countries, as consequence of a late settlement. The market remains limited to the government bonds which represent 96 % of the total outstanding. 3.4. Bond Markets and Corporate Financing In the context of the crisis, corporate borrowers also resorted to issuing local currency bonds, as banks became more reluctant to lend, while liquidity in global markets had evaporated particularly after the collapse of Lehman Brothers in 2008. The corporate bond market plays an increasingly important role in corporate financing. While banking lending continue to dominate corporate finance in many emerging Asian economies, equity and bond financing has gained in prominence. 39
9. Table 6: Corporate Financing: Corporate Bonds, Stock Market, Bank Credit (% of GDP) 2015 2005 1995 Corp. Stock Bank Corp. Stock Bank Corp. Stock Bank Countries Bonds Market Credit Bonds market Credit Bonds Market Credit USA 117.1 % 139.5 % 48.1 % 127.0 % 129.8 % 41.9% 79.6 % 90.7 % 33.7% Japan 15.8 % 118.5 % 93.6 % 17.4 % 100.0 % 74.0 % 24.2 % 66.5 % 87.4% Emerging 23.3 % 91.6 % 116.0 % 13.3 % 66.8 % 84.2 % 1.6 % 77.7 % 78.2% Asia China 20.0 % 71.9 % 131.8 % 2.8 % 17.7 % 105.3% 0.0 % 70.1 % 94.1% Hong Kong 29.4 % 1034.8% 313.7 % 38.0 % 581.0 % 164.2% 12.6% 210.0 % 334.3% India 14.6 % 69.5 % 73.8 % 10.3 % 66.3 % 59.0% 1.8 % 76.1 % 39.7% Indonesia 2.2 % 40.5% 32.9 % 2.1 % 26.2 % 22.8 % 2.4 % 27.3 % 20.4% Korea 76.9 % 88.4 % 83.4 % 39.6 % 79.9% 67.6 % 0.0 % 32.7 % 35.4% Malaysia 43.9 % 122.2 % 111.5 % 31.7 % 121.8% 93.6 % - 224.1 % 79.5% Philippines 6.1 % 79.8 % 37.3 % 0.9% 38.6% 26.1 % - 98.2 % 35.1% 202.0% Singapore 32.2 % 217.7 % 132.1 % 28.4 % 83.8% 8.8% 168.4 % 82.1% 65.4 % 74.6 % Thailand 18.6 % 93.4 % 91.4 % 7.6 % 0.5 % 82.9 % 133.2% 16.4 % 60.2 % Vietnam 0.7 % 26.1 % 111.6% 0.0 % - - 18.5% Source: Asia Bonds on Line; ADB; Securities Industry and Financial markets; World Bank and IMF. As we can see, in Vietnam, Bank Credit is still the main source of corporate financing. Nevertheless, stock market occupies now a significant importance, only fifteen years after its establishment. However, the corporate bonds share remains marginal. 4. Factors Affecting the Development of Bond Market in Vietnam: Determinants and Caveats Bond markets have positive externalities with respect to economic growth, financial inclusion, and financial stability. On a macro level, financial development has been linked to economic growth and poverty reduction (Levine-2005, 2008). On financial inclusion, the core factors that enable bond market development are the same factors that enable borrowing and lending within an economy (Burger and Warnock - 2006). In a country like Vietnam, in which almost 70 % of households do not have formal bank accounts (World Bank - 2016), anything that improves financial inclusion should be a priority. 40
10. In Vietnam, like in most of the Asian emerging countries, the growth in bond market has likely improved financial stability, as the Vietnamese economy has become less reliant on foreign currency denominated bonds, which can result in currency mismatches and are susceptible to depreciation-related crisis. The development of LCY bond markets and the concomitant reduction of reliance on foreign currency borrowing is a fundamental and positive change in the structure of the Vietnamese financial system, which is more resilient now that the currency mismatches of the past have been greatly reduced. 4.1. Bond Market Development in Vietnam: a Policy Objective A road map approved in February, by the Decision n° 261/BTC (02/01/2013) of the Vietnamese Ministry of Finance, provides guidance to develop Vietnam’s bond market through 2020 in close coordination with the development of other financial markets located in Asia. Table 7 - Vietnam: Bond Market Development Objectives 1) Increase bond market capitalization from 18 % of GDP (2011) to 38 % of GDP (2020), as follows: government bonds (22%); government guaranteed bonds (8%); municipal bonds (1%) and corporate bonds (7%). 2) Extend the average maturity of LCY government bonds from 6 years (3011- 2015) to 6-8 years (2016-2020). 3) Increase government guaranteed bond investment by insurance companies, pension funds, and fund management from 12% (2011) to 20% (2020). 4) Increase the average spot trading volume per session, as a percentage of outstanding listed bonds, from 0.2% (2011) to 0.3% - 0.4% (2020). Source-Road Map for Development of the Vietnam Bond Market 2020. Under the road map, the primary government bond market is supported by predictable preannounced debt auctions and a coordination mechanism for debt issuance between the State Bank of Vietnam and Treasury. The latter is intended to ensure a uniform development of the bond market and close coordination between fiscal and monetary policy. The government plans to develop a primary dealer system and lay the foundations for market makers. Corporate bonds market development will be supported as well by providing an enabling environment for issuance and for the establishment of credit rating agencies. Moreover, to stimulate demand, the government will implement policies for voluntary supplementary pension funds to promote long-term investments in the bond market, and encourage bond purchases by the deposit insurance fund, social security fund, insurance companies, investment funds, private investors, and foreign investors. Ancillary support will be phased in to adopt repurchase agreements and basic derivatives, and to allow the use of government bonds for reserve requirements of commercial banks. 4.2. Size and Composition of the Local Currency Bond Market in Vietnam Vietnam’s LCY bond market expanded to VND 1,038.2 trillion (USD 47 billion) at the end of September 2016, remaining the smallest in terms of size in emerging Asia. 41
11. Much of the rapid growth was contributed by government bonds, which account for 96.1 % of the aggregate bond market. Table 8 - Size and Composition of the Local Currency Bond Market in Vietnam Outstanding Amount (billion) Growth rate Q3 2015 Q3 2016 Q3 2016 VND USD VND USD y-o-y (%) Total 848,760 38 1,038,164 47 22.3 % Government 821,988 37 998,070 45 21.4 % Treasury Bonds 534,576 24 718,287 32 34.4 % Central Bank Bonds 90, 279 4 69,999 3 (-22.5) % State-Owned Enterprise Bonds 197,133 9 209,784 9 6.4 % Corporate 26,722 1 40,094 2 49.8 % Source - Asia Bonds on Line The outstanding stock of LCY government bonds climbed to VND 998.1 trillion (USD 45 billion) at the end of September 2016, mainly as consequence of issuance of Treasury bonds. Contributing to overall growth in government bonds were state-owned enterprise bonds with an amount of USD 9 billion. Moreover, the outstanding stock of corporate bonds climbed to VND 40.1 trillion (USD 2 billion) at the end of September 2016, up by 49.8 %, year- on-year. Table 9 - Corporate Issuers of Local Currency Corporate Bonds in Vietnam LCY Bonds LCY Bonds Listed Issuers State Owned Type of Industry (VND billion) (USD billion) Company 1-Masan Consumer Holdings 11,100 0.50 No No Diversified 2-Vinagroup 8,000 0.36 No Yes Real Estate 3-Asia Commercial Joint Stock 4,600 0.21 No Yes Finance 4-Hoang Anh Gia Lai 4,000 0.18 No Yes Real Estate 5-Techcom Bank 3,000 0.13 No No Banking 6-Ho Chi Minh City Infrastructure 2,102 0.09 Yes Yes Infrastructure 7-DIC 1,000 0.04 No No Chemicals 8-Ocean Group 980 0.04 No Yes Consulting 9-Saigon Hanoi Securities 950 0.04 No Yes Finance 10-Hoangquan 500 0.02 No Yes Real estate 11/21- Others (*) 3,3862 0.20 No ( ) Yes ( ) Total LCY Corporate Issuers 40,094 1.80 - - - (*) Others corporates: Saigon Securities; Tasco; Vietinbank Securities; Khang Dien House Trading and Investment; An Phat Plastic; Sotrans; Vietnam Investment Construction and Trading; Hung Vuong; Ha Do; Son Ha International; Dongnai Plastic. 42
12. ( ) Vietinbank Securities excepted - ( ) Vietnam Investment Construction and trading excepted. Source: Asia Bonds on Line. Nevertheless, Vietnam’s corporate bond market accounts for only 3.9 % of the aggregate LCY bond market stock and comprises issues from 21 corporates entities. Masan Consumer Holdings was the largest corporate bond issuer with outstanding bonds valued VND 11.1 trillion, representing a 27.7% share of the entire corporate bond segment. Real estate firm Vinagroup was in the second spot with bonds outstanding of VND 8.00 trillion, followed by Asia Commercial Joint Stock with VND 4.6 trillion. 4.3. Vietnamese Bond Market: Improvements and Persistent Structural Handicaps After an impressive development, the LCY bond market in Vietnam noted a significant improvement in liquidity. Liquidity conditions improved on the back of increased issuance coupled with efforts by the government to lower interest rates and maintain more stable exchange rates. Nevertheless, the market remains submitted to several handicaps, like a maturity mismatch, with a predominance of short-term issuance, and as consequence a persistent low rating by the international agencies. 4.3.1. Vietnamese Bond Market: Foreign Currency versus Local Currency Data for the Asian economies are available from Asian Bonds on Line along two dimensions: the size of the local currency bond market as a percent of GDP and the share of foreign currency bonds in total bonds. These data show different situations within the Asian countries. Table 10 - Emerging Asian Bond Markets: Share of Foreign Currency Bonds in Total Bond Issuance Hong Years China Indonesia Korea Malaysia Philippines Thailand Vietnam Kong 2000 8.4 % 46.5 % 9.9 % 11.3 % 26.7 % 47.0 % 14.4 % 100.0 % 2001 7.8 % 44.9 % 8.7 % 9.9 % 23.4 % 46.3 % 13.7 % 92.3 % 2002 7.5 % 42.3 % 6.9 % 8.7 % 26.7 % 46.0 % 12.6 % 63. 4 % 2003 7. 3 % 40.3 % 7.7 % 7.9 % 25.6 % 45.3 % 13.7 % 22.3 % 2004 5. 3 % 39.6 % 8.1 % 7.4 % 22.3 % 42.3 % 13.2 % 24.4 % 2005 4. 6 % 41.2 % 15.6 % 7.5 % 22.0 % 41.0 % 12.3 % 26.7 % 2006 4. 4 % 42.3 % 18.3 % 7.9 % 18.7 % 39.7 % 11.4 % 18.9 % 2007 3. 6 % 46.5 % 18.9 % 8.3 % 17.8 % 37. 8 % 10.1 % 15.6 % 2008 2.4 % 43.4 % 22.9 % 10.4 % 16.3 % 35.3 % 8.6 % 12.5 % 2009 2.1 % 42.3 % 27.9 % 10.3 % 12.3 % 37.1 % 7.1 % 12.3 % 2010 3.3 % 38.7 % 31.4 % 10.1 % 11.1 % 38.3 % 7.3 % 13.4 % 2011 3.6 % 39.4 % 30.6 % 10.0 % 11.5 % 41.2 % 6.4 % 14.6 % 43
13. 2012 3.7 % 41.6 % 35.6 % 10;3 % 14.1 % 37.4 % 7.1 % 11.6 % 2013 4.1 % 40.9 % 38.8 % 9.6 % 12.1 % 33.0 % 7.3 % 10.0 % 2014 4.2 % 41.3 % 40.1 % 9.1 % 11.4 % 31.3 % 7.5 % 9.6 % 2015 5.2 % 40.7 % 40.2 % 8.8 % 10.8 % 30.5 % 6.7 % 9.3 % 2016 5.4 % 40.9 % 38.7 % 7.4 % 9.4 % 27.3 % 6.4 % 8.5 % Source - Author’s calculations using ADB Asia Bonds on Line Most economies do not display currency mismatches, with most foreign currency shares below 10 % of the total bond issuance, if we except Indonesia and Hong Kong. Indeed, in Hong Kong and Indonesia,, the foreign currency shares would be considered very high were it not for the pegs to the US dollar and the significant US dollar export revenues. As an illustrative example of financial stability issues related to bond market development, let us consider Malaysia, Philippines and Vietnam, three economies in which reliance on foreign currency bonds declined significantly in recent years. During the period 2000-2015, the foreign currency shares of the bond market fell from 27 % to 11 % in Malaysia, from 45 % to 30 % in Philippines and from 100 % to less than 10 % in Vietnam. In the Vietnamese case, this evolution witnesses the success of the policy aiming to limit dollarization phenomenon at several levels. In this framework and in accordance with the cross-border portfolio investment regulation, there is no limit on investments. However foreign investors are required to open a VND-denominated securities trading account to sell or purchase debt securities. These transactions must be executed in VND through an account at a licensed bank in Vietnam. In fact, Vietnam is applying the concept of Lex Monetae Principle which means that a sovereign State chooses what currency it will use and that the meaning of units of above mentioned currency is determined by the law of the country whose money is in question (Garner - 2001). 4.3.2. Maturity Profiles of LCY Government Bonds LCY bonds can be issued for the short-term (less than 5 years), the medium term (between 5 and 10 years) and the long term (more than 10 years). The term of a bond refers to the length of time from issuance until maturity, when final payment of a debt security (the principal and all remaining interest) falls due. The term structure of a market has implications for the rollover or refinancing risk from an issuer perspective, and for the sensitivity of bond prices to changes in interest rates and broader economic conditions from the perspective of investors. In general, longer-term bonds tend to offer high yields to compensate investors risk exposures to economic factors. 44
14. Table 11- Maturity Profiles of Asian LCY Government Bonds (September 2016) (as % of total) Countries 3 x 5 x 10 x 5 x 10 years years China -PRC 25.92 % 26.23 ù 38.61 % 9.23 % Hong Kong 55.01% 21.31 % 20.63 % 3.06 % Indonesia 17.42 % 12.92 % 27.54 % 42.12 % Japan 31.82 % 14.83 % 23.18 % 30.17 % Korea Rep. 35.64 % 19.77 % 20.26 % 24.34 % Malaysia 22.28 % 26.95 % 29.37 % 21.41 % Philippines 14.08 % 16.71 % 26.05 % 43.16 % Singapore 24.11 % 22.39 % 27.56 % 25.94 % Thailand 22.45 % 12.46 % 23.78 % 30.32 % Vietnam Sept.2016 33.46 % 41.11 % 11.45 % 13.98 % Vietnam Dec.2013 66.74 % 21.68 % 10.56 % 1.02 % Vietnam Dec.2010 55.49 % 20.94 % 17.58 % 5.98 % Vietnam Dec.2005 12.01 % 46.62 % 6.54 % 34.83 % Source - Asia Bonds on Line Table 11 shows the maturity profiles of LCY currency government bonds outstanding. Maturities in the government bond sector have generally got longer, but they are still relatively concentrated at the short end. China, Korea, and Malaysia have almost or more than 50 % of their government bonds outstanding with maturities of less than five years. However, Indonesia, Philippines and Thailand have structured their government debt since early 2000s to extend the maturities and their government bonds of more than ten years are the largest segment of their markets. In Vietnam, almost 75 % of the outstanding correspond to a short-term debt with maturities of less than five years, which means a critical situation. Nevertheless, the situation is slowly improving, because in December 2013, almost 87 % of the outstanding corresponded to short-term maturities Finally, the foreign currency share of the bond market fell from 100 % in 2000 to 8.5 % in 2016, but Vietnam’s increased LCY bonds issuance is coupled with a reduction in the share of long-term bonds. More than one third of its local currencies bonds have maturities of one to three years, suggesting that Vietnam may have replaced its currency mismatch with a maturity mismatch, leaving it vulnerable to changes in financing conditions. The government is trying to manage the situation, by reducing the maturity mismatch, but obviously the aim cannot be reached easily. It will need several long years, with a number of structural persistent uncertainties. 4.3.3. Trading and Insufficient Market Liquidity The growth in the size of LCY bond markets has not translated automatically to a significant improvement in market liquidity. Although secondary market liquidity and trading have been improving in several emerging Asian markets, liquidity varies significantly across the region’s LCY bond markets, depending on their overall size, 45
15. turnover, issuance, and investor bases. Liquidity is a multidimensional concept and can be measured in terms of market tightness, depth and resilience (Bank of International Settlements - 1999). A common metric for gauging liquidity is the bid-ask spread, or bid-offer spread, which reflects the cost of executing a trade. Tightness often measured by the bid-ask spreads, refers to ‘how transaction prices (bid or ask prices) diverge from the mid-market price’. The lower or narrower the spread, the more liquid the market. The region’s average bid-ask spread for on-the-run government instruments narrowed to 3.8 basis points in September 2016 from 5.4 bps in 2015, reflecting an overall improvement in government bond market liquidity conditions in 2016. Table 12 - LCY Government Bonds Bid Ask Spreads (On-the-Run) (Average over period, basis points) Countries 2016 (Sept.) 2015 2014 2013 2012 2011 China- PRC 1.0 5.3 3.4 4.1 2.7 4.0 Indonesia 5.2 0.2 6.0 7.6 5.9 3.3 Korea Rep. 0.5 0.5 0.7 0.7 0.6 3.8 Malaysia 2.1 2.4 1.7 3.8 2.7 5.3 Philippines 4.6 3.4 3.3 5.4 2.1 3.3 Singapore 3.0 2.0 2.3 2.6 3.1 0.7 Thailand 2.3 1.5 1.9 2.4 3.2 5.0 Vietnam 7.2 15.0 11.7 21.7 30.5 4.0 Regional 3.8 5.4 - - - - Source - Asia Bonds on Line Emerging Asian government bond market liquidity can be characterized as moderately improving because the bid-ask spreads have narrowed and yield volatility has declined. This trend is visible in Vietnam, while the spreads have clearly and tendentiously decreased since 2012, as a proof of a better liquidity. Nevertheless, the Vietnamese market remains less liquid than most of the Asian markets. 4.3.4. Government Bonds and Low Sovereign Ratings As Ho & Wong (2003) and Arner, Lejot & Rhee (2005) had already pointed out, the low credit rating of the underdeveloped Asian economies was the most serious problem, because it prevented the supply of ordinary bonds from increasing. In fact, in many Asian countries, the junk-bond market was absent and only a few Asian companies could get investment grade credit ratings. Table 13 summarizes the credit rating situation for East Asian government bonds, according to which China, Hong Kong, Japan, Korea, Malaysia, and Thailand meet the appropriate investment grading according to several agencies. 46
16. Table 13- Sovereign Ratings and Outlooks in ASEAN + 3 (2016) PRC HK INDO JP KR MY PH SG TH VN Fitch A + BBB - A AA - A - BBB - AAA BBB+ BB - Outlook Stable Positive Stable (Stable) Stable Positive Stable Stable Stable S & P AA - AAA BB + A + AA A - BBB AAA BBB + BB - Outlook Negative Negative Positive Stable Stable Stable Positive Stable Stable Stable Source - Asian Development Bank However, as we can see, Vietnam remains still affected by a relatively low rating, as consequence of several structural persistent difficulties : shortcomings in the business climate, weak banking system, widening inequalities, lack of infrastructures, incomplete public sector reforms Moreover, in Vietnam, government finance remains fragile. Indeed, in 2016, 2017 and 2018, the fiscal deficit and the public debt will in a likelihood continue to grow. In addition to the lack of transparency on government finances, the public debt remains very vulnerable to currency risk as 42 % of it is denominated in foreign currencies. Furthermore, the contingent liabilities could call into question the sustainability of the public debt in the medium term, especially in the event of defaults by state-owned companies. Therewith, the banking system remains fragile as it is insufficiently capitalised and highly dollarized. Credit risk remains significant and undervalued. Furthermore, the high exposure of state-owned banks to state-owned companies that are lacking in transparency is an additional factor of low rating. 4.4. Vietnamese Bond Market, Budget Balance and Public Debt As Burger, Warnock & Warnock (2016) show, the fiscal balance has a significant impact on the bond market in several Asian countries. Everything else equal, larger fiscal deficits imply more government borrowing and hence larger government bond markets, a phenomenon commonly called ‘financial repression’ (Chari, Dovis & Kehoe - 2016). Let’s consider the following data settled by the World Bank. Table 14: Budget Balance and Public Debt (% GDP) Table 14.1- Budget Balance (% GDP) China Indonesia Korea Malaysia Philippines Singapore Thailand Vietnam 2013 -1.1% -2.2% + 0.7% -4.3% + 0.2% + 5.5% + 0.4% -7.4% 2014 -2.1% -2.1% + 0.4% -3.6% + 0.9% + 3.3% -0.8% -6.1% 2015 -2.3% -2.5% -0.2% -3.5% 0.0 % + 1.1% -1.2% -6.9% 2016 (e) -3.0% -2.7% +0.3% -3.2% -0.6% +2.1% -1.4% -6.7% 47
17. Table 14.2- Public Debt (% GDP) Years China Indonesia Korea Malaysia Philippines Singapore Thailand Vietnam 2013 39.4% 24.8% 33.8% 55.9% 39.2% 102.1% 49.2% 52.6% 2014 41.1% 24.7% 35.1% 55.2% 36.4% 98.6% 43.5% 57.2% 2015 43.2% 27.3% 35.9% 55.6% 37.1% 98.7% 43.6% 61.2% 2016 46.0% 27.6% 37.3% 53.6% 35.7% 95.8% 42.6% 63.7% (e) Table 14.3- External Debt - Public and Publicly Guaranteed 2015 Countries China Indonesia Malaysia Philippines Thailand Vietnam USD billion 158,402 160,038 66,385 36,145 30,643 46,335 % GDP 1.5 % 19.2 % 23.2 % 10.3 % 8.5 % 25.5 % Table 14.4- Vietnam: Public Debt Service (% of total revenues) 2010 2011 2012 2013 2014 2015 Public debt services obligation 22.3 % 23.5 % 22.6 % 26.0 % 27.9 % 28.1% Public debt services from State budget 13.5 % 13.9 % 13.3 % 12.6 % 13.8 % 14.7 % Source - World Bank (2016) - Debt Statistics We can express the following remarks: 1) The fiscal deficit in Vietnam seems clearly structural, correspnding to more or less 7 % of the GDP (Table 14.1). 2) At the end of 2015, Vietnam’s total outstanding debt (government, government- guaranteed debt and local government) was estimated at approximatively USD 121 billion. As a share of GDP, total public debt rose 61.2 % for 2015 and 63.7 %, the highest corresponding percentage in emerging Asia (Table 14.2). The Ministry of Finance projects that total outstanding public debt stock could peak at about 65 % of GDP by the end of 2017. Following that, the debt/GDP ratio would gradually decline as a result of fiscal consolidation. 3) The Vietnamese external debt (public and publicly guaranteed) remains high compared to countries like Thailand and Philippines, with an outstanding in excess of USD 46 billion, representing almost 26 % of GDP, the highest level in emerging Asia. (Table 14.3). 4) Moreover, while government external debt has remained steady at around 25 - 27 % of GDP for 2010-2015, domestic debt has risen quickly from 23.1. In 2010 to 31.7 % of GDP in 2015. 48
18. 5) Moreover, debt servicing costs pose an increasing burden on the budget, with services obligation having risen from 22 % in 2010 to about 28 % of total budget revenues in 2015. Interest payments alone now account for estimated 7.9 % of total budget spending, crowding out other more productive spending. In our opinion, the Vietnamese situation is providing a relevant example of ‘financial repression’. ‘Financial repression’ concept refers to a wide array of policies that allow a government to place its debt with financial institutions at relative low interest rates. Often an urgent need to issue debt typically results from a sharp increase in government expenditures. For emerging economies, an urgent need sometimes results from a ‘sudden stop’ in the willingness of foreigners to lend money to their domestic government. In this context, the government can practice ‘financial repression’ by forcing banks to hold a certain fraction of their assets as government bonds (Bruner et al. - 2014). However, ‘financial repression’ is a costly way for a government to purchase credibility. Indeed, due to collateral constraints, banks can raise only a limited amount of funds from depositors. Forcing banks to allocate a greater share of these limited funds to government rather than to corporates reduces the total amount of investment in a national economy. In this sense, ‘financial repression’ has crowding-out costs and can reduce aggregate output by driving down private investing (Chari, Dovis & Kehoe - 2016). With more than 95 % of the bond market issuance corresponding to the government funding debt, Vietnam could seriously suffer this kind of crowding-out as a handicap for its development process. 4.5. Vietnamese Bond Market and Inflation Burger, Warnock & Warnock (2012; 2016) assess the size of LCY bond markets in several emerging countries referring to 2008. As in previous studies, they find that emerging countries with lower inflation volatility and stronger legal rights have more developed local bond markets. The evidence indicates that countries with better inflation performance have larger LCY bond markets and rely less on foreign currency bond markets. This analysis explains the reason why, in most of the Asian countries and particularly in Vietnam, efficient monetary policies have allowed to halt the inflation processes, at least temporarily, and to promote the LCY bond markets. Table 17 - Inflation in Asian Countries: Annual Rates (Consumer Prices Index) Countries 2007 2008 2009 2010 2011 2012 2013 2014 2015 China 4.8 % 5.9 % -0.7% 3.3 % 5.4% 2.6 % 2.4 % 2.0 % 1.4 % Malaysia 4.2 % 5.4 % 0.6 % 1.7 % 3.2 % 1.7 % 2.1 % 3.1 % 2.1 % Philippines 2.9 % 8.3 % 4.2 % 3.8 % 4.6 % 3.2 % 3.0 % 4.1 % 1.4 % Singapore 2.1 % 6.5 % 0.6 % 2.8 % 5.3 % 4.5 % 2.4 % 1.0 % -0.5% Thailand 2.2 % 5.5 % -0.8 % 3.3 % 3.8 % 3.0 % 2.2 % 1.9 % 0.9 % Vietnam 8.3 % 23.1 % 7.1 % 8.9 % 18.7 % 9.1 % 6.6 % 4.1 % 0.6 % Source - World Bank Data. 49
19. Inflation can have a significant influence on the financial markets. Investors and savers are concerned about the real interest rate, which reflects the cost of borrowing. The distinction between nominal and real interest rate was first emphasized by Irving Fisher (1930) as a part of his theory of variations in investment. The Fisher equation can be written as a geometric average of the expected inflation rate and real interest rate: 1 + = = 1 + + + X Where represents the nominal interest rate for one period bond maturing at time t; ( is the one period rate of interest expected by the bond market at time t -1 for the bond maturing at time t, and ) is the inflation rate from t - 1 to t expected by the bond market at time t - 1. Nevertheless, for stumpy rates of inflation, the product X is not important and can be omitted. Therefore, the equation turns out to be: = + According to this equation, money lenders require a nominal interest rate that compensates them for the loss of purchasing power during the duration of the loan, with this compensation being proxied by the expected inflation. If investors and the public have higher expectations of inflation ( ), then nominal interest rates must become greater. If the government wants low nominal interest rate to alleviate the debt servicing, then the public and the investors must believe the inflation will low. Therefore, the government should be able to control inflation (Maghyereh & Al Zoubi - 2006). Table 18 - Government Bond Yields in Asia (18 January 2017): basis points China Indonesia Japan Korea Malaysia Philippines Singapore Thailand Vietnam 2-Years 2.753 6.964 -0.228 1.597 3.229 3.711 1.143 1.537 4.713 5-Years 2.997 7.226 -0.115 1.830 3.719 3.850 1.771 2.242 5.338 10-Years 3.268 7.518 0.057 2.122 4.250 4.286 2.321 2.690 6.400 Source: Asia Bonds on Line As we can check, in Vietnam, the inflation rates were very volatile until 2012. Nevertheless, since 2013, the inflationist tensions look decreasing significantly, as consequence of a more efficient monetary policy. There is no doubt that this virtuous evolution is contributing to the enforcement of the LCY bond market. Moreover, a tendency to run fiscal deficits is associated with larger government bond markets. Indeed, larger deficits require more government borrowing and therefore larger bond markets. In this context, any surge in inflation therefore merits close attention. If an increase is contained and proves short-lived, LCY bond markets will not be adversely affected. If, however, a spike turns into persistently high and volatile inflation, progress could quickly reverse, with a return of dollarization. In Vietnam, as consequence of persistent inflationist 50
20. risks, the yields on government bond remain high, comparatively with other Asian countries, which constitutes of course a burden for the public finance 5. Conclusion Bond markets, and especially local currency bond markets, have expanded rapidly in Asia. Since the global financial crisis, Asian governments and corporates have made increasing use of bond issuance for their funding needs, complementing traditional channels such as bank lending. However, Asian bond markets provide a mixed picture. While the bond markets of China, Hong Kong, Singapore, Malaysia and Korea, are comparatively advanced and liquid, markets in Indonesia, Thailand and clearly Vietnam are still at an early stage of development. Using data based on issuance also reveals variations in terms of structural characteristics by sector, currency, issuing volume and use of funds. While fast growth in bond markets has provided an effective source of financing for the governments and the corporates, its development is far from complete. Leverage and indebtedness have risen all over the region. More needs to be done to build a framework that is both conductive to market innovation and enables governments and companies to seek funding from a broader range of sources without increasing vulnerability to shocks. The lessons and experiences in other continents are applicable to developing Asia. They suggest that historically high inflation volatility presents a serious obstacle to bond market development. Developing Asian economies could enable bond market development by pursuing creditor-friendly policies, stabilising inflation and strengthening the legal rights of borrowers. The Asian countries have experienced impressive developments of their local currency bond markets, which should contribute to continued growth and financial stability, in accordance with the aims of the Asian Bond Market Initiative promoted by the ASEAN + 3. Those countries have reduced their reliance on foreign currency borrowing, thereby making their financial systems more resilient. Maturity mismatches have not replaced currency mismatches in most cases and Asian emerging countries have demonstrated their ability to borrow long-term in local currency. Vietnam remains a notable exception and a cautionary tale, despite significant improvements. This country could recently develop a local currency bond market and has greatly reduced its reliance on foreign currency bonds. Nevertheless, the vast majority of its local currency bonds have maturities of one to five years, which is a crucial factor of structural weakness and instability. Further progress on creditor-friendly policies and institutions will likely be necessary before Vietnam is able to borrow long-term in its own currency. In conclusion, there is a structural imperative underpinning growth in Asian bond markets, for the governments and for the corporates. Long-term projects increasingly require funding from the public and the non-public sectors, given the region’s demographic challenges, emerging middle classes and substantial needs in infrastructure and urban development, which cannot all be met via fiscal spending only. 51
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