HÀ NỘI — Municipal bonds are expected to serve as an additional medium- and long-term capital source for Hà Nội's infrastructure projects, alongside the State budget, bank credit, foreign investment and public-private partnerships.

Hà Nội is entering a development phase characterised by strategically significant infrastructure projects, particularly the urban railway system.

According to the city’s 100-year master plan, the urban railway system is designed as a public transport network comprising 18 lines with a total length of 979km. Laying the groundwork for this historic transformation, Hà Nội officially started construction on five key urban railway lines in June, with total investment exceeding VNĐ1.3 quadrillion (US$49.2 billion).

The capital demand to invest in Hà Nội's infrastructure development during the 2026-30 period is thus immense, necessitating the continued diversification of capital raising channels.

Developing multiple capital channels is thus crucial, enabling Hà Nội to take a more proactive approach in balancing resources for its myriad programmes and projects.

Vietcombank Deputy CEO Bạch Thành Long said the bank is collaborating with the Hà Nội Department of Finance to explore issuing municipal bonds in pursuit of this goal.

Long estimated that Hà Nội would need a substantial amount of capital raised through municipal bonds during the 2027-30 period, at about VNĐ150-200 trillion, equivalent to approximately 20-30 per cent of the city's budget revenue last year.

Given the large scale of capital needed within a relatively short time frame, the success of the bond issuance depends on the prestige, potential and unique status of Hà Nội, and would also require policy support as well as a competitive product structure, he noted. 

These elements must create enough appeal to attract a wide range of investors, from domestic and foreign institutions to the general public.

Vietcombank proposed several areas for further study to enhance the attractiveness of the bonds.

First, the liquidity of the secondary market is a key concern, since compared to central Government bonds, local government bonds currently have more limited market scale and secondary market liquidity.

The bank thus proposed exploring the diversification of bond tenors and face values ​​to suit the needs of different investor groups, while also considering mechanisms for early bond redemption to increase flexibility.

Next, Long suggested setting interest rates in alignment with market trends, term structures and Government bond yields, thus ensuring a reasonable return for investors.

Another proposal involved determining issuance denominations tailored to specific investor groups, with larger denominations for institutional investors and smaller ones to facilitate access for individual investors.

Enhancing the liquidity and utility of the bonds has also been recommended.

Vietcombank proposed that the State Bank of Vietnam (SBV) consider classifying local government bonds as Level 1 high-liquidity assets when calculating liquidity safety ratios for credit institutions. The municipal bonds could also be used on the same basis as Government bonds in transactions with the SBV.

The bank also suggested that the Ministry of Finance consider recognising primary purchases and secondary market transactions of the municipal bonds as part of the performance obligations for Government debt market makers.

According to Vietcombank, if properly implemented, these mechanisms could provide further incentives for market participants to invest in and trade the municipal bonds.

Long said that in addition to collaborating with the Hà Nội Department of Finance to explore issuing the municipal bonds, Vietcombank is also actively engaging with or considering financing for Hà Nội’s numerous key municipal projects in transport infrastructure, technology, healthcare, social welfare, smart cities and the green transition.

Streamlining capital raising channels, broadening investor participation and enhancing resource use efficiency will help secure the necessary funding for Hà Nội's infrastructure projects and development goals during the 2026-30 period. — BIZHUB/VNS