Laos to sell government bonds to Thai investors

The Lao government will this week launch its sale of 3 billion baht (93.56 million U.S. dollars) in denominated bonds to Thailand with aims to accelerate national development.

The government will use the money to finance construction of infrastructure in the country. According to state-run daily Vientiane Times Tuesday, Thai TMB Bank and Bangkok Bank will begin to sell the bonds to large and institutional investors on Nov. 29, Dec. 2 and Dec. 3.

Observers say that the Lao government's decision to sell the bonds is part of a larger effort to inject money into the economy and stimulate economic growth. The sale of bonds would also help the government address a rising budget deficit amid rising expenditure demand.

The Lao government has set the target of 8 percent annual growth from 2011 to 2015. The World Bank East Asia and Pacific Update released in October predicts 8 percent growth for 2013 but a fall to 7.7 percent in 2014. World Bank predicts resurgent Lao GDP growth in 2015 with 8.1 percent.

According to Bangkok Post the bonds will mature in either three or five years. This is the first time that Laos has offered five- year bonds in Thailand. Interest on the bonds will be paid every six months which carry a coupon rate of 4.60-4.70 percent per annum for three year-maturity and 5.10-5.20 percent for five-year maturity.

Analysis shows that Laos still has the potential to procure foreign investment funds thanks to the solid growth of the national economy. In recent years Laos has made a strong investment in electricity generation. A number of power plants including a 1,800 MW power plant will be completed and commence commercial operation within the next few years. The government has also begun construction of several hydropower plants which are expected to generate hundreds of millions of dollars annually for government coffers.

Jarin Pintusopon, executive vice president of TMB Bank told the Bangkok post that his bank had sold an initial lot of Lao Government bonds worth 1.5 billion baht (46.78 million U.S. dollars) in May. According to Pintusopon, the sales far exceeded expectations with double the amount of investors applying than there were bonds available. The new bonds will offer alternative investment options to Thai investors who want high returns and are seeking to diversify their risks, he said.