Posted by Arno Maierbrugger on January 13, 2013
In a bid to tap international capital markets, the communist nation of Laos will sell its first foreign bond to raise around $50 million.
The bond will be denominated in Thai baht after the Lao government finally obtained approval from Thai authorities earlier in January 2013.
The issue is Laos’ first fund-raising in an overseas market. In the past, Laos has received low-cost finance from international institutions such as the World Bank and the Asian Development Bank.
The bond is said to have a term of seven to 15 years and aims to to attract more attention of global investors than if Laos were to issue it at home. The baht denomination is also seen as a regional alternative to the US dollar.
The Lao government will guarantee the bonds based on royalties from two hydro power 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. Laos said it is planning to use profits from the bond issuance for the development of infrastructure inside Laos.
Laos needs an estimated investment capital of about 127 trillion kip ($16 billion) to implement its five year national development plan. The government can contribute only 8 to 10 per cent of GDP and needs to raise more capital to secure sufficient funding to boost national economic development.