Richard Melson

December 2005

CI Cyprus

http://www.ciratings.com

1 December 2005

PRESS RELEASE

Vietnam’s Sovereign Ratings Raised

Capital Intelligence (CI), the international emerging markets rating agency, today announced that it has raised Vietnam’s long-term foreign currency rating to BB- from B+ and affirmed its short-term foreign currency rating of B. CI has also assigned long- and short-term local currency ratings of BB and B, respectively. The outlook for Vietnam is revised to stable from positive. The upgrade reflects favourable prospects for sustained economic growth and a relatively strong external position for a sub-investment grade sovereign.

Despite being buffeted by a number of shocks, the economy of Vietnam has expanded briskly over recent years, with real GDP growth averaging just over 7% annually in 2000-04. Real output growth is expected to reach 8% in 2005 and to remain in the 7%-8% range in 2006-07. Per capita income is rising and poverty rates are falling. Economic expansion is underpinned by strong investment demand and robust export growth, supported in turn by structural reforms and increasing integration with the world economy. The ongoing development of an already diversified economic base that includes oil, gas, coffee, rice, textiles and tourism is not only raising living standards but also increasing the country’s resilience to external shocks. Vietnam is on course to accede to the World Trade Organisation (WTO) in the near future and WTO membership is expected to improve market access for Vietnamese exports, boost investor confidence in the country, and add momentum to the economic reform process.

Vietnam’s external vulnerability is limited. Gross external debt is comparatively low at around 34% of GDP (46% of current account receipts) of which over 80% is owed by the public sector. Net of foreign assets, the public sector external debt is estimated at 17% of current account receipts in 2005. The majority of public sector external debt stock is concessional and projected debt service is comfortable at under 8% of current account receipts. Official foreign exchange reserves have more than doubled in US dollar terms since 2002 and currently cover external debt falling due within 12 months fourfold. The balance of payments outlook is favourable given the strength of world oil prices (Vietnam is a net oil exporter), stable inflows of remittances, strong foreign direct investment flows, and substantial low-cost assistance from official creditors.

Vietnam’s ratings remain constrained by structural imbalances and the challenge of completing the transition from a centrally-planned to market-based economy, as well as weaknesses in the public finances. Government debt is moderate, at around 38% of GDP, but contingent liabilities are substantial and include the cost of absorbing the problem loans of state-owned financial institutions and raising their capital to prudent levels.

Contact: Anthony Cooke

anthony.cooke@ciratings.com Tel: 00 357 2534 2300

To: US CFG Co Richard Melson

Please find attached our latest press release title

VIETNAM'S SOVEREIGN RATINGS RAISED

Press Release Department

Telephone: ++ 357 2534 2300
Facsimile: ++ 357 2581 7750

e-mail: teresa.andreou@ciratings.com
Capital Web: http://www.ciratings.com

Capital Intelligence:

Credit Analysis and Rating Service
P.O. Box 53585, Oasis Complex, Block E
Gladstone Street, CY 3303 Limassol
CYPRUS

CI Latest Press Release

Attachment: 000524.doc

Teresa Andreou

teresa.andreou@ciratings.com

2005/12/01 Thu