Seizing the golden opportunity from financial centres

Seizing the golden opportunity from financial centres

The development of financial centres in Ho Chi Minh City and Da Nang is a strategic step to usher in new opportunities for Vietnam to integrate more deeply into the global financial markets, said RMIT lecturer Dr Nguyen Tuan Anh.

The Vietnamese Government’s plan to establish an international financial centre in Ho Chi Minh City and a regional financial centre in Da Nang shows a resolute will to create a breakthrough in the current era of digital transformation and global economic growth. As technology transfer accelerates (especially with fintech and blockchain), Vietnam has a golden opportunity to realise its financial centre ambition, following the footsteps of leading Asian economies like Singapore, Japan, and South Korea.

The two financial centres will benefit the selected cities and Vietnam’s overall economy in various ways. First, they will facilitate capital mobilisation, attract international investment, and propel the domestic financial market. Vietnam can aim to attract more financial institutions from the Fortune 500 list and major international banks, as well as investment funds and asset management companies, who will come to do business and set up offices here.

In terms of trade, financial centres will help Vietnam make the most of its export advantages. With derivative financial instruments (including stocks and futures contracts), the trading of goods will become more flexible, helping to optimise capital flows and increase market liquidity. This, in turn, will promote stronger trade and investment growth in the future. Revenues from taxes and financial activities will also be important contributions to the state budget.

Ho Chi Minh City skyline at dusk The development of financial centres will benefit Ho Chi Minh City and Da Nang, and Vietnam’s overall economy. (Photo: Pexels)

The financial centres also create job opportunities for highly skilled talent in finance, accounting, technology, and management. This contributes to improving the overall skills levels in the workforce and Vietnam's global competitiveness.

In addition, financial centres serve as launching pads for startups and small and medium-sized enterprises. With a favourable business environment and appropriate support policies, these firms can attract more capital from international investors, and confidently develop their ideas and expand their operations with little barriers.

Financial centres also support Vietnamese enterprises in expanding into international markets through listing on foreign stock exchanges. A notable example is the case of Grab Holdings, which raised 4.5 billion USD after a merger with special purpose acquisition company Altimeter Growth at Singapore’s financial centre in 2021.

However, the development of financial centres in Vietnam is facing significant challenges. To successfully build the centres, there are seven key issues to consider:

1. Speeding up the completion of a legal framework to ensure compliance with international standards on transparency, accountability, and investor protection. This is key to building trust and attracting international financial institutions. Vietnam already has a roadmap to create a clearer and more streamlined legal foundation. By 2030, Vietnam will issue and implement eight sets of policies based on international standards that fit the conditions in Vietnam and can be rolled out immediately. It will pilot six additional sets of policies used by major global financial centres, ensuring a phased approach tailored to the Vietnamese landscape.

2. A comprehensive development of the financial markets is needed, including the capital market, stock market, and financial derivatives. By creating supportive conditions to mobilise capital and develop modern financial services, Vietnam can attract more domestic and foreign investment.

Da Nang city skyline A regional financial centre will be established in Da Nang. (Photo: Pexels)

3. Strengthening the talent pool. The selected cities need to invest in their education and training system to develop high-quality workforces in finance, accounting, banking, and financial technology. This pool of skilled professionals will ensure that the increasing demands of the market are met.

4. Building comprehensive and modern infrastructure. Well-developed infrastructure for transportation, telecommunications and other utilities is essential to create a favourable business environment and meet the needs of thousands of financial institutions in the future.

5. Strengthening international cooperation to enhance the position and connectivity of the financial centres on a global scale. As an international financial centre, Ho Chi Minh City needs to pay special attention to building strategic partnerships with other international financial centres and major financial institutions in the world. This can help enhance its reputation and global integration, and the city can acquire and apply best practices from the global market.

6. It is important to promote fintech innovation. Fintech is one of the fastest growing sectors with an important role in enhancing the competitiveness of the financial markets. Ho Chi Minh City and Da Nang need to encourage and support innovative fintech businesses.

7. To attract international investors and compete with major financial centres in the region such as Singapore and Hong Kong, Vietnam needs to develop a competitive edge and distinctiveness for its centres. This includes crafting unique incentives and more attractive business conditions to draw international capital flows to Vietnam. Vietnam can learn from the investment policies of other financial centres, such as Switzerland’s development of an innovation ecosystem for fintech companies through infrastructure support and tax incentives, or South Korean city Busan’s policy to grant tax exemptions to foreign financial institutions meeting certain conditions.

The implementation of policies and strategies must be carried out carefully and with a specific roadmap, divided into many stages suitable to the reality of Vietnam. It is also necessary to consider the potentials and competitive advantages of the selected cities thoroughly, to ensure the sustainable and effective development of their financial centres.

Story: Dr Nguyen Tuan Anh, Lecturer of Finance, The Business School, RMIT University Vietnam

Thumbnail/masthead image: THINK b – stock.adobe.com

12 February 2025
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