Seminar "Solutions to form an international financial center in Ho Chi Minh City"

By sggp.org.vn - 09/02/2023

On February 9, SGGP Newspaper held a seminar on "Solutions to form an international financial center in Ho Chi Minh City". Information is being reported on www.sggp.org.vn.

5 key factors to establish a financial center

Speaking with the delegates, Mr. Trần Hoài Nam, Deputy General Director of HDBank, said: “As one of the commercial banks in Ho Chi Minh City, we are also eager to establish the International Financial Center (IFC) in Ho Chi Minh City as soon as possible.” With extensive experience in stock offerings and capital mobilization in international financial markets, Mr. Trần Hoài Nam outlined five key factors to establish an IFC.

An IFC is a place for financial transactions, which means it must operate bidirectionally. The goal is to make Ho Chi Minh City the first thought for international businesses and financial institutions looking to raise capital. Similarly, Vietnamese banks and businesses should think of major IFCs like London, New York, Dubai, Hong Kong, and Singapore when they participate in roadshows. This shows that to become a true IFC, it must be a place where businesses go to utilize capital, not just to invest it. The second factor is human resources; the financial sector requires highly specialized personnel, and currently, Vietnam's human resources are still limited. Additionally, infrastructure is crucial. Besides seaports, airports, and buildings, there must be technology and telecommunications because Fintech companies in Vietnam are developing very well.

Finally, policies and legal frameworks are essential. Vietnam needs tax policies that can attract international businesses and financial institutions. Moreover, it is necessary to elevate Ho Chi Minh City's stock exchange because currently, the Vietnamese stock market only has Vietnamese companies listed. Experiences from major stock markets like New York, Singapore, and London show that they always create favorable conditions for foreign companies to list on their exchanges.

Sketching the "portrait" and roadmap is extremely important

Mr. Nguyễn Văn Hậu, General Director of Asian Holding Real Estate Joint Stock Company, asked at the seminar: How long does it take from the proposal to implementation? In my opinion, to establish an IFC, it is essential to sketch the "portrait" and detailed roadmap; this is extremely important.

Citing reality, Mr. Hậu said: “We have many foreign customers buying real estate, but it is not easy for them to withdraw their money now. Previously, they could easily transfer money from abroad to Vietnam to buy real estate, but now, selling and taking the money back is not easy. So how can we make it easy for foreign money to flow into Vietnam and for them to withdraw it when needed?”

Dr. Đinh Thế Hiển: Why has it been slow despite being a financial center for a long time?

Dr. Đinh Thế Hiển, an economic expert, cited: In 2000, the financial market was still in its infancy, but the HCMC Investment Fund was established as a new financial institution. At that time, the investment fund model was still in its early stages in Vietnam's financial center but had stronger functions than HFIC today.

“I'm not talking about scale but about role, because the investment fund at that time clearly defined the management of state capital, city budget revenues and expenditures, had a trust management department, and a loan appraisal department for core projects of Ho Chi Minh City... However, over the past 20 years, there has been no movement,” Dr. Đinh Thế Hiển remarked.

Pointing out the shortcomings, Dr. Đinh Thế Hiển said, recently, the Ho Chi Minh City Department of Transport proposed capital for gateway projects in the form of BOT, while the role of HFIC should be in proposing solutions for these projects. In 2000, Ho Chi Minh City issued municipal bonds when it had enough capacity and conditions to issue municipal and project bonds, but now the largest bond issuances belong to private companies, issuing corporate bonds over 1 million billion VND, while municipal and project bonds in Ho Chi Minh City are at a standstill.

“As the chairman of an investment fund, I am also looking for good bonds to invest in but cannot find any good bonds to invest in, while government bonds have low interest rates. This shows that the HCMC financial center is moving slowly. The financial center proposal by the HCMC Economic Institute in 2000 was approved, and Ho Chi Minh City was the leading force of 7 provinces. However, if Ho Chi Minh City does not get special mechanisms from the Central Government, it will be difficult to form a financial center,” Dr. Hiển said.

Currently, the main source of capital for the Vietnamese economy comes from commercial banks, while credit for working capital and the public is overloaded. The capital market in Vietnam is facing many incidents and difficulties. Therefore, an IFC is needed to attract capital from international markets. This capital attraction is not for Ho Chi Minh City or HFIC but for financial institutions, investment funds, mutual funds, debt purchase funds, and infrastructure investment funds to mobilize capital.

Three core pillars need to be completed

Continuing the discussion on Ho Chi Minh City IFC, Mr. Nguyễn Ngọc Hoà said that three core pillars need to be completed:

Firstly, for the monetary market and banking system pillar, there are currently only commercial banks but no investment banks.

Secondly, the capital market pillar is still nascent and rudimentary, with bonds forming in certain sectors, mainly real estate. It is necessary to complete the legal system for this market to operate fully across all industries.

Thirdly, the commodity derivatives market pillar is completely absent, and even the most basic electronic commodity exchange has not been formed. Meanwhile, Vietnam is ranked among the top 10 largest exporters in the world, but trade transactions are still manual and traditional.

Regarding the solution group, five issues need to be addressed to complete the three pillars, but it is crucial that proactive and responsible participation from Central agencies is needed as it exceeds Ho Chi Minh City's authority. Specifically: build a comprehensive, synchronized legal and institutional system that encompasses the areas where financial flows will go. In particular, focus on investment attraction policies from pioneering investors to lead and form the market, creating a foundation for secondary investors to participate. In this regard, the Government can assign a functional agency to focus on building a suitable legal framework for the IFC. Alternatively, shorten the time by inheriting and applying existing financial center models globally.

Secondly, there needs to be a mechanism allowing for pilot legal frameworks to be applied in certain areas. This provides a basis for assessing the compatibility between the legal system and the practical effectiveness, moving towards adjustments suitable for future development trends.

Thirdly, Central agencies need to be involved in building a transparent legal corridor, creating a solid, safe foundation to attract and form leading "cranes" capable of participating in the common financial market. These corporations must ensure their capacity to integrate multi-sector businesses from banking, insurance, and securities... These are considered leading "cranes," necessary prerequisites for the IFC to operate stably.

Fourthly, it is necessary to determine the core values for the competitive advantage of the IFC as a highlight to attract international financial institutions. This requires determining whether to choose a niche market or a general market across all industries globally. This is the basis for building preferential policies to attract investment for corresponding financial institutions.

Fifthly, proactively build a workforce qualified in the financial sector. This workforce can be attracted from abroad or trained domestically. Along with that, there should be consistent investment policies to create a favorable working, living, and recreational environment for investors, financial experts, and their families.

Ho Chi Minh City is already the financial center of the country

Following the experts' remarks, Dr. Huỳnh Thanh Điền, an economic expert, commented: In reality, Ho Chi Minh City is already the financial center of the country, although not yet systematically established. This is most evident in basic factors like securities, bonds, loans, and insurance... However, on an international scale, it needs to transition and improve further.

Accordingly, to soon establish an IFC in Ho Chi Minh City, policies must be sufficient to facilitate investors' participation in the market, create opportunities for profitability, and ultimately strengthen investor confidence. To meet these needs, many solutions must be implemented simultaneously, such as having a professional advisory team, convenient transactions, and especially tax policies approaching those of IFCs in the region and the world.

"We need to define businesses with strong production scales, reliability, and the capacity to create potential projects with high profitability. It should also be affirmed that forming a Vietnamese financial center is entirely achievable because Vietnam's recent economic growth is very high. Vietnam also has an attractive and favorable investment environment for businesses to innovate. The remaining issue is the need to restructure the economy and the participation of the whole country," said Dr. Huỳnh Thanh Điền.

According to this expert, regarding the trust factor, the State needs to ensure balanced and complete information, avoiding asymmetric information. To do so, it is necessary to strictly regulate the market, make information transparent, and provide clear listing policies and legal frameworks for businesses to implement.

From another perspective, the quickest solution is to link with international financial investors at major IFCs worldwide to come to Vietnam to open branches and representative offices. From their practical operations, they will propose amendments and create a legal framework, which is the basis for Vietnam to quickly complete the necessary and sufficient legal framework to form the IFC.

Financial centers play a crucial role in international maritime transport

Clarifying the close relationship between financial centers and seaports, Mr. Phạm Anh Tuấn, General Director of Port Engineering Consulting Corporation, Executive Committee Member of Ho Chi Minh City Logistics Association, said, previously, Hong Kong (China) was an international financial center with large seaports, but now Shanghai, Beijing, and Shenzhen (China) are developing more strongly. However, Hong Kong's international financial center still maintains its top 10 position, contributing to maintaining the position of the international financial center globally.

Financial centers play a crucial role in international maritime transport. Specifically, Hong Kong has a special position, located at the gateway between Asia and Europe, with a large airport that promotes the large financial center and port activities; simultaneously driving the development of other factors such as finance, policy, and capital markets. An international port not only helps the development of the nation and region but also consolidates cargo for other countries; it also attracts other financial companies and provides capital activities for shipowners and cargo owners, all of which develop significantly. To form a financial center requires a large amount of capital and takes about 20 years.

It should also be noted that Vietnam has three ports ranked among the top 100 container ports in 2022 in terms of cargo throughput: Hai Phong, Ho Chi Minh City, and Cai Mep. These are ports with good growth rates. Regarding the Can Gio port system (Ho Chi Minh City), we have a special transport route on the international Asia-Europe transport line. The strengths of the port system are there, but for many years, Vietnam's port activities have been inefficient, merely stopping at transshipment and cargo handling at gateway areas through inland waterways...

For Ho Chi Minh City, we are talking about the international "super port" Can Gio - Cai Mep, oriented for investment with a design capacity of 15 million TEUs, currently preparing a pre-feasibility study proposal with a total investment of about 5 billion USD, and borrowing for a period of 15-17 years. The long-term investment process requires a capital market to meet investment needs. Fortunately, recently, MSC Group (one of the world's largest shipping companies) proposed participating in this "super port," along with attracting companies related to port activities, contributing to strongly promoting the formation of Ho Chi Minh City IFC.

Ho Chi Minh City International Financial Center creates the third wave of investment attraction

Co-chairing the seminar, Mr. Nguyễn Ngọc Hoà, Chairman of the Board of Members of Ho Chi Minh City State Financial Investment Company (HFIC), said that HFIC has been tasked with building and forming the Ho Chi Minh City International Financial Center (IFC). The proposal has basically completed its contents, has been approved by the city's leadership, and submitted to the Central Government. Efforts are being made to establish the Steering Committee to complete and put it into operation soon.

Mr. Nguyễn Ngọc Hoà analyzed that we need to look back at Ho Chi Minh City's development process. The city has gone through two waves of investment. In the first wave, the city succeeded in attracting many businesses in various fields and forming many export processing zones and industrial zones. This foundation created many opportunities, provided jobs, improved the lives of people, built great investor confidence, and helped form the second wave of investment.

In the second wave, learning from the first, investment attraction was more selective, aimed at improving the quality of investment capital. The city proposed many breakthrough mechanisms to the Central Government to successfully attract many foreign-invested enterprises producing high-tech end products, such as Samsung, Intel, Nidec Sankyo... These leading enterprises established a basis for global supply chains to shift to Vietnam. A successful example of this wave is the formation of the high-tech park.

However, according to Mr. Hoà, with the new scale and role in the current context, the city needs to create a third wave of investment attraction. This includes creating a capital market, with Ho Chi Minh City IFC as a model. In reality, the capital from the banking system is not enough to meet the development needs of businesses. Businesses need more diverse, larger, and longer-term capital to expand investment and development. Vietnam has begun to form a capital market in the form of bonds but with many shortcomings. Despite these shortcomings, it must be organized to meet the city's and country's development needs.

"Resolution 31 will provide a foundation for the city to replace its tight-fitting old clothes. The early formation and operation of the Ho Chi Minh City IFC will attract investors and financial groups, creating resources for developing businesses with larger, higher-quality projects, creating a strong impetus for the synchronous development of various industries," affirmed the Chairman of the Board of Members of Ho Chi Minh City State Financial Investment Company.

Suggestions for successfully implementing the Ho Chi Minh City International Financial Center

With the interest and support of many mechanisms and policies from the Party, the State, the Government, and various ministries and sectors, along with the outstanding efforts of the people, businesses, and leadership, Ho Chi Minh City has developed strongly, contributing significantly to the country's economy.

In 2022 alone, Ho Chi Minh City contributed over 471,000 billion VND to the budget, accounting for more than 20% of the country's total budget revenue. However, to date, the city's potential and advantages have not been effectively exploited: The socio-economic infrastructure is developing slowly and lacks synchronization; urban planning and management have many limitations and weaknesses; traffic congestion, tidal flooding, environmental pollution are increasing; housing, hospitals, schools, and social welfare systems do not meet the people's needs...

To overcome these limitations and create new momentum for Ho Chi Minh City's comprehensive development, contributing more to the country, on December 30, 2022, the Politburo issued Resolution 31-NQ/TW on the orientation and tasks for developing Ho Chi Minh City until 2030, with a vision to 2045, proposing many breakthrough solutions and strategies, including the policy to promote the formation and development of the Ho Chi Minh City International Financial Center.

The seminar began at 8:30 AM today at the SGGP Newspaper headquarters. Attendees included the following delegates:

Dr. Huỳnh Thanh Điền, Economic Expert

Dr. Đinh Thế Hiển, Economic Expert

Mr. Phạm Anh Tuấn, General Director of Port Engineering Consulting Corporation, Executive Committee Member of Ho Chi Minh City Logistics Association

Mr. Trần Ngọc Thạch, Deputy General Director of Saigon Port Corporation

Mr. Nguyễn Ngọc Hoà, Chairman of the Board of Members of Ho Chi Minh City State Financial Investment Company, Chairman of Ho Chi Minh City Business Association

Mr. Trần Hoài Nam, Deputy General Director of HD Bank

Ms. Liêu Thị Phượng, General Director of Charm Group

Mr. Nguyễn Văn Hậu, General Director of Asian Holdings Real Estate Joint Stock Company

From SGGP Newspaper, Mr. Phạm Văn Trường, Deputy Editor-in-Chief, co-chaired the seminar.

Opening the seminar, Mr. Phạm Văn Trường, Deputy Editor-in-Chief of SGGP Newspaper, said: After 10 years of implementing the Politburo's Resolution No. 16-NQ/TW, the Party Committee, government, and people of Ho Chi Minh City have made great efforts and achieved significant results in various fields.

The economic scale in 2020 compared to 2010 increased by 2.7 times, and GRDP per capita doubled. Education, training, healthcare, cultural, and social development have achieved important results; people's material and spiritual lives have continuously improved.

Foreign relations and international cooperation have been strengthened and expanded; national defense, security, and social order and safety have been maintained. The Party and political system building and rectification work have achieved important results, creating positive changes. The leadership methods of the Party, management, and administration of the government, and the activities of the Vietnam Fatherland Front and political-social organizations have continuously innovated; the great national unity bloc has been strengthened.

According to Mr. Phạm Văn Trường, Ho Chi Minh City's development achievements have significantly contributed to the country's overall success; affirming the city's particularly important position and role in the cause of national construction and defense.

However, the city's potential and advantages have not been effectively exploited. The city's superiority, dynamism, creativity, leading role, driving force, and leadership for the region and the country are declining, economic growth is slow, and international competitiveness is still low.

Unresolved limitations and shortcomings have created new difficulties and challenges, becoming bottlenecks that hinder the city's development. Socio-economic infrastructure is developing slowly and lacks synchronization; urban planning, management, and land use still have many limitations and weaknesses; traffic congestion, tidal flooding, and environmental pollution are increasing; housing, hospitals, schools, and social welfare systems do not meet the people's needs...

To overcome these shortcomings, on December 30, 2022, the Politburo issued Resolution No. 31-NQ/TW on the orientation and tasks for developing Ho Chi Minh City until 2030, with a vision to 2045. The resolution proposed many solutions to build and develop Ho Chi Minh City into a civilized and modern city. One of the important solutions, which the city has identified for many years, is to build an internationally recognized financial center in Ho Chi Minh City. This center is both a goal and a solution for the city to fulfill its role as the country's economic locomotive. However, for various reasons, this center has not yet been formed...

"Today, SGGP Newspaper organizes the seminar 'Solutions to establish Ho Chi Minh City International Financial Center' with the participation of guests who are economic, financial, banking experts, businesses, and journalists... We hope that through today's seminar, there will be more practical ideas and solutions to contribute to the city in the early formation of the International Financial Center in Ho Chi Minh City, creating momentum for the city to develop commensurate with its role and position as a leading force," said Mr. Phạm Văn Trường.

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