Connecting Vietnam’s IFCs with global initiatives

The government is focusing on attracting international financial institutions and investments, as Vietnam needs the capital to finance its further growth. For building a sustainable financial ecosystem, however, domestic development is crucial.

We have witnessed this in many parts of the world. In China, foreign investments were crucial for its economic development, initially coming from or channelled via Hong Kong. But the most significant impact in finance came from two local fintech players, Tencent and Ant, as well as the Chinese domestic banks.

Tencent and Ant have fostered financial inclusion across the country, bringing financial services to the smallest villages. This has helped to develop e-commerce and thriving small businesses.

Providing access to digital finance for the whole population of Vietnam, including free money transfers, savings, lending, and investments, will further boost the economy. Vietnam should nurture its domestic power and support its national digital finance champions in expanding globally, similar to other Asian countries.

Significant investments are planned in Ho Chi Minh City and Danang, with billions of US dollars to be spent. My understanding is that the lion’s share of this will go into real estate and urban development in both cities.

However, apart from infrastructure, we should invest mainly in people. Talent is the most essential ingredient for thriving IFCs, as well as attractive jobs for well-educated local talent to ensure that they stay and do not leave to work in other financial hubs.

We published a report on this issue a few months ago, highlighting best practices for financial hubs in attracting and retaining talent.

From an international connectivity point of view, most of the education should be in English. You need young people fluent in English with a deep knowledge of modern finance. Education and training should focus on technology like AI, blockchain, and cybersecurity, but also on business and entrepreneurial aspects. This will create a sound basis for the next wave of fintech entrepreneurs.

Fortunately, talent development is on the agenda in both cities, from educating students to reskilling current employees in the financial sector and attracting foreign talent through preferential immigration policies and other benefits.

Besides talent, Vietnam needs to strengthen its institutions, primarily the financial regulatory authorities and market infrastructures. They need to have strong presences in Ho Chi Minh City and Danang city, even if they are headquartered in Hanoi.

Also, Vietnam needs to intensify its work with the Financial Action Task Force to get removed from its list of countries under increased monitoring quickly.

Fighting financial crime is a crucial topic for IFCs, as a strict regime against financial crime significantly improves the trust of an international audience. Most of our members coordinate working groups and other initiatives in their communities to fight against financial crime.

Additionally, global connectivity matters. I trust Vietnam Airlines to continue offering more frequent flight connections with major financial hubs globally. While I acknowledge that Ho Chi Minh City is doing well in this area, Danang still needs some improvements. It is connected regionally, but not yet globally.

I applaud the government for expediting the North-South high-speed railway, connecting Hanoi, Danang, and Ho Chi Minh City. This will be extremely helpful for the latter cities.

Meanwhile, Vietnam needs to continue embracing AI, digital finance, and digital assets. These are the game changers in the financial industry.

For AI, the gold standard is to have so-called AI factories for the financial industry. These are data centres specialising in AI supercomputers, with different needs than a normal data centre. Those factories are expensive and require government funding. However, they enable young companies to excel, which would otherwise struggle to afford large-scale AI developments and ultimately face competition from other countries.

Within digital finance is the area of embedded finance. Embedded finance integrates financial services, like payments, lending, or insurance, directly into non-financial platforms (such as e-commerce or apps) and enables seamless user experiences. It eliminates intermediaries by allowing businesses to offer financial products within their existing ecosystems.

Given Danang’s strength in the tech sector, this presents an excellent opportunity. In the long run, the city can become a significant exporter of tech products with embedded finance services.

Vietnam’s financial centre initiative will be most powerful when closely connected internationally.

Regional collaboration is the first necessary step, for example, with other ASEAN countries operating financial hubs. There is a lot to discuss, including connecting fast payment systems, harmonising standards (such as in green finance), implementing fast-track licensing procedures, and achieving mutual recognition for specific financial verticals.

Membership in the World Alliance for Ho Chi Minh City and Danang, once granted, would facilitate close collaboration with other like-minded IFCs, allowing them to meet in one place to exchange best practices and learn from each other. World Alliance members invite each other to their flagship conferences, which would give the two cities direct access to their communities and the option to promote their developments globally.

*The author’s opinion is not necessarily those of the World Alliance of International Financial Centres or its members.