According to world reports as well as domestic studies, Viet Nam's financial market is a very fast growing market and has great potential in the region. However, Viet Nam's financial system is developing in an imbalanced structure, in which the stock market and bond market have not developed commensurate with the credit market, putting pressure on credit of the banking system while the financial systems in countries with large financial centers often develop more evenly (Banking Strategy Institute, State Bank of Viet Nam). Therefore, in the context of Viet Nam in general, Da Nang city in particular aims to form an international financial center, researching international financial center models and international financial trends can provide some reference information and experience.
Definition of International Financial Center
A financial center is an economic institution, a gathering place for many companies and human resources involved in banking, asset management, insurance or financial markets with trading floors and services. support for these activities. In addition, this institution also includes financial intermediaries (such as banks and financial brokers), investors (such as investment managers, pension funds, insurance companies, hedge funds) and financial issuers (such as companies and governments). Trading activity can take place at locations such as exchanges and involve clearinghouses, or transactions take place directly between participants. Financial centers often have the presence of companies providing a variety of financial services such as those related to mergers and acquisitions, company offerings; or participate in other financial sectors such as private equity and reinsurance. Ancillary financial services include credit rating, legal advisory services, auditing and accounting (University of Western Ontario, Canada).
The International Monetary Fund (IMF) classifies financial centers according to scales:
- International Financial Centers (IFC), such as New York City, London and Tokyo;
- Regional financial centers (RFCs), such as Shanghai, Shenzhen, Mumbai, Bangalore, Singapore, Frankfurt and Sydney;
- Offshore financial centers (OFCs), such as the Cayman Islands, Dublin, Cyprus and Hong Kong.
However, some speakers classified international financial centers according to the basis of formation. For example, Princeton University (USA), Kiev National University (Ukraine), etc, divide international financial centers in the world into three groups:
- Group 1 includes international financial centers formed naturally over time, history, economic conditions and available financial and physical facilities such as New York, London, Frankfurt, Hong Kong.
- Group 2 includes international financial centers formed due to the country's development policy and the growth of the economy, thereby creating a requirement to build international financial centers such as Shanghai and Tokyo.
- Group 3 includes newly formed international financial centers following the direction of the Governments, which identifies modern service industries (finance, entertainment, modern office rental, tourism, resort,...) is an economic spearhead and national competitive advantage. Some of the International Financial Centers in this group include Singapore, Dubai and Busan.
Some typical financial center models for Viet Nam's reference
The International Financial Center models formed according to the Government's direction are quite suitable models for following countries, including Vietnam, to refer to, and Da Nang city can research and apply.
The United Arab Emirates' (UAE) Dubai International Financial Center (DIFC) began operations in the 1990s as an investment gateway to the Middle East, South Asia and Africa. DIFC plays a role in attracting global banks and financial institutions; finance and support economic growth and sustainable development; improve labor productivity and develop the financial sector and aim to gradually reduce the economy's dependence on oil; create the necessary foundation for the national financial industry to develop and integrate closely with the regional and global economy; build a new national image.
The UAE government built DIFC based on experience from established International Financial Centers such as New York, London, Singapore and Tokyo. The financial district is aimed at becoming a world-class center supporting DIFC's initial core activities of asset management, Islamic finance, reinsurance, back office operations and trading floors. regional financial transactions.
DIFC is managed by the Dubai International Financial Center Development and Regulatory Authority (DIFCA). DIFCA has a special model, similar to Singapore's government model of operating like a business, with its own management and regulatory agencies with an independent court system according to the common law system (UK, US). DIFC is considered a "city within a city" with all the amenities and functions of a world-leading modern closed metropolis, providing financial services to 72 countries in the Middle East and South Asia. and Africa with a population of nearly 3 billion people and a nominal GDP of nearly 7,700 billion USD.
South Korea's Busan International Financial Center (BFC) was established in July 2020 to implement the vision of Busan becoming an international financial city. BFC's strategic goals are to attract foreign investment in infrastructure projects, including the Busan New Port and Gedeon New Airport, and to discover and support potential FinTech startups. Currently, Busan is actively approaching domestic and foreign investors and financial institutions to promote business connections, cooperation and investment through many different channels; promote more frequent cooperation with member organizations.
Singapore International Financial Center is considered one of the most successful models besides the International Financial Centers in New York and London, this may be a suitable model for Da Nang city in particular and Vietnam in general. This result comes from the Singapore Government's policies on trade development, law, language, regulations, taxes, talent, infrastructure and accessibility, thereby creating a comparative advantage. of Singapore compared to other international financial centers. Singapore's policy to build an International Financial Center focuses on groups of measures: (1) Liberalization of the financial market according to the roadmap; (2) Developing financial intermediation: Forming an Asian dollar market (ADM) taking advantage of time zones to fill the trading gap between the American and European markets. ADM is an international capital and currency market, operating similarly to the European dollar market, with the function of trading many strong foreign currencies (USD, Japanese Yen, British Pound, German Mark and Swiss Franc). To separate transactions between non-residents and residents, all licensed banks must create special units of account for non-resident transactions, called Asian currency units (Asian currency units). ACU, Asian currency unit). Build a two-layer banking system: separate foreign currency transactions from domestic currency transactions through separate accounting accounts. This allows international money flows into Singapore without affecting national monetary policy and protects domestic banks from competitive pressure from large international banks. Encourage the development of fund management companies: The Government Investment Corporation (GIC) and MAS invest in good fund management companies and are committed to developing the domestic asset management industry. Regulations on the Social Insurance Fund (CPF) are loosened so that social insurance payers can hire professional asset management organizations to invest the allowed social insurance investment. (3) Stock market development: SGS government securities are issued as a basis for businesses to issue corporate bonds; Other authorities are also encouraged to issue bonds to expand product supply to the market. (4) Other solutions: consolidate the financial system supervision model; attracting venture capital, Fintech development, financial solutions (tax incentives, fees, subsidies); protect investors' interests (information security, intellectual property rights protection); macroeconomic stability and infrastructure development; improve the business environment; infrastructure development (transportation infrastructure, urban planning, information infrastructure...); administrative procedure reform (good governance, convenient business establishment procedures); Developing talents and using them in management agencies, while also making use of practical experts (banks, investors...) in the process of creating and developing policies.
Financial buildings and Marina Bay corner (Singapore) (photo: Internet)
Update and grasp some trends in the development of international financial centers
The “rise” of Fintech (financial technology). FinTech is developed on a platform of automation (robotics), artificial intelligence (AI) and machine learning (machine learning) to provide financial services such as electronic payments/e-wallets, consumer finance, peer-to-peer lending, personal finance, robo-advisory, digital banking, digital stock brokerage, blockchain and cryptocurrency. Current leading areas in Fintech include "Silicon Valley" in New York, "Silicon Roundabout" in London, "Finance Innovation" in Paris, Berlin, Munich, Singapore and China.
Singapore is currently the regional hub for a range of financial institutions, markets and services including commercial banking, investment banking, stock and bond brokerage, fund management, asset management , venture capital, offshore financial services, foreign exchange trading. Startups and Fintech companies in Southeast Asia raise capital and register their business in Singapore due to the country's highly competitive business environment, low transaction costs, legal environment and framework. effective state management.
Size and strength of financial regulatory and supervisory organizations in North America and Europe. Currently, New York still holds the top position thanks to the size of the stock market, the concentration of global financial institutions, human resources, the role of the USD as the main reserve currency in the world, and the power to guide global financial markets of the Fed and the US Treasury. Tightening financial policies and regulatory supervision do not slow down banking and financial transactions but create opportunities for capital flows to move from traditional markets (New York, London and Switzerland) to new markets. Northeast Asia and Southeast Asia.
The shift of geo-economic - geopolitical factors. Brexit (the United Kingdom of Great Britain and Northern Ireland leaving the European Union) has caused many financial institutions in the London Financial Center to plan to relocate or establish new operations in other financial centers in Vietnam. EU like Frankfurt. Geopolitical instability reduces the attractiveness of some international financial centers in Northeast Asia. Competition for influence between major countries has many impacts on global security and development. In that context, countries with high levels of political stability, open economic policies and deep, multilateral integration will have great potential to attract investment in financial services.
Opportunity for Viet Nam
Prof.Dr. Andreas Stoffers, Country Director of the FNF Institute in Vietnam, former CEO of Deutsche Bank Vietnam shared: "Building a financial center will help Vietnam attract foreign financial institutions, while taking advantage of the opportunity to Association to transfer international investment capital flows to Vietnam. Vietnam is located in a different time zone from the world's 21 largest financial centers. This is a special advantage in attracting idle capital during trading breaks from these centers."
According to Vietnam Economic Journal, there are 5 factors that determine the formation of a financial center, including: business environment, connectivity, people, financial infrastructure and law. Currently, Vietnam is gradually perfecting these elements. According to the General Statistics Office, the scale of GDP at current prices in 2023 is estimated to reach 10,221.8 trillion VND, equivalent to 430 billion USD. With this result, Vietnam's economic scale in 2023 will rank 34th according to CEBR's rankings, increasing more than 10 times compared to 2000. Vietnam's GDP per capita in 2023 at current prices is estimated to reach 101.9 million VND/person, equivalent to 4,284.5 USD, an increase of 160 USD compared to 2022. IMF forecasts that Vietnam's GDP in 2024 will rank 4th in ASEAN, reaching 615.6 billion USD. Vietnam is among the leading markets in terms of adoption rates of future technologies, such as: financial technology (fintech) and metaverse (cryptocurrency, augmented reality, virtual reality, virtual worlds and NFT - a digital asset built on a blockchain system), besides Indonesia and the Philippines. 58% of digital consumers in Vietnam have used Fintech solutions (online banking, e-wallets, money transfer applications...) in the past year.
Over the past two decades, Vietnam's financial market has undergone positive changes: Vietnam's banking system has become increasingly dynamic and kept up with governance trends in the world; In the stock market, barriers to market entry for foreign investors have been removed and are much more open. Typically, the maximum foreign investor ownership limit for public companies operating in conditional investment and business sectors is 49% (except for some fields).
What Da Nang city needs to pay attention
Da Nang City has many advantages to form an International Financial Center thanks to its geographical location and connectivity, urban infrastructure, quality of living environment, human resources and many other development conditions. .
Resolution 43-NQ/TW of the Politburo on building and developing Da Nang city to 2030, with a vision to 2045, has determined the goal of building Da Nang city to become one of the economic centers. - major society of the country and Southeast Asia, including its role as a financial center; Resolution 26-NQ/TW dated November 3, 2022 of the Politburo also identified a number of major tasks and solutions to develop the North Central region and the Central Coast, which focused on strong development. urban systems, especially coastal urban systems; Promote investment in regional socio-economic infrastructure, especially transportation infrastructure... Build Da Nang to become a regional international financial center; Decision No. 1287/QD-TTg dated November 2, 2023 of the Prime Minister on approving Da Nang City Planning for the period 2021 - 2030, with a vision to 2050. Among them, key tasks include: access: "Focus on developing Da Nang into a regional international financial center..." associated with the vision to 2050 "Building Da Nang city as a large, ecological, smart, unique, and sustainable urban area." sustainable, on an international level, serving as a focal point for connection and development with regional and international urban networks; is the International Tourism Center associated with the International Event Center; Center for high-tech industry and information technology; Center for entrepreneurship and innovation; International Financial Center on a regional scale and a livable coastal city at the Asian level."
Da Nang City has planned a clean land fund of more than 06 hectares in Son Tra district to serve the establishment of a financial center complex, an area located at the gateway to the sea of the city's central urban area. Da Nang street. From the planned area, directly connected to Tien Sa port and Da Nang international airport at a distance of 5km, 3km from the city administrative center, located next to My Khe beach - one of 6 beaches The most attractive place on the planet, Da Nang International Financial Center has good connectivity with neighboring areas and possesses the potential of a world-class living and working space.
It is expected that from 2024 to 2030, Da Nang city will complete its infrastructure; attract international financial institutions and investors with world influence. After 2030, the city will transform into a center model to provide financial services domestically and in some countries in the Asia-Pacific region, aiming to become a regional and central financial center. nation's fintech center by 2045.
However, it can be seen that allowing the development of a financial center model in Vietnam is a very new issue, posing great challenges both in terms of requirements for perfecting institutions, legal framework and in terms of quality. State management to ensure management and supervision of safe operations and risk management in the financial and monetary sector.
Da Nang city center (photo: Internet)
Therefore, in order for the International Financial Center project to become a reality, it is necessary to pay attention to the following issues:
- It is necessary to improve competitiveness in developing financial and business infrastructure, and strive to create the most favorable legal and institutional framework to attract investment.
- Ensure human resource issues because Human capital is one of the most important factors creating competitiveness among international financial centers. Human resources must be highly qualified and specialized; Focus on adding human resources for sustainable development or digital transformation in addition to focusing on training experts in law, accounting, business services, services and information technology.
- Have a specific plan to promote the development of Fintech and AI (artificial intelligence) industries;
- Pay attention to the Sustainable Development Goals as customer and consumer demand for green products increases, requiring financial intermediaries to have sufficient capacity to implement and monitor financial instruments. Support the implementation of sustainable projects.
- Proactively adapt to opportunities and challenges from the 4.0 Industrial Revolution to overcome the challenge of establishing and harmonizing digital and cryptocurrency standards, enhancing the inclusiveness of the financial sector.
- Continue to research, proactively propose and work with central agencies and international organizations to improve management institutions.International Financial Centers need to have effective systems to prevent fraud and financial corruption, such as anti-money laundering and customer capture systems capable of monitoring financial transactions, detecting unfair trading practices and other types of financial crimes. Da Nang City must act as a bridge between ministries, branches and the central bank to ensure that the Government grasps developments in the investment process, industry and market development.
