Turning an idea into policy
This time, the HCMC Economic Forum will be of great significance towards the implementation of the idea to develop the City into a regional and international FC and for presenting a plan to competent agencies for consideration and approval. The question is how to turn this idea into a national policy, because it is actually an issue which will affect the whole country, not just HCMC alone.
As far as legal regulations are concerned, City authorities can only provide assistance and facilitate the development activities in accordance with Government policies and guidelines, when building a regional and international FC in any form and of any model.
To start with, four main issues need to be clarified. Firstly, we should know and understand the role of the financial market in HCMC and how it will play in the modern day financial market of Vietnam, and what efforts and achievements there have been over the past 15 years.
Secondly, we must be well aware of the various factors required to make a competent regional financial center, and how HCMC is ranked as compared with other successful financial centers like Singapore, Bangkok, Kuala Lumpur and Manila.
Thirdly, we must analyze the legal framework that will regulate a FC in Vietnam and improve on inappropriate regulations. Fourthly, we need to create effective and favorable conditions for the City to become a regional and international FC. Hence, to fully understand all these issues, it is necessary to assess the institutions and groups providing basic services within HCMC.
Since 2002, the City has mulled over the idea to develop it into a financial hub, as part of nine major service sectors. It was also the time when the HCMC Stock Exchange (HOSE) came into existence as the first securities center of Vietnam. Though still young, the HCMC FC has been developing market products through institutions, including banks and credit institutions operating in accordance with the Law on credit institutions, financial institutions and non-banking credit institutions (securities market and securities market participants) in HCMC. Other institutions include insurance services, financial companies and financial lending institutions, investment funds, public finance services (government bonds and local authority bonds), and assistant financial services.
However, the growth of the financial market around the country in general and in HCMC in particular has not been uniform over the years, especially in the relationship between the medium and long-term capital market and the short-term currency market. The heavy dependence on the banking system for all kinds of capital has largely distorted the financial market.
Requirements for a financial center
HCMC must meet three essential requirements before it can become the financial hub of the country and later of the region, and the world in the long run.
First, HCMC must improve on its role as the powerhouse and driver of the economy in its surrounding areas as well as the entire country. So to speak, HCMC must play a pivotal role as the economic hub of the South, simultaneously connecting and stimulating the growth of the Mekong Delta and the Central Highlands. The economic growth rate in HCMC must be maintained about 1.5 times higher than the country’s average rate, like what the City was able to do earlier.
HCMC must be the most successful in boosting competitiveness within ASEAN-4 (Indonesia, Malaysia, Philippines, and Thailand) as per the goal set by the Government. The City must have highly effective legal regulations, human resources and infrastructure which would be the three basic factors for improving competitiveness. The City has long been the launching pad for successful businesses around the country, and now it must do the same for the whole region.
Second, HCMC must have a major large-scale financial market. In that sense, the City must have a system that can facilitate a wide variety of demands and supply of financial products; and attract diverse sources of domestic and international capital for business and investment activities as the hub for transmission of capital in the domestic economy and create substantial effect on the regional and international markets as well.
Additionally, the City must be the headquarters for major financial institutions, where there are essential “hard” and “soft” infrastructure systems for smooth operations of the financial market. Such features will show that HCMC needs to resolve several problems before it can act as the national financial hub of the country.
Third, the Central government must show strong political determination to make HCMC the main financial hub of the country and of the region and the world by introducing appropriate policies and legal frameworks. To the extent of a macro-economic environment, it is obligatory to develop an effective legal system for the financial market; promote economic liberalization; and release a schedule for opening the financial market and capital account liberalization. These facts together prove that this huge project must be at a Government scale.
Development in stages
First, it is imperative that the idea to make HCMC into a regional and international FC must come under a Central plan, incorporated as part of the 10-year Socio-Economic Development Strategy from 2021 to 2030, to be approved at the 13th Meeting of the Party in early 2021. It should be considered a National Economic Strategy. This is a requirement for the National Assembly and the Government to introduce specific policies and regulations for successful implementation of the FC, including some pilot policies, especially for financial products.
Second, HCMC should continue to prove its key role as the economic capital in the South; serve as an international trade center; act as the leader in entrepreneurship and creativity; and prove to be the gateway for international business activities. Resolution No.20/BCT in 2002 says that HCMC would strive to be the industrial and trade center of the region. Therefore, it is imperative to stress that the urban area includes the whole City.
Fourth, the development of a FC must be done in three stages. In Stage one till 2025, a focus must be to strengthening the City and developing a smooth mechanism for the biggest FC in Vietnam in terms of a diversity of necessary infrastructure, including a strong telecommunication system.
During Stage two, from 2026 to 2035, the three factors of legal regulations, human resources and urban infrastructure (such as construction of Thu Thiem financial center), must be completed and made fully operational.
Stage three from 2035 onwards must focus on the international financial market. That will be the time for comprehensive international integration when all domestic regulations must be in line with global demands in terms of business and financial operations.