Legal framework must be clear
Many tourists visiting Wall Street are surprised and somewhat disappointed when they realize that this world famous financial center is but a small street, no more than Huynh Thuc Khang Street in District-1 in Ho Chi Minh City. Even the headquarters of the New York Stock Exchange in the middle of Wall Street are quite humble.
Perhaps only the sculpture of a bronze bull at the top of the street, marking a symbol of the growth of the stock market, shows tourists that the activities running on this street are of great significance and they are actually standing in the financial heart of the United States and of the world. The significance of the world's largest financial hub in New York lies in its network of financial services, and not in the grandeur of a skyscraper. Not just New York, but all other financial centers across the globe are the same.
Finance is a secondary service, so a financial center depends on two factors. Firstly, finance is very important but financial activities are always behind other types of economy. New York, Chicago, London, Frankfurt, Hong Kong were all major economic and commercial centers before they become financial centers. Since most economic activities require capital, economic hubs are in great demand for arranging of capital, through bank loans or stock and bond issuances in the stock market. Therefore, the condition for a City to become a financial center is that it must be an economic and trade center before becoming a financial center.
Secondly, like other types of services where "software" is more important than "hardware", the conditions for a city to become a financial center depend on two types of "social capital": quality human resources and effective regulatory environment.
Most international financial centers were established when the world didn't have computers or even landline phones. But they still helped to flow capital very well because of clear legal framework and a team of experts with professional qualifications and high moral ethics. If deceptive behavior and financial crime was widespread, financial institutions would soon have lost trust from both supply-side and demand-side and they would not have been able to develop into major financial centers.
In most countries, the legal framework related to finance such as securities laws, accounting standards, auditing and listing are prescribed at a national level. But localities can still clear their legal environment, especially via local administrative agencies, courts, and through local economic arbitration. The local governments can absolutely do these things, such as helping trade organizations to establish their branch standards, have a voice in the process of drafting national laws, and campaign for economic policies that benefit the development of the financial industry.
People and technology are very important
On the human side, in addition to investing in education and research, the government can pursue the goal of attracting human resources from other localities and from abroad, not only in the financial industry but also in all economic activities. Attracting brain is not difficult, because the income of the financial sector is quite high. Therefore, the government does not need to intervene. The important thing to attract brain is good living environment and quality public infrastructure, education and health.
In ten years, in the wave of mobile technology, cloud computing and the artificial intelligence boom, the global financial industry has seen remarkably big changes. Financial services are increasingly relying more and more on technology, so the nature of financial centers will shift to technology centers or they will have a symbiotic relationship with other technology centers. This will be a challenge for existing financial centers and an opportunity for new centers.
Therefore, in addition to the policies to encourage the development of traditional businesses, fintech ecosystem development will be a new direction for financial centers. Basically, they are also policies to encourage specific development for tech-startups; attract venture capital funds; consultant advisory services; fund R&D activities, seminars, technology workshops; and set up co-working spaces with strong computing and information infrastructure. But the biggest help for the fintech ecosystem will lie in removing legal barriers and limit existing financial institutions to lobby for an exclusive role.
Vietnam as a country and Ho Chi Minh City in particular are hardly in the race to build an international financial center in the traditional way. But conceiving of a few unicorn companies, creating excellent startups valued above 1 billion USD, and fintech with international coverage is completely within our reach.
Trusting Social, a pure Vietnamese financial technology company, is approaching that goal and there are also many other promising startups. That will be the future of financial centers in Vietnam and in Ho Chi Minh City.