Turning HCMC into financial hub called difficult: experts

Turning HCMC into financial hub called difficult: experts

The Saigon Times Daily

HCMC – HCMC has great potential to attract financial resources, but the path to become a regional and international financial hub will face numerous challenges and strong competition, according to experts at the HCMC Economic Forum on Friday.

While discussing the theme, “Developing HCMC into a global financial center,” the forum brought together more than 800 delegates, including government leaders, representatives of the diplomatic corps and financial experts at home and abroad, reported the Vietnam News Agency.

Deputy Prime Minister Vu Duc Dam said in his opening remarks that HCMC plays an important role as Vietnam’s largest economic and financial center, noting that turning the city into a regional and global financial hub is not only its own wish, but also a common target for the entire country.

Therefore, he called for the formulation of special mechanisms and policies to facilitate the process.

Meanwhile, the city’s chairman, Nguyen Thanh Phong, said the financial market is important as it helps mobilize  resources from society.

Phong added that the financial market has been defined as one of the nine main service sectors of HCMC since 2001. However, it would now be difficult to become a financial hub, as the city must begin from a lower starting point.

He said financial market restructuring remains slow, and the market capitalization of the companies listed on the stock exchange remains low, accounting for 52% of HCMC’s gross regional domestic product (GRDP), compared with Singapore’s 243%, Kuala Lumpur’s 143%, Bangkok’s 120%, and Manila’s 92%.

This has exacerbated the city’s already serious shortage of resources, slowed down economic growth and resulted in an overburdened infrastructure, which undermines its prospects as a financial center.

However, the chairman affirmed that municipal authorities have pledged to create conducive conditions for financial institutions to operate on a sustainable, long-term basis.

Vu Thanh Tu Anh, dean of the Fulbright School of Public Policy and Management, said that the city is now lagging behind other regional cities, such as Seoul, Shanghai, Kuala Lumpur and Bangkok.

Regarding domestic realities, Anh said, the gap in economic scale between Hanoi and HCMC is increasingly narrow, while that between other localities, especially the northern province of Quang Ninh, the central coastal city of Danang, and the southern province of Binh Duong are growing significantly.

Meanwhile, the proportion of HCMC’s GDP in the country’s total has remained almost unchanged in recent years, implying that the city’s productivity growth rate is lower than the average of the country’s economy, he noted.

The ratio of State budget allocations to the city steadily declined, from 26% in 2007-2010 to 18% in 2017-2020, leading the city to constantly overstretch its budget.

Therefore, the city government needs to formulate a development strategy to enhance productivity, bolster the local economy, raise incomes and living standards, and develop financial capacity, according to Anh.

Tran Dac Sinh, former chairman of the Hochiminh Stock Exchange, said banks account for a whopping 70% of the city’s financial market, but their operations entail many risks and their dispersion of resource is too high, which goes against the principle of cumulative advantage among financial centers.

He also mentioned other products in the financial market, such as finance leasing, which involves investment funds and fund management companies.

This is a new type of business, he said, noting that the relationship between investment funds and enterprises is not close enough because enterprises have long been familiar with bank loans.

Dr. Tran Du Lich, a member of the Prime Minister’s economic advisory team, said the city government has been focusing on the development of the financial market for nearly two decades.

However, the development has not been as fast as expected, which is why the city needs more time to become a major financial center in Asia, according to Lich.

“Turning this potential, advantages, and ambition into reality is a tall order, not only for HCMC but for the country, as well,” he said. “However, there is always a first step to start this long journey. If we don’t start, we will never go there,” he added.

The city’s Party chief, Nguyen Thien Nhan, said the city aims to become a financial center in southern Vietnam in the near future. The move is meant to meet capital demand of eight neighboring provinces, which make up some 45% of the country’s GDP.

City authorities will then take into account the actual developmental situation to turn the city into an international financial hub, he said. China’s Hong Kong and India’s Dubai are the models of financial centers, which HCMC wishes to learn from.

The municipal authority is scheduled to submit the scheme to the central Government in June next year. City chairman Phong expressed his hope that the Government will list this as a key national plan which he said will be a prerequisite for the city to carry out this plan successfully.