(March 27): Vietnam is seeking to create global investor interest in its nascent international financial centre (IFC), envisaged as an entry point for funds into one of the world’s fastest-growing economies.
“There’s capital stored up all over the world that wants into Vietnam, but it’s a capital-controlled environment,” Rich McClellan, the centre’s chief executive officer, said in an interview in Melbourne on Tuesday, where he was meeting investors. “I am probably doing on average three-to-four investor conversations every day.”
The IFC, spanning Ho Chi Minh City and Danang, is part of a broad government push to attract foreign investment as General Secretary To Lam seeks to turbocharge growth to 10% per annum over the next five years. The plans call for tax incentives along with legal and regulatory sandbox mechanisms, though there are questions over whether Vietnam’s regulatory framework, market depth and currency convertibility are sufficiently developed to support its ambitions.
“We have a lot of work to do to put the institution in place,” said McClellan, noting he has been working on the IFC project for more than three years and building ties with Wall Street institutions, which he declined to identify.
“I am working a lot right now on internal rule books and policies, fee schedules, admission guidelines — all these activities that need to be put in place to actually have a working, functioning financial centre,” he said.
An exodus of foreign funds from Vietnamese stocks this year underscores the centre’s challenges, as optimism over an upgrade to emerging-market status has given way to concerns about concentration risk and capital rotating into other markets. Vietnam is on course to be reclassified by FTSE Russell in September following an interim review next month, but it may face a tougher test to secure an upgrade from widely tracked MSCI Inc.
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Still, Vietnam’s fourth-quarter growth rate of 8.46% was among the world’s fastest, coming in more than triple the pace of neighbouring Thailand.
The IFC will play a “pivotal role in resource allocation, providing modern financial instruments, enhancing national competitiveness”, Prime Minister Pham Minh Chinh said at an event last month. It should help Vietnam transition from being a “capital recipient” to a “market creator”, he said.
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Singapore-based Vantage Point Asset Management is involved, describing itself as a founding and development partner ahead of the centre’s opening ceremony and pledging to raise US$10 billion ($12.87 billion) from global investors in the next five years.
“Initially, a lot of our capital will be deployed into building real estate,” Vantage Point chief executive officer Colin Mullins said in Melbourne on Tuesday.
The firm is currently working with three banks to help raise US$120 million on behalf of Shinec, a Vietnamese provider of ecological industrial parks, in a deal that could act as a “case study” for future IFC transactions, Mullins said.
“This is a massive economic development initiative that’s going to attract hundreds of billions of dollars over time and allow that money to be channelled into the Vietnamese economy to help fund the next round of growth,” McClellan said.
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