International Finance and the Role of the IFCs

Good morning, everyone. We're here to talk about international finance centers. I obviously, I'm from Hong Kong, so I live in one of these financial centers. And I'm really excited to talk about kind of what Vietnam is planning to do to kind of bring in some of this money into Vietnam and kind of putting it towards all of the projects that are here that are going to help this country grow. But I want to kind of start by setting the scene a bit. And going to Ashley first, you know, you were sharing some of your data with me earlier about kind of inflows, outflows into the region. And it's very volatile. It's like inflows one month, it's outflows the next month, then inflows again, then outflows again. What's kind of going on with financial flows in this part of the world? Okay, Nicholas, for the questions, and thanks for watching and ICBC for inviting me here, feel honored. So, I would like to start with a broader context. So, let me begin with the number that frames the entire discussion. The global debt surpassed 365 trillion US dollars in the first half of 2026. With emerging markets accounting for the bulk of the increase. So in our tracking, we're seeing emerging markets portfolio flows It's becoming increasingly volatile. And the flows swing from positive 70.6 billion US dollars in April to negative 26.6 billion in May. Then back into positive territory in July before turning negative again in September. So the more consequential, I mean, story underneath the numbers is the capital is not flowing along the old channels. The capital is continuously repriced among returns, safety, risk, and institutional credibility. So for an international financial center, This repricing changes the competitive question. So the old advantage is scale and inertia, and the new advantage is the credible linkage under the conditions of volatility. So for an IFC, it no longer earns its position by assuming all flows will arrive. You know, so it earns it by reducing the friction, regulatory, informational infrastructure that stands between the capital and the opportunities it is seeking. So we've talked about new channels, and I think one of the goals of the discussion is to talk about kind of how one of those channels will interact with Vietnam. And I want to bring you, Rich, you know, when we interviewed Jens Lautner, who was on the stage a couple of minutes ago, about kind of the financing gap in Vietnam, he gave a number that was like $200 billion to kind of fund everything that Vietnam needs funded. What's the problem, you know, that the VIFC is trying to solve? Well, it's exactly that. Vietnam has had about 30 years now of fantastic growth, 5% to 8% that it's been running at for a long, long time now. And what that means functionally is that virtually every Vietnamese person you meet is better off than their parents, and virtually every one of their parents is better off than their parents. Two generations of amazing growth. If Vietnam can repeat that one more time, it's a fully developed economy, right? Now the challenge is that we're running up against the limitations of what sort of the classic low-wage, low-skill manufacturing, export-led growth model can really deliver. And so Vietnam needs to rapidly transition to maintain that growth trajectory, rapidly transition to a much more complex economic structure. And one of the pivotal underpinnings of that is, of course, capital has to be there to support it. The domestic capital market does not have the capacity to support the size of growth that Vietnam is generating year on year right now. And so the opportunity of the moment now is to create channels that will allow global capital to come in and start supporting what is already one of the most remarkable growth stories in the world. You know, we've talked about kind of the limitations of the Vietnamese model that's starting to come to the fore, and I want to bring in Warwick and then Hai to talk about this. But Warwick, you know, you're on the ground, you're talking with business here, domestic, international, about what's going on here in Vietnam. Kind of what's your take on kind of where Vietnam's economy is going And why, you know, this... Greater openness to global capital may be necessary. Yeah, I mean, Rich is touching on some of the themes, which is a move beyond a really successful formula that Vietnam has been pursuing for some 30 years now of opening up the economy enough to attract... Foreign direct investment primarily, not a lot of portfolio or indirect investment, mostly FDI, and most of that FDI is going into the industrial sector to build factories to make things for export. And the whole state has been operating around that. They've been training engineers, they've been concluding amazing trade agreements, which we talked about in the last panel I heard. You know, there's a lot of the framework is in place for that formula, and it's lifted, you know, tens of millions of Vietnamese out of poverty, and it's made the country a lot more prosperous. But there's a recognition that it's got to go to the next level So, there's a very, very strong policy push to move from volume to value in terms of the sort of destination of FDI and the structure of the economy. There are a lot of very fundamental reform programs being driven from the top, top down messaging from the new leadership and the Politburo forming up really comprehensive policy frameworks which are ideologically coherent and policy coherent as well. And that to do with transforming the economy from where it is, a heavy industrialized manufacturing for export economy, into a more of a service-based economy, more of a higher level economy. So IFC is part of a bigger framework around transformation of domestic enterprises and also transformation of the FDI story and uplifting the stock market to bring more indirect investment in as well. So part of the big picture. You know, like, Hai, you're tapped into these financial flows. UOB is a bank that's really kind of betting on ASEAN for its future growth. You're betting on Vietnam. I think you're building a big new headquarters in the IFC. But kind of what's the UOB take on Vietnam in terms of the opportunities and kind of where some of the challenges still are? I think for us, Vietnam represents I think three key opportunities for UOB. The first one in itself is a high growth market. I think Warwick and, and, uh... We talked about all the potential, if you look at the market, high-growth market, strong domestic consumption, strong FDI into the country, as part of the global supply chain. So that's the first point. The second point is that I think more and more you can see Vietnam now become very integrated in the global supply chain. So not only for the China outbound, but we see the Korea coming to Vietnam, Japan, we have European company in the U.S. as well. So that, I think, will link to my third point at the end. Coincide really well with our focus of UOB is we want to build UOB become ASEAN bank in the market that really help our client to when they expand internationally into ASEAN. That's where we are to support. Also, we can see that there's a trend that a lot of Vietnamese company now once they have built successful business in Vietnam, now they go internationally as well. And the common market they often go to is ASEAN market because that's where they have the knowledge they feel more familiar with. And that's where I think UOB can provide the support to them. Lastly, I think on the building, I think we decided to start the building a few months ago, in the IFC area, very excited with that. I think a lot of people also question that about, like, why... Why we choose to build a building? I think the first reason is really to show the commitment to the market. We are here for at least for another 100 years. But also I think where we see the potential is that IFC will be the place where capital transactions are taking place. And we want to be close to those activities that will really serve Vietnam for the next few decades. Just very quickly, Hai, because you mentioned Vietnamese companies going global. Just very quickly, where are they going first, kind of in ASEAN? So I would say that they tend to pick Singapore as the first common place because of their safe, predictable legal framework. Malaysia, Thailand, Philippines are coming up as well. And I can see that a lot of Vietnamese companies, they see ASEAN not as one single country, but as a combination of a lot of markets. Your mention of Singapore is a great segue for my next question. Back to Ashley. You know, we've gotten now the domestic perspective, and I hope you can come in with the international perspective. You know, when international finance, when international institutions are looking at a financial center, what are the things they're looking for? What are the, like, what's kind of their internal checklist as, like, this is a good hub for us to kind of invest in? I would like to put it into three key functions, I mean, and IFC is called on to perform to attract more global capitals, regional linkage, monetary, and fill the gap. So first, I think the most important functions of an Asian IFC is the regional linkage to link the parts of Asia that are growing at different speeds and in different ways. So ASEAN nowadays is no longer waiting for the capital to finance a single gateway, and the region is also building their connective tissue. We see this through cross-listing and depository and receipt arrangements involving Singapore, the Philippines, and Vietnam. And we see this through the region's effort to deepen investment connectivity, local currency markets, and regional capital recycling. And at the same time, emerging IFC like Ho Chi Minh City are not positioning themselves as the rival to Singapore or Hong Kong, but as a strategic complementary participant in a broader regional financial ecosystem. So that is the linkage function in practice, not a single center absorbing all the flows, but a network of centers to make the capital more accessible across the region. So from my perspective, I think an IFC that cannot connect will be an IFC, will get bypassed. So the second function is the monitoring. to provide the funding and the currencies that regional trade and investment really required. So for many years, I think the funding market was dominated by a relatively small amount of traditional funding currencies. So I mean, for the carry trade era makes that concentration look But nowadays we're seeing funding currency is increasingly becoming more multipolar. So regional capital can play a larger role in regional trade finance, infrastructure financing, and the longer term capital formation. So the question of the financial I mean, international financial center is no longer how to become a hub for a single currency. Instead, I mean, the competitive question is whether a financial center can build an infrastructure supported a wider spectrum of funding currency and products. So that includes clearing, custody, settlement, liquidity arrangement, and also the financial products that allows investors and issuers to operate among multiple currencies across the region. So I want to go back to you, Rich. So we had the 10 founding members, I think, a week or two ago. So we're at point A, which is $33 million in registered capital. We have point B, which is $2.7 billion of committed capital by next year, I think, 2047. And then we have point C, which is that $200 billion that Jens was talking about with us earlier this year. How do we get from point A to point B to point C? Sure. I guess I would ground that first by saying my favorite phrase, which is, this is a 10-year project. Yes. Not a two-year project, right? This has to be built incrementally, and IFC does not just materialize overnight. And IFC is something that has to be built one regulation at a time. We passed our first regulation about two months ago now. That's what allowed us to register our first batch of members. We hope to be passing our next couple regulations still within the next several weeks, and at that stage, we'll be able to open more products. Every regulation for an IFC represents a new product or a new basket. And so when I look out five years and 10 years from now, we're solving problems at hundreds of billions of dollars level because we're able to offer to the marketplace different types of products, different types of services, and this core infrastructure that you're talking about as well. But those things are going to be built sort of one step at a time. And when I look at the very near term, I think really in terms of three milestones that are worth watching for, if this is sort of where you're going, is what can we expect and when. The three milestones to watch for are first, regulations, as we announce that we are now able to license banks, as we announce that we're now able to license asset managers, et cetera, over the next several weeks and months. Then those are big milestones for us. Second would be the registrations, the businesses that sign up with us, that start to show up. UOB, of course, very committed to being part of what we're doing here, right? And then third would be transactions, getting to the point where we can start doing transactions. And really the mindset right now is about priming the pump. Getting the first ones through the pipeline, being able to demonstrate to the market that we are open to some extent. But over the course of a few years, we'll be opening more and more every day. When people have asked me over the last year and a half, when will you open? I always say, well, it's kind of a funny, tricky question to answer because open means something different to each. different sub-sector within finance. What will be possible and when is a more useful question. You know, I want to kind of go back to you. Obviously, legal questions, regulatory questions, tax questions. These are all conversations to have about. Not just investing in Vietnam, but also investing in the IFC as it continues to be built up. What are the sorts of questions that you're thinking about as kind of more meat gets put on the bones of the VIFC? Yeah, I mean, Rich is rightly managing expectations and he spends a lot of time doing that with the IFC. But in doing so, he's probably underselling one aspect of the IFC, which it is crystallizing understanding and awareness of the limitations of the current. financing and legal and tax system when it comes to capital coming into Vietnam and I think what we We all hope, and I think we will see with the IFC, and certainly the initial members of it indicate this, that it's not investment in the IFC, it's investment through the IFC. That is, the IFC is a conduit to access the Vietnamese real economy. And I think that's just a helpful way to think of the IFC. It's not a standalone there for its own sake. It is really to help fuel growth and to overcome some of the friction that exists when people try to play in Vietnam at the moment. That means that a lot of the sort of financial... Engineering and structuring happens outside Vietnam in regional financial centres, particularly Singapore, as I mentioned, but I think it'll bring some of that on shore because it'll solve some of the challenges around the accounting and reporting obligations, which will be more internationalised, more simplified in the IFC than they are in the domestic economy. The tax system, the government's been very, very clear that the IFC is not a tax. ...driven structure, it's not designed to make Vietnam a tax haven at all, there is tax associated with the IFC, but there are incentives there, and it ought to be simpler to administer your tax compliance and tax obligations in the IFC than it is in the domestic economy. And the big one, and I think this is probably, maybe still a problem to be solved, but perhaps Rich and I can talk about it, but the challenge that financial centres have in countries like Vietnam that do not have easily convertible or automatically convertible currencies, and ...is the border issue. That's a reason that Shanghai hasn't taken off to the same way that Hong Kong has. You have to deal with the currency conversion issue. And it's solvable in Vietnam, we can see it, through the capital account mechanisms and so on. But that's a big issue that the IFC is going to have to solve as it goes forward. And I think the other thing that has to be solved, but this is just a matter of time, and Rich has talked about the building blocks, that it is the enormously... Powerful promise in the IFC of common law and of international dispute resolution because it is a challenge in Vietnam that the court system is not fit for purpose for the sorts of disputes that would happen in financial matters. So the IFC will enable that to happen differently. Hi. Work set up kind of the perfect segue for you, which is kind of capital flows in and out of Vietnam and managing that and working kind of within. Capital controls in Vietnam, you know, when we talk to people here, they would say things like, oh, it's very easy to get money into Vietnam. It's getting money out that's trickier. But you're actually working with this stuff. So kind of what are kind of the regulations on capital controls like and how are you kind of dealing with them? I think there's sometimes a misperception that on one hand we have capital control in Vietnam, which is very true, I think for the right reason. But also I would say that for all the investors in Vietnam so far, as long as you go through the proper channel, with a legitimate approval channel, you can get your money out. So that's for sure. Compared to a few other countries where you might face challenges, and I don't want to name the country. So again, my view is that understanding the regulatory framework is very important. But secondly, I think that there's a very strong demand for Vietnam opportunity. The challenge I often face, or the question I often face is, where are the bankable options for investors? So, yes, we talk about 200 billion in capital requirements for infrastructure projects in Vietnam. Are they bankable or not? And how do we make it bankable? I think it's very important. So again, those are the things that I think that VFC, we need to play a role, together with the bank as well, and other partners as well, to make sure that there's a clear rule of law, the enforcement, the structure of the deal. So then we can attract capital, but what I can say is that the appetite of Vietnam is there. People want to invest in the country. Speaking of appetite, Vietnam got the FTSE upgrade earlier this year, which is a pretty big milestone, certainly compared to other countries in the region, I will again not name names. But what was the immediate effect of that upgrade? I would say that it has been long sought after for the upgrade for the FTSE emerging market status. I think if you look at on the day one upgrade, it doesn't tell the true story. It's a long story. So yes, the market was down a little bit. But where I think is that when the upgrade happened, it opened up the addressable investor base. So a lot more investors can have, can like Vietnam can meet the criteria that they can invest in. But the work hasn't completed yet. We still need to continue with our restructuring reform. So what has been completed so far before the upgrade is really the, one is that the pre-funding requirement is no longer required. Secondly is the English disclosure, in terms of financial information disclosure in English. And thirdly is the settlement infrastructure. So allow settlement to happen, I think, real time. So again, those are, I think, the first steps done. But there's a lot of Requirement for investor, for example, the foreign ownership issue, we need to address that. Capital control we talked about, right? So those are the things that I think Vietnam need to continue to continue with the journey. But where we see is that people are seeing that the direction is there. It's about the execution of that direction. I think one of the investor interests coming onto the index unleashes a lot of global capital ultimately into the exchange over time. We know it'll disperse. The investee part of it is another part of the equation. The quality of Vietnamese companies, the quality of their financial reporting and their corporate governance, these are things that they're going to have to work on next, I think. And we should all be following the Indonesian story, which is a press warning to what. It can happen if things go wrong, but that, I think, will be a big area of focus for those listed Vietnamese companies, I know some of them are here, that corporate governance, financial reporting, transparency, all the things that require, that are really important when these international investors come onto your share register. Ashley, I want to go back to you. You mentioned in one of your answers about kind of the growth of a more multipolar kind of currency system. And, you know, I want to ask a bit more detail about what that means. I mean, what are the currencies that you're seeing are kind of rising in importance in the funding landscape? Well actually I would echo a little bit about the flows and the returns. That is a very key function I didn't mention in my previous comment. I think this might be the least discussed but most important functions that we are looking for at an IFC to filling the gap between the returns and the flows. Our observation have seen reoccurring paradox across several Asian markets like returns improved, but the capital doesn't follow. I mean, as sometimes even reverses. So why? Why is that? Because the investors just Feel hesitant when they are uncertain about the information environment and also the policy predictability and also the exit mechanism. So, I think Singapore and Hong Kong set a really instructive example. I mean, so it's continued growth as a global financial center reflect not only the market depths but also strong disclosure and also transparent market rules as well as the adequate buffer and strong onshore-offshore connections. So, yeah. Rich, I want to go back to you and kind of the time we have. Yes, we have. You're probably talking to international business, international capital. Thank you very much. You're having to pitch Vietnam to them. Maybe they're a bit of a skeptic, but kind of what's your pitch to them to kind of take Vietnam more seriously as an investment destination, as a place to put capital? Well, I think, firstly, Vietnam is already the most interesting investment thesis in the world. I don't think that's something that even everyone gets excited about Vietnam, right? But then some of the points that Warwick mentioned earlier are reasons why people hesitate, because they don't know it, they don't understand it, they haven't engaged with it. I mean, I mentioned this as well. Virtually everyone that's here says it's really not a problem getting my money in and out. That's not a problem, right? But that's not what sort of the reputation internationally is. That's generally the first question I get asked. Thank you very much. So I do think that it... Of course, we start with the story of Vietnam itself and that this is the conduit for global capital to flow more readily and participate more readily in Vietnam's growth story. But what it's going to come down to is really us putting in place the regulations that are recognizable and believable and credible to the international community and then us demonstrating over time That we can deliver and that as the supervisory comes online, as the dispute resolution mechanisms come online, that those are done in a credible, transparent way that the international community recognizes. I think just real quick, it's important to be clear in case everyone does not understand what the VIFC is. We have 900 hectares here in Ho Chi Minh City where businesses can register with us instead of being registered with the domestic system. Primarily financial institutions but also holding companies, SPVs, investors etc. and the you basically get to use an international-like set of regulations for their investments to flow in and out of Vietnam. So it's really a privileged platform a very exciting platform much that we're presenting to the world, but again back to always Very clear with the market, we're building it one step at a time. And so we have, you know, this much of it ready today. We've got a long ways to go before we'll be able to have a full-scale offering like the likes of Dubai or Abu Dhabi. Well, Dubai, Abu Dhabi, Hong Kong, Singapore, maybe Ho Chi Minh City and Da Nang. We'll join them in the near future. I want to thank Rich, Work, Hai, and Ashley for explaining all the financial flows to us and the IFC. Please give them a round of applause as we move to our next panel.