Vietnam built a financial center on paper - now for the hard part
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Let’s get into our focus for this edition: Vietnam’s nascent International Financial Center - known as the VIFC - and what it will take to open it for private capital.
By almost any measure, the speed with which Vietnam established the IFC is remarkable. In just over a year, the government moved from concept to framework. The National Assembly passed Resolution 222, the government issued eight implementing decrees, and the Law on Specialized Courts created the country’s first English-language judicial venue. Abu Dhabi took over three years to build something comparable, while Singapore’s VCC framework took two.
However, fund managers on the ground like us tend to have a more skeptical read. The IFC cannot simply be a collection of laws; these regulations must work well enough to prevent investments from avoiding the country.
Officials are no doubt aware of this, meaning the question is what comes next, and how fast.
September’s non-deadline deadline
There is a clock running on this, even if that isn’t explicitly being called out.
In early April, FTSE Russell confirmed that it will start to upgrade Vietnam to Secondary Emerging Market status in September, a process that will take about a year. This is expected to draw billions of dollars in inflow over the next few years.
This means global capital allocators will look hard at Vietnam, some for the first time. If the VIFC is still little more than a legislative concept by then, allocators will simply stay in known capital havens such as Singapore. However, if the VIFC is functioning, even at a “minimum viable” level, their thinking will shift.
That gives Vietnam a five-month window.
What’s needed to be “open for business”
In our view, three main steps need to be taken before September.
1) Fix the Decree 320 capital transfer tax. This is the single most important item on the list. A flat 2% tax on gross sale proceeds, not on net gains, means a PE firm exiting a turnaround at a loss can still owe millions in taxes. Singapore, Ireland, Luxembourg, and Malaysia all let funds elect a net-basis calculation, and Vietnam won’t be competitive until it offers the same choice.
2) Codify a real fund vehicle. Vietnam’s existing onshore fund regulations cap membership at 30 contributors and deny independent legality. A Singapore-style equivalent with variable capital, sub-fund segregation, and umbrella structure could serve as a model. Singapore’s Variable Capital Company (VCC) has attracted over 1,400 funds since 2020, in part because the Monetary Authority of Singapore (MAS) co-funded 30% of incorporation costs to spur adoption. Vietnam doesn’t necessarily need to replicate this, but it needs a vehicle.
3) Open the door. In February, the VIFC-HCMC officially launched its digital portal and membership registration system, with Nasdaq, SHB, Sovico, MB, and TPBank named founding members. Warburg Pincus hosted a Vietnam-US business forum on the VIFC in New York in March. These are real signals, but the absence of a credible onshore fund vehicle remains a major barrier to entry, along with exit pathways. In other words, the product isn’t there yet.
What the comparisons tell us
The instructive cases here are not just the success stories, like Singapore. The cautionary tales may matter more.
Qatar opened its Financial Center in 2005 with sovereign backing and competitive tax rates. Two decades later, it never built the alternative capital ecosystem it targeted. Thailand, meanwhile, has been attempting some version of a regional financial hub for 30 years without producing one.
The pattern in those failures is consistent: legislative ambition that wasn’t matched by operational urgency, and a lack of anchor commitments. Singapore’s VCC, for example, didn’t take off on its own: Temasek and GIC gave global managers a reason to take part.
Vietnam has the institutional pieces for this kind of anchor play. SCIC, the Vietnam Social Security Fund, and the new national VC fund collectively control real capital, at least in theory. Mobilizing at least one of them as an anchor LP for the VIFC would be a major catalyst.
Our take
Put simply, the VIFC must have a functioning structure by September, otherwise it may enter the long, slow Qatar/Oman trajectory. The middle path is narrow.
The good news is that the gap is operational, not philosophical. None of the steps discussed above requires new legislation to resolve. It requires the same cross-ministry coordination Vietnam demonstrated when it moved from Politburo approval to an enacted framework in just over a year.
For our part, AVV continues to invest from offshore vehicles like every other Vietnam-focused manager, because there is currently no onshore alternative that institutional LPs will accept. We hope that changes.
We’ll also be at the upcoming NIC and VPCA co-organized Vietnam Innovation and Private Capital Summit 2026 in Ho Chi Minh City on May 28. If you’re a founder, fund, or service provider thinking about VIFC participation, reply to this email. We’d love to compare notes.
See you next month.
The AVV team
