Draft Urban Law Targets the Capital Trap at the Heart of the VIFC

Vingroup wanted to dual-list in Singapore. Singapore said yes. Vietnam's own regulations said no — and one of the country's largest conglomerates had to incorporate a Singapore holding company to access international capital markets from its home market. That outcome is not an edge case. It is the VIFC's central design problem made concrete, and it is what a June 2026 seminar of business leaders, lawyers, and economists gathered in Ho Chi Minh City spent three hours trying to solve.

The Two-Way Problem the Zone's Architects Underestimated#

The VIFC's foundational logic is geographic containment: create a defined perimeter, grant special rules inside it, and let those rules attract sophisticated capital and institutions. This model — which Associate Professor Dr. Nguyen Huu Huan, Vice Chairman of the VIFC Executive Agency, compared to Dubai's DIFC and Kazakhstan's AIFC rather than the systemwide liberalization of Singapore or Hong Kong — requires explicit cross-boundary mechanisms. Without them, the zone becomes a terminal rather than a transit hub.

The June 2026 seminar surfaced two distinct failures of that cross-boundary design.

The inbound re-entry trap. When a fund or financial institution raises capital within the VIFC and deploys it to a project or business outside the 898-hectare perimeter — a metro line, a clean-energy plant, a hospital — current Vietnamese law classifies that deployment as foreign investment. The full compliance stack applies: State Bank of Vietnam foreign exchange management rules, foreign investment approvals, ownership limit restrictions, and investment procedure requirements. The speed and flexibility advantages that make the VIFC worth using disappear at the boundary.

The outbound access gap. Vietnamese enterprises cannot use the VIFC to reach international capital markets without first restructuring offshore. This is not a theoretical constraint. Ho Ngoc Lam, Vingroup's legal head, disclosed at the seminar that the company studied a dual-listing on both the Ho Chi Minh City Stock Exchange and the Singapore Exchange. According to Ho Ngoc Lam's disclosure at the June 2026 seminar — no SGX public statement has been issued — SGX approved the plan in principle. Vietnamese regulations on investor management, payment systems, securities custody, and domestic legal frameworks blocked it. The solution Vingroup adopted — incorporating a Singapore entity — is exactly the kind of capital flight that the VIFC was designed to prevent. The name of that entity and the capital it has raised are not publicly disclosed.

Lawyer Tran Anh Duc of the Ho Chi Minh City Bar Association gave the problem its sharpest formulation: the VIFC is a gate but not a door. Capital can enter the zone from outside Vietnam; it cannot exit the zone into Vietnam without re-acquiring the status of foreign investment.

The Scale of What This Blocks#

Dr. Do Thien Anh Tuan of Fulbright University Vietnam's School of Public Policy and Management quantified the stakes. According to seminar reporting, Vietnam needs VND 38–40 quadrillion (readers should consult the original Vietnamese-language source for the precise figure) in investment capital during 2026–2030 while raising total social investment from 32% to 40% of GDP. State budget and bank lending cannot close that gap. New financial models — fintech, peer-to-peer lending, crowdfunding, digital fundraising mechanisms — operating through the VIFC could contribute an additional 3–5% of GDP to total social investment, but only if the zone can connect international capital to domestic projects efficiently.

The infrastructure dimension is equally concrete. Nguyen Ngoc Hoa, Chairman of the Ho Chi Minh City Business Association (HUBA), noted that HCMC's eight urban railway projects require approximately $30 billion in financing. No combination of central government transfers and domestic bank credit approaches that figure. The VIFC's utility as a municipal finance vehicle depends entirely on whether capital raised internationally can reach those projects without being processed as foreign direct investment.

For comparison: when the DIFC routes capital into UAE projects, the mechanism is explicit — DIFC entities operate under their own civil and commercial law with a defined gateway framework into the UAE onshore economy. Vietnam's VIFC currently has no equivalent gateway. The VIFC's FX regime under Circular 72 governs transactions within the zone and with offshore counterparties, but the SBV's draft circular on FDI forex — the first instrument to create a formal IFC-to-mainland capital category — remains in consultation. See SBV's draft circular on FDI forex for the current state of that framework.

What the Draft Law Proposes#

The Draft Law on Special Urban Areas is the legislative vehicle that Huan confirmed has concretized Resolution 222 and its implementing decrees — and gone beyond them on capital flow architecture. Four provisions matter most to practitioners.

Unlimited foreign fundraising for Vietnam projects. The draft law would permit investment funds and investment companies operating within the VIFC to raise unlimited capital from foreign investors for deployment in Vietnamese projects. Current regulations impose sector-specific caps and approval requirements that apply regardless of where the fund is domiciled. Removing those caps for VIFC-registered funds would be the most significant structural change in the draft — and the provision most likely to face resistance during legislative review, given its implications for capital account management.

International municipal bond issuance. HCMC would gain authority to issue local government bonds on international markets. Current regulations address green bond issuance but do not provide a regulatory framework for infrastructure bonds or other municipal bond types at the international level. This provision is what makes the $30 billion railway financing question answerable in principle rather than merely aspirational.

A sector-specific green channel for VIFC-to-mainland capital. Tran Anh Duc's proposal — adopted in the draft law's consultation framework — would establish a separate capital-flow mechanism for VIFC-sourced capital investing in HCMC's priority sectors: transportation infrastructure, clean energy, urban renovation, logistics, innovation, high technology, education, healthcare, and social housing. Investors within that channel would choose between VND and convertible foreign currency settlement, with simplified cross-boundary procedures replacing the standard FDI compliance stack. The draft does not yet specify what "simplified" means in procedural terms — that remains a gap.

City-wide sandbox expansion. The current VIFC sandbox is legally confined to the 898-hectare perimeter. The draft law would give the VIFC Executive Agency authority to pilot mechanisms that expand to all of Ho Chi Minh City if they succeed within the zone. This matters for the outbound access problem: financial products and structures that work for Vingroup or another Vietnamese enterprise inside the zone could propagate city-wide without requiring separate national legislation.

The Gap the Draft Law Does Not Close#

The draft law addresses the structural problem but leaves two questions open that practitioners should watch.

Outbound securities access remains unresolved. The Vingroup dual-listing case study involved investor management, payment infrastructure, and securities custody — operational layers beneath the capital-flow architecture. Even if the draft law removes the capital-raising cap and simplifies cross-boundary procedures, a Vietnamese company seeking to list shares internationally still faces the investor registry, custodian, and settlement infrastructure constraints that blocked the Singapore plan. The draft law does not address SGX or other exchange connectivity directly. This is a regulatory coordination problem between the State Securities Commission (SSC), the SBV, and the Vietnam Securities Depository (VSD) — not one the Special Urban Areas law alone can solve.

Sector criteria for the green channel are not yet defined. The priority sector list (transportation, clean energy, urban renovation, and the rest) is broad enough to encompass most meaningful HCMC infrastructure investment, but the draft does not specify how a project qualifies, who certifies it, or what happens to capital that enters the channel and is later used for purposes outside the approved list. The Green Verification Centre proposed for the VIFC would presumably handle environmental certification, but investment eligibility verification is a separate function. Without defined criteria, the green channel risks becoming a general exemption that the SBV and Ministry of Finance cannot operationally defend.

What the Expert Consensus Signals#

The June 2026 seminar produced something unusual: convergent positions from the legal profession (Bar Association), academia (Fulbright), and the business community (HUBA), all pointing at the same structural gap and the same legislative vehicle as the fix. That convergence matters because it reflects a demand-side consensus — enterprises and their advisers identifying what they need the VIFC to do — rather than a supply-side argument about what the zone makes available.

The supply-side framing — the story the government tells about the centre's ambition and early capital commitments — is covered separately. The demand-side story is different: Vietnamese companies are incorporating in Singapore because they have to, not because they want to. Foreign capital sitting inside the VIFC zone cannot easily reach the Vietnamese projects it was raised to fund. The zone's value proposition, as currently constructed, is geographically self-contained in a way that limits its utility for the economy it is supposed to serve.

The Draft Law on Special Urban Areas is the most concrete attempt to date to redesign those boundaries. Whether the unlimited fundraising provision, the municipal bond framework, and the green channel survive the National Assembly process intact — or are narrowed by SBV and MoF input during legislative review — will determine the VIFC's functional reach for the next planning cycle.

What to Monitor#

Three developments will signal whether the legislative fix holds:

The unlimited fundraising cap provision. Watch for amendments during National Assembly committee review that reintroduce sector caps or ownership limits for VIFC-registered funds. SBV has historically been conservative on capital account liberalization; the draft's unlimited foreign fundraising language is the most exposed provision to administrative rollback.

Outbound securities infrastructure. A dual-listing framework requires SSC-VSD-SBV coordination on investor registry, custody, and settlement. Monitor for a joint circular or inter-agency working group tasked with the operational layer — not just the capital-flow architecture. Without it, the Vingroup problem repeats for the next company that tries.

Green channel criteria publication. The VIFC Executive Agency or the Ministry of Planning and Investment (MPI) should publish sector eligibility criteria and a certification process before the law takes effect. Absence of criteria by the time the law passes is itself a signal that the mechanism will be administratively delayed.

The draft law is a real architectural improvement. But a gate that is designed correctly and built correctly is still useless if no one publishes the key.

This article reflects expert positions presented at the June 2026 VIFC seminar reported by VietnamPlus and Vietnam.vn. The Draft Law on Special Urban Areas was in consultation as of that date; provisions cited here may change during National Assembly review. We will update this analysis when the final text is published.