Vietnam-US: Promoting Trade and Investment

Though the two countries normalized their diplomatic relations in 1995, when the Bilateral Trade Agreement (BTA) was signed in 2001, bilateral trade remained modest. However, two years after the implementation of BTA, the US has fast become expert market No. 1 of Vietnam. By 2011, 10 years after the signing of BTA, the bilateral trade had increased from US$1.5 billion to over US$20 billion. According to General Department of Customs, in the first quarter of 2016, the bilateral trade attained over US$10 billion.

 

Vietnam has 8 groups of export items to US market each worth over US$ billion namely garment, footwear, wood-based products, computers, electronic parts, aqua-products, telephone and parts, machine and parts, bags and umbrellas.

 

The US is the biggest import market of Vietnamese products with US$33.48 billion in 2015, up 16.9 percent compared to 2014, with biggest extra trade value of US$25.68 billion. In 2014, Vietnam has overtaken Malaysia and Thailand, ranking first among ASEAN members in export value to the US and accounting for 22 percent of the total of export value of ASEAN to the US.

 

According to the American Chamber of Commerce (Amcham), the bilateral trade value is expected at US$80 billion in 2020 and even higher if the momentum continues with TPP. Furthermore, Vietnam is increasingly the main ASEAN exporter to the US. The market share could reach over 30 percent in 2020 if the present trend continues.

 

Vietnam ranks first among ASEAN-6 in import from the US with some US$6.7 billion in 2015. The figure could be higher with the improvement of the Vietnamese investment environment for exporters from the US and other countries as well as Vietnamese importers and distribution agents.

 

According to Ms Sherry Boger, Amcham Chairperson, the turnover of AmCham members and partners at Vietnamese market continues to increase alongside with the greater number of AmCham members boosting their FDI in Vietnam.

 

Promoting new opportunities

According to the Foreign Investment Agency – FIA (Ministry of Planning and Investment), by December 31, 2015, the US ranked 8^th among 110 countries and territories investing in Vietnam with 781 projects and registered investment capital of over US$11.3 billion.

 

FIA also envisaged that, in comparison with other countries in the region, Vietnam is prominent in consumption and new opportunities, therefore American FDI can increase rapidly in the next period.

 

One of the most important elements is low-cost labour. With highly increasing production cost in China, many American multi-national enterprises are looking for 50 percent low-cost markets as Vietnam.

 

For example, by the end of 2014, Microsoft has transferred smartphone production from China to Vietnam, making Vietnam a key point for its global supply chain. In addition to bringing the production line to Vietnam with software, equipment and solutions, Microsoft has also increased personnel investment, developing capacity and resources for IT sector in Vietnam.

 

In addition to Microsoft, other groups are also moving the production to Vietnam such as Intel, Jabil and Microchip.

 

Notably, the attraction to Vietnam of foreign businesses in general and American businesses in particular is the expectation of the enforcement of Trans-Pacific Partnership (TPP) in 2016.

 

Ever since Vietnam engaged in TPP negotiation, more and more American businesses are seeking investment opportunities in Vietnam including big delegations from Boeing, Apple, AIG, Exxon Mobil, and others.

 

Apart from favourable conditions such as young population, higher income boosting consumption power, political stability, inflation under control, key sectors of Vietnamese economy are also American strong points such as oil and gas (Exxon Mobil, Chevron..) airlines (Boeing, ADC-HAS Airport), IT (Microsoft, Intel, Apple, HP) and electricity (General Electric, General Atlantis, AES etc.). Those advantages will increase American FDI to Vietnam in the coming years.

 

Presently, however, according to Department of Foreign Investment, American investment remains below capacity, especially in comparison with investments in Singapore and Malaysia. The cause can be found in transparency, corruption, government-business cooperation in economic restructuring to accommodate with WTO environment for SOEs and SMEs as well as infrastructure and shortage of hi-tech human resources.