As the US and Vietnam seek to deepen economic ties, US President Donald Trump’s upcoming visit to Vietnam is expected to create a positive attitude among the US business community, which is likely to unlock further bilateral trade and investment opportunities. Thanh Van and Tung Trang report.
As one of the first American companies to invest in Vietnam in 1995, Cargill is upbeat about US President Donald Trump’s upcoming visit, and excited about new business opportunities in the country.
According to Bruce Blakeman, vice president of corporate affairs at Cargill Asia Pacific, it is a positive signal that President Trump will be joining the APEC Economic Leaders’ Meeting in Danang this November. At the same time, the US president’s first official state visit to Vietnam will also underscore the US’ commitment to the bilateral long-standing partnership.
“We hope the president’s discussions with other leaders will foster more open trade and investment in the region. Some of the challenges we would like to see addressed by President Trump and the APEC leaders are a harmonisation of standards in the region and science-based regulations,” he noted.
“The US president’s visit to Danang to attend the APEC Summit is very significant. It aims to underscore his commitment to longstanding US alliances and partnerships, including continued importance of the bilateral economic relationships between Vietnam and the US,” said Natasha Ansell, managing director and Citi country officer for Vietnam.
According to Ansell, Vietnam is the new darling of the emerging markets. Underpinning this is strong growth with prudent economic management and a combination of a fast growing emerging affluent population and continued attractiveness of Vietnam for foreign investors. This trend continues to underpin diversification of the economy and positions it well for a sustainable growth for the years to come.
As the first US financial institution licensed to open a bank branch in Hanoi, just before the normalisation of the diplomatic relationship in 1994, Citi, has proudly partnered with Vietnam through many changes over the past two decades, as Ansell noted.
“We have been playing an integral part in boosting bilateral ties between Vietnam and the US by facilitating the development of various aspects of financial markets, as well as helping to bring together American companies and local businesses. Those partnerships have grown and prospered over the years and we look forward to continuing to partner with the nation as the US – Vietnam bilateral relations get to the next level,” she stressed.
Daryl Tay, managing director of delivery firm UPS Vietnam, said that President Trump’s upcoming visit and his presence at the APEC Summit reflect the new administration’s intention to remain engaged in the Asia-Pacific region, and grow the US-Vietnam relationship.
“US businesses have been an important cornerstone of the US-Vietnam bilateral relationship. They have been valuable partners throughout the journey of Vietnam’s international integration, starting from the US-Bilateral Trade Agreement to Vietnam’s WTO accession. While the US has withdrawn from the Trans-Pacific Partnership (TPP), we are hopeful that the president’s visit will serve to solidify this partnership further, understanding not only the commercial but also strategic value of a strong bilateral relationship,” Tay told VIR.
A new wave of interest
The prospects for US investment in Vietnam look promising as investors turn more bullish on the market. In the last two months alone, Vietnamese Prime Minister Nguyen Xuan Phuc has welcomed several leaders of major US companies including Philip Falcone, chairman of Harbinger Capital Partners; Timothy Geithner, president of Warburg Pincus; Paul Greenwood, vice president of ExxonMobil; and most recently Kevin McAllister, president and CEO of Boeing Commercial Airplanes.
Emboldened by Vietnam’s growing economy, stable political system, and a large population, many US businesses are eager to cash in on the market. Falcone has been candid with his ambition to extend investment in the $4.2 billion The Grand Ho Tram Strip in the southern province of Ba Ria-Vung Tau.
Warburg Pincus inked a deal with Becamex IDC Corporation to establish a joint venture (JV) company with an initial investment of $200 million, projected to reach $1-2 billion in the next four to five years. The JV is aimed at developing internationally-compliant logistics warehouses and prefabricated factories.
In addition, ExxonMobil is en route to developing the Blue Whale deepwater gas reserve for power generation. The estimated $10 billion project is the largest of its kind in Vietnam, with an estimated 150 billion cubic metres of natural gas reserves. It aims to supply the first gas to power plants by 2023. Meanwhile, Boeing is looking to capitalise on Vietnam’s booming aviation market by offering aircraft orders and maintenance services.
Jonathan L. Moreno, chairman of the American Chamber of Commerce (AmCham) in Vietnam, believes that in the short run, US investment inflows into Vietnam will likely be steady and measured. “As Vietnam further develops its economy with more advanced infrastructure and communications systems, I believe increases in American direct investment, specifically in the areas of higher technology, finance, and services industries, will follow closely behind.”
Movements in US investment
In fact, all key sectors in Vietnam are home to big US investors, including oil and gas (ExxonMobil), aviation (Boeing and Airports Worldwide), IT (Microsoft, Intel, and HP), and electricity and electrical equipment (GE, General Atlantic, and AES).
In recent years, renewable energy has been in the spotlight for US investors thanks to the country’s great potential and preferential tariffs for solar and wind power. GE signed an agreement with the Vietnamese government to develop one gigawatt of wind energy capacity, while First Solar decided to resume its $1.2 billion solar panel manufacturing project in Ho Chi Minh City.
The logistics sector has increased its appeal to US giants like UPS and FedEx. UPS Vietnam’s Tay said, “UPS is optimistic for Vietnam’s growth. This is why we have enhanced services nationwide in a total of 19 cities and provinces in northern, central, and southern Vietnam. The service enhancements demonstrate UPS’ strong commitment to developing competitive trade lanes to help Vietnamese businesses connect to the world.”
US investors also explore the latest developments in technology. Visa Vietnam is currently stepping up its efforts to implement electronic payment as well as looking at options to bring world-class digital payments to Vietnam. Meanwhile, Uber has plans to expand its coverage in Vietnam on the back of the robust demand for ride-hailing services.
Given the new investment opportunities, US companies with a firm presence in Vietnam are continuing to branch out into other areas. Cargill has been doing business in the country for more than 22 years, focusing on animal nutrition, food and beverage ingredients, and agriculture.
“Our ongoing investment in the expansion of manufacturing capacity, local workforce development, farmers’ betterment, and continuous community development is a strong testament to our long-term commitment to the country. We believe there is significant growth potential in many sectors and we continue to look for new opportunities to invest,” Blakeman said.
Despite strong interest from investors, US-backed investments in Vietnam ranked ninth from January to August, just behind Thailand. The total registered capital from the US during the same period – $370 million – is only 6 per cent that of Vietnam’s leading foreign investor, South Korea, which registered over $6 billion, according to AmCham’s Moreno.
He pointed out that the barriers and restrictions in industries which are more likely to receive American investments should be removed. For example, operating, importing, distribution, warehousing, and transportation restrictions on foreign-invested pharmaceutical and medical device companies cause significant under-investment in Vietnam’s healthcare system. Another example would be banking and technology regulations that limit investments in financial services sectors.
Mary Tarnowka, US Consul-General in Ho Chi Minh City, said that Vietnam remains committed to economic reforms. In the Joint Statement during his May visit to the US, PM Phuc affirmed Vietnam’s pursuit of a consistent policy of economic reforms and international integration, creating favourable conditions for foreign companies to do business and invest.
“We understand that Vietnam has committed to following that path of reform, because the country recognises that such reforms will attract investment, spur economic growth, and connect Vietnam to the global supply chain,” Tarnowka said.