Preventing restrictions to blossoming US engagement

Nguyen Viet Ha - Managing director BowerGroupAsia Vietnam

In 2021, the US was Vietnam’s second-largest trading partner with a total turnover of over $111.56 billion compared to only $451 million in 1995. American businesses are optimistic about Vietnam’s future and believe that continuing efforts to improve governance and policies are essential to propel the country to the next level of economic competitiveness.

Manufacturing exports have been the cornerstone of the Vietnam economy. However, American companies and their manufacturers in Vietnam have experienced challenges in the expansion of their manufacturing operations due to a lack of infrastructure and high transport costs. The limited capacity of air and rail cargo terminals and logistics services have been major obstacles to their expansion plans.

US investors are also concerned about the stability and consistency of the local master plans and guidelines. More specifically, manufacturing and infrastructure investors would hesitate to make decisions if their project sites are impacted by changes to the local master plans. Vietnam should enforce rules to protect foreign investment projects from changes to local master plans and regulations.

Given the increasing demand for quality healthcare in Vietnam, there has been interest from foreign investors, including American companies, in the pharmaceutical and healthcare sector. Unfortunately, the relevant regulatory framework still contains restrictions that prevent or limit foreign investment.

For example, Vietnam is among a few countries in Southeast Asia which restrict market access for the distribution of pharmaceutical products. It is expected that several restrictions will be reconsidered when the Law on Pharmacy and accompanying decrees are reviewed and revised.

American companies in the pharmaceutical and healthcare sector also expect improvements to the registration process and harmonisation with regional and global standards to ensure continued access to life-saving and high-quality pharmaceutical and healthcare products, including innovative pharmaceuticals, medical devices, and consumer nutrition products.

Vietnam should welcome the opportunity to share information about good governance and best practices, including the establishment of an independent industry regulatory oversight body for hospitals and medical clinics.

Meanwhile, the free flow of data, which allows Vietnamese companies to access global services such as data centres and international finance, is critical for the rapid development of Vietnam’s digital economy. American companies providing digital services expect a regulatory environment that puts users first and at the centre of new policies.

This will ensure that Vietnam continues to have access to global services and prevent potential restrictions or requirements that would impose unnecessary costs for both foreign and local service providers in Vietnam.

Cloud computing can play a role in creating better citizen services while facilitating collaboration and data sharing among government agencies as well as businesses. American companies expect the Vietnamese government to develop and adopt smart cloud-first policies to accelerate digital transformation in accordance with internationally recognised cloud accreditation, compliance and security mechanisms.

American businesses welcome the tax administration reform designed to improve transparency and accountability. However, some new rules require further clarification and guidance to avoid potential adverse impacts. For example, there should be better guidance on e-invoicing without verification codes from tax authorities, online tax registration, tax treaty protection for foreign suppliers, tax withholding obligations by banks, and potential double taxation.

In the context of the post-pandemic recovery and inflationary consequences of the Russia-Ukraine conflict, American companies, especially in the consumer product manufacturing sector, expect stability in tax policies. Any additions or increases to existing taxes will cause a serious negative impact on efforts to recover from the pandemic.

Likewise, the local American business community welcomes Vietnam’s commitments to reduce carbon emissions and build a cleaner energy future. However, the transition to clean energy will take time and require significant efforts to develop technology standards, mobilise financial resources and create a framework to address the policy and technical issues of the process.

In the short term, gas can serve as an important transition fuel and help Vietnam reduce coal consumption. Liquefied natural gas and hydrogen should be considered for the energy transition plan, while Vietnam continues to improve infrastructure and regulatory framework for the implementation of more renewable power projects.

As the global leaders in related green technologies, American companies wish to work with the Vietnamese government to create the winning market conditions to facilitate investments and the development of green power projects in this critical energy transition process.

As Vietnamese Prime Minister Pham Minh Chinh visits the United States for the upcoming US-ASEAN Special Summit, American business leaders are looking forward to engaging with him to promote the success of the bilateral economic relationship between the two countries.