|Prime Minister Pham Minh Chinh (right) met with US President Joe Biden last November at COP26, VNA |
On February 11, US Ambassador Marc Evans Knapper presented his credentials to State President Nguyen Xuan Phuc, officially starting his term in Vietnam. He is the eighth ambassador to Vietnam since both nations normalised their relations in 1995.
Before flying back from Vietnam to the US to prepare for Prime Minister Pham Minh Chinh’s visit to the US during May 10-17, Knapper met with Party General Secretary Nguyen Phu Trong. “I had the honour to meet General Secretary Trong and to thank him for his steadfast support for the US-Vietnam relationship. The mutual respect and understanding between our two nations have allowed us to make great progress together to bring peace and prosperity to our two countries and the region,” said Knapper, stressing that the US supports a strong, independent, and prosperous Vietnam and will promote bilateral relations based on respect for each other’s political governance.
General Secretary Trong underlined the foreign policy of independence, cooperation, development, diversification, and multilateralism based on mutual respect for the two countries and regional and global peace, friendship, and cooperation.
Vietnam is emerging as a rising power at the heart of the Indo-Pacific region and an increasingly important US partner. Both countries agreed on a comprehensive partnership in 2013, including cooperation on economic, security, educational, cultural, and war legacy issues.
PM Chinh will be in the US to attend the ASEAN-US Special Summit, meet with US leaders including President Joe Biden, and visit the United Nations. PM Chinh will also meet with many US companies operating in the sectors of energy, infrastructure, finance, and science and technology. He has been invited to visit the headquarters of Intel and Apple, both in Silicon Valley, where he is also expected to attend an innovation forum. It is expected that many cooperation deals worth billions of US dollars will be inked on this occasion.
Vietnam and the US have also discussed a plan to lift their existing comprehensive partnership to a strategic one. Testifying before the Senate last July, Knapper said, “Right now, we have what we call a comprehensive partnership. We hope to raise it to a strategic partnership, and I will take steps to do that by strengthening even further our security relationship with Vietnam.”
During her visit to Vietnam last August, US Vice President Harris also told President Phuc, “I would also ask, while we are here, that we consider doing what we can to upgrade our relationship as a strategic partnership. This will send a positive message to our governments, our people, and the region as we deepen our relationship.”
Both nations riveted their bilateral ties in many sectors during her visit, including COVID-19 and health security, combatting climate change, development assistance and market access, addressing the war legacy, security, investment, peaceful exploration of space, and higher education.
Ambassador Knapper said, “I will make bigger efforts to beef up the US-Vietnam ties in many sectors, especially trade, investment, education, and defence and security.”
The two countries’ bilateral trade have witnessed a spectacular rise, of nearly 250 times, from $451 million in 1995 to $111.56 billion last year, when the US was Vietnam’s largest export market, with an estimated turnover of $96.29 billion, up 24.9 per cent on-year.
The US was also Vietnam’s sixth-largest import market, with an estimated turnover of $15.27 billion, up 11.4 per cent on-year. In the first four months of 2022, Vietnam’s export turnover from the US was $35.6 billion, up 18.9 per cent on-year.
“There are two factors behind such an impressive increase. Firstly, the people, the governments, and enterprises of both countries have been working hard to find opportunities for investment, business, construction of factories, and export of goods. And secondly, Vietnam’s economy is growing with a rise in demand,” Knapper said. “We’re seeking opportunities to bring many US goods to Vietnam. We will also bring many US investors to Vietnam and also want to see more Vietnamese investments in the US.”
Vietnam’s Ministry of Planning and Investment reported that as of April 20, the total US registered investment capital in Vietnam reached $10.47 billion for 1,158 valid projects, making the US the 11th-largest foreign investor in Vietnam.
In 2021 alone, the US became the eighth-largest foreign investor in the Southeast Asian market, with the total registered capital of over $738 million. From January to April 20, the US was Vietnam’s ninth-largest foreign investor, with the total registered capital of more than $169 million.
Recently, PetroVietnam, PetroVietnam Gas JSC, and US-backed AES signed a deal to establish a joint venture – Son My LNG Port Warehouse Co., Ltd. The establishment of the Son My LNG port warehouse in the south-central province of Binh Thuan has an expected capital of $1.31 billion with an annual capacity of 3.6 million tonnes of liquefied natural gas (LNG). The facility will receive, process, and supply LNG for the Son My 1 and Son My 2 power plants in Binh Thuan, expected to become operational in 2025.
Attracting new value
Ted G. Osius, president and CEO of the US-ASEAN Business Council (USABC), said that never have US companies demonstrated their interest in Vietnam as much as they are doing now.
“American businesses are here to boost investment and business activities in Vietnam, which we find a very active location for manufacturing, with foreign direct investment continuing to flow,” said Osius, former US Ambassador to Vietnam during 2014-2017.
The USABC in mid-March led a senior executive business mission of 42 US leading companies to Vietnam, including 3M, Abbott, AES, Amway, Apple, Bank of America, and Bay Global Strategies, among others.
Michael W. Michalak, senior vice president and regional managing director of the USABC, also told VIR that the council is working with the country on attracting high-quality investments with added-value products. “Many US companies are exploring opportunities to invest billions of US dollars in Vietnam in the coming time,” said Michalak, former US Ambassador to Vietnam during 2007-2011. “Many of them are applying modern technologies for various projects in the sectors of agriculture, healthcare, and renewable energy, among others.”
It is expected that in 2022, the US and Vietnam will continue to meet regularly on trade and investment issues, including under their 2007 Trade and Investment Framework Agreement. Under this agreement, Vietnam and the US asserted their desire to promote attractive investment climates in their respective territories and expand and diversify their trade.
Ambassador Knapper hopes that Vietnam will welcome a visit by the US president in the near future. It is reported that President Joe Biden will likely visit Vietnam alongside the Asia-Pacific Economic Cooperation meeting in Thailand or the ASEAN Summit 2022 in Cambodia.
Vietnam continues to welcome foreign direct investment, and the government has policies in place that are broadly conducive to US investment. Factors that attract foreign investment include recently-signed free trade agreements, political stability, ongoing economic reforms, a young and increasingly urbanised population, and competitive labour costs.
The EU-Vietnam Free Trade Agreement came into force in August 2020. Vietnam also signed the UK-Vietnam Free Trade Agreement, which came into effect in May 2021, and the Regional Comprehensive Economic Partnership. While these agreements lower certain trade and investment barriers for companies from participating countries, US companies may find it more difficult to compete without similar advantages.
Last February, the 13th Party Congress approved a 10-year economic strategy that calls for shifting foreign investments to high-tech industries and ensuring those investments include provisions relating to environmental protection.
A month before that, Vietnam’s Law on Securities and new Labour Code, which the National Assembly originally approved in 2019, came into force.
The laws formally state the government’s intention to remove foreign ownership limits for investments in most industries and provide more contract flexibility.
In June 2020, Vietnam passed a revised Law on Investment and a new Public-Private Partnership Investment Law, both designed to encourage foreign investment in large infrastructure projects, reduce the burden on the government to finance such projects, and increase links between foreign investors and the Vietnamese private sector.
As for investment incentives, foreign investors are exempt from import duties on goods imported for their own use that cannot be procured locally.
Remote and mountainous provinces and special industrial zones are also allowed to provide additional tax breaks and other incentives to prospective investors.
Investment incentives, including lower corporate income tax rates, exemption of some import tariffs, and favourable land rental rates, are also available in advanced technology, research and development, renewable energy, automobiles, software development, waste treatment, and primary and vocational education. Source: US Department of State