US investors seeing superb long-term opportunities

James Ollen, executive director for the American Chamber of Commerce in Ho Chi Minh City and Danang

Many of our members face short-term economic challenges in 2023, yet we see great opportunities in the medium - and long term in Vietnam.

The current level of economic and trade cooperation between Vietnam and the US is dynamic and growing stronger every day. The US is one of the top foreign investors in Vietnam and its biggest export market. The vibrant business relationship between the US and Vietnam is one of the world’s most important trade flows.

We are pleased to see Vietnam and the US work together to advance the Indo-Pacific Economic Framework for Prosperity and have an interest in these efforts to promote trade, develop resilient supply chains, and accelerate the transition to clean energy.

We are celebrating the 10-year anniversary of the comprehensive partnership between Vietnam and the US, and look forward to an even stronger partnership in the future. Dialogue with the government is valued, as is Vietnam’s efforts to continually improve the regulatory environment and streamline administrative procedures.

Some areas of focus to ensure a positive investment environment include improving the rate of enforcement of arbitration awards compared to other countries; increasing the rate of implementation of infrastructure projects; and continued adoption and implementation of multilateral trade and investment agreements. We are concerned about the number of investigations we see in private-sector projects.

This year has been a challenging one given global economic trajectories. In order to ensure a continued positive environment for investors, there are several further policy areas where the government could make a major, positive impact and help the economy speed up.

The first area is energy where, following the excellent news of the Power Development Plan VIII being approved, there is an opportunity to pursue important next steps. Approving a direct power purchase agreement policy and providing clear guidance on investor selection processes for renewable energy projects (especially wind energy) would be important near-term priorities for business across sectors.

The second area is the global minimum tax and the need to protect Vietnam’s attractiveness in a global context where corporate income tax incentives are no longer possible.

Investing in Vietnam’s future by supporting investors with reduced fees, state-financed human resource initiatives, and state-financed sustainability support can be both revenue neutral, via increased corporate tax revenue, and make Vietnam even more attractive for global businesses. Having flexible and supportive procedures for export processes that reflect the needs of modern business will also be important.

Maintaining stable domestic taxes is also important to Vietnam’s attractiveness, so any change in tax legislation should be carefully considered.

There is an opportunity to further support and encourage foreign service providers to invest in Vietnam, across sectors from technology to logistics. In the tech sector, especially, the introduction of policy mechanisms such as post-check – most recently introduced in areas ranging from online film dissemination to personal data protection – could be applied in other policies and would encourage investment.

Also, when regulations are introduced, ensuring there is appropriate transition timing and clear guidance from relevant agencies will give businesses even more confidence in Vietnam’s policy environment.

Finally, with respect to the critically important sector of healthcare, we have several recommendations. The first is regarding healthcare product access. Streamlined registration and reimbursement processes are required for faster affordable patient access to innovative, life-saving, and high-quality healthcare products including consumer healthcare products, medicines, and medical equipment and devices.

There should be the establishment of a policy framework to strengthen regulations for e-commerce (including online pharmacy sales) and e-labelling to protect public health and safety and improve patient access to healthcare products.

For pharmacy chains, a policy framework is needed to replace the abolished Circular No.03/2009/TT-BYT, especially for the scope of activities, priority rights, and preferential policies for GPP-licensed pharmacy chains, to help facilitate retail pharmacy chains’ operation and growth while strengthening governance in pharmaceutical activity management.

Meanwhile, we must enhance the transparency, objectivity, and efficiency of the judicial system, including courts, police, and prosecution. Ensuring enforceability of contracts is crucial for investor confidence. While arbitration can be an alternative (though not entirely, for example in financial disputes or labour disputes), challenges like setting aside or non-recognition of arbitral awards exist. It is important to address judicial reform, which has lagged behind economic, infrastructure, and political reforms.

Against the backdrop of gradually declining inflation and monetary easing, the recovery in fiscal stimulus is welcome. It directly bolsters the construction sector, which has been reeling under the impact of the real estate downturn.

Vietnam is among the biggest solar photovoltaic module manufacturers in the world, exporting to top solar countries such as the US and Japan. Having risen to the top 10 countries in the world for solar power capacity, investments in solar energy continue.

E-commerce remains a bright spot of Vietnam’s economy in 2023, and foreign investors are commanding more than 90 per cent of the market share. We expect to see continued strong investment from foreign investors in the segment given the key factors Vietnam has to support long-term sustainable e-commerce growth.

Large and traditional foreign technology companies are also actively investing in the sector. Electronics goods manufacturing is at the forefront of booming investment, with Taiwanese, South Korean, and US companies leading this space.

Vietnam is also moving up the value chain to manufacture higher-value products. Export of electrical, electronic equipment and components grew at 9.7 per cent compound annual growth rate in the last five years, hitting $114 billion in 2022. Key growth drivers make Vietnam an attractive destination for global manufacturers to diversify production capacity away from China.

Phuc, Trump talk of deepening trade cooperation between Vietnam and US Vietnam and the US are committed to enhancing their mutually beneficial economic relationship, according to the joint declaration on enhancing the comprehensive partnership between Vietnam and the US signed by Prime Minister Nguyen Xuan Phuc and US President Donald Trump on May 31.

Bamboo Airways to operate special authorisation flights connecting Vietnam and US Bamboo Airways has received approval from US authorities to conduct 12 special authorisation flights connecting Vietnam and the US from September 2021.