Vietnam sees improved US relations as golden opportunity

In his meeting with U.S. President Joe Biden on Monday, Prime Minister Pham Minh Chinh said to consider the economy, trading and investment as the "perpetual drivers" of a bilateral agreement.

Vietnam and the U.S.’ establishment of the Comprehensive Strategic Partnership, according to Ambassador Pham Quang Vinh, "elevates the trust and understanding between the nations, which will surely become a motivator for long-term economic cooperation."

In the face of a disrupted supply chain, numerous shifts and competition between major nations, he said the U.S. would need locations where it could trust the production process.

As observed by experts, the significance of elevated Vietnam- U.S. ties resides in the ability to establish strategic trust, which is the basis for businesses to invest long-term.

Dr. Nguyen Khac Giang, Visiting Fellow of Singapore’s ISEAS-Yusof Ishak Institute, said the Biden administration was emphasizing strategies – de-risking, shifting the supply chain to mutual partners, and friend-shoring – that were now improved after Vietnam and the U.S. upgraded their relations.

"The conditions are satisfied for both sides to form a political bond and safeguards for businesses to operate and develop," said Nguyen Quang Dong, the director of the Institute for Policy Studies and Media Development.

The premise is the advantageous and mutually beneficial relationship between Vietnamese and U.S. businesses in past decades.

The U.S. notified Vietnam of its friend-shoring strategy in July when Secretary of the Treasury Janet Yellen visited the country.

She said the U.S. wanted to expand its business relations and diversify the supply chain between trusted partners such as Vietnam.

The purpose is to reduce global uncertainties and geopolitical risks. Since 2021, the U.S. has promoted efforts to restructure the global supply chain, especially that of semiconductors which contain many essential technologies.

Vietnam’s first opportunity is to shift its economy toward modernization and to join the advanced technology supply chain.

In a shared statement, the U.S. committed to supporting Vietnam in training and growing an advanced technology labor force, as well as promoting the rapid growth of the country’s semiconductor ecosystem.

Many U.S. semiconductor firms have emphasized their investments in Vietnam.

Amkor Technology (based in Arizona) is looking at a September completion window for its US$1.6 billion semiconductor factory in Bac Ninh, with test production at the end of October.

Amkor said the factory was their largest one in the world. In mid-May, Marvell Technology, Inc. announced its world-class semiconductor design center in Ho Chi Minh City, which is at the same level as its facilities in the U.S., India and Israel.

Expectations are placed on Vietnam to make great commercial advances, especially when slower growth in the global economy reducing exports.

A shared statement between General Secretary of the Communist Party of Vietnam Nguyen Phu Trong and President Biden said both Vietnam and the U.S. would create beneficial conditions, expand access for respective countries’ goods and services, support trading and economic policies, and overcome hurdles relating to accessing markets via the Trade and Investment Framework Agreement.

"Exported goods that are traditional and have the upper hand such as textiles, furniture, footwear and electronics will recover with a positive growth rate," said the Minister of Industry and Trade Nguyen Hong Dien.

Vietnamese agricultural goods will also see increased access in U.S. markets. In August, husked coconut is the eighth fruit product to be exported via an official quota to the U.S.

As official statistics show, trading between Vietnam and the U.S. scored US$124 billion last year, a 275-fold increase in 27 years.

To Vietnam, the U.S. is the largest export market and the second-largest trading partner. Conversely, to the U.S., Vietnam is the seventh-largest trading partner globally and largest in the ASEAN bloc.

That being said, according to experts, Vietnam still has much work to do.

Specifically, by participating in the advanced technology supply chain, Nguyen Quang Dong said, it was necessary to reflect on the failings of the supporting industries in the past decades.

The ecosystem for supporting industries remains low in number and strength, which is prompting Vietnamese firms to only be manufacturers, the lowest tier.

The advanced technology supply chain will have stricter demands and requests.

"We need to carefully analyze where in this new supply chain we can insert ourselves, and from there make investments for local businesses in a methodical, strategic manner. We must refrain from thinking that we can participate immediately," Dong said.

This is to avoid a repeat of the supply chain for FDI businesses’ failure in the past.

"Vietnam has to heighten its efforts to absorb new opportunities," added Ambassador Pham Quang Vinh.

He said the Government and the U.S. needed to come together to develop major decisions focusing on policy frameworks, infrastructure and human resources.

Minister Nguyen Hong Dien noted the U.S. was a hyper-large and super-competitive import market with a scale of $US 3.277 trillion, a detail that compels businesses to adapt quickly.

Businesses must clearly establish their product strategy, partners and distribution channels; gain clarity regarding export requirements and potential relevance to trade remedies; guarantee input materials have clear origins; and research ways to upgrade production facilities based on "eco-friendly production standards."

They also need to apply strategies to diversify their customer base and to reach niche markets to lower risks.

Dr. Nguyen Khac Giang also said, at this point, the most important thing is to create conditions for local businesses to utilize this opportunity and become an essential component in the global flow of goods and services.

"When the ‘favorable window’ has passed, Vietnam’s economy must have enough strength to stand on its own at a higher rank internationally," he said.