US President Joe Biden's visit to Vietnam and the upgrading of Vietnam-US relations to a Comprehensive Strategic Partnership open up explosive opportunities for economic cooperation between the two countries.
Vietnamese flag and US flag at Noi Bai airport on September 10, 2023. Photo: Hai Nguyen
Economy is the core foundation and important driving force
The Joint Statement on the Vietnam-US Comprehensive Strategic Partnership stated that economic, trade, and investment cooperation and inclusive economic growth based on innovation play a core role and important driving force of the bilateral relationship.
The United States is committed to increasing support for Vietnam in manufacturing, developing high-quality physical and digital infrastructure, equitable energy transition, sustainable and smart agriculture , as well as supporting Vietnam's deep and sustainable participation in regional and global supply chains.
"We will deepen our cooperation in critical and emerging technologies, especially in building a more resilient supply chain for the semiconductor industry. We will also expand our economic partnership to further promote investment and trade between our two countries," President Joe Biden stressed at a press conference with General Secretary Nguyen Phu Trong.
The US President cited an example: last year, a Vietnamese company signed a $4 billion deal to build an electric car and battery factory in the US state of North Carolina, creating 7,000 jobs.
"World-class Vietnamese technology companies have been and will be listed on the US stock market, and we have many more important commercial contracts signed during this visit," said President Biden.
According to CNN, American giants from Apple to Intel have moved deeper into Vietnam to diversify their supply chains, maximize the capacity of many factories in Vietnam and help boost economic growth, despite the global recession.
On September 11, the White House announced a “landmark memorandum of understanding” between Boeing and Vietnam Airlines worth $10 billion, expected to support more than 30,000 jobs in the U.S. Boeing said Vietnam Airlines would buy 50 of its 737 Max planes.
“Southeast Asia is one of the fastest-growing aviation markets in the world and the 737 MAX is the perfect airplane for Vietnam Airlines to effectively meet that demand in the region,” said Brad McMullen, Boeing’s senior vice president of commercial sales and marketing.
On September 11, 2023, in Hanoi, Vietnam Airlines and Boeing signed a memorandum of understanding on the sale of 50 Boeing 737 MAX narrow-body aircraft. Photo: Hai Nguyen
In recent years, trade between Vietnam and the US has skyrocketed thanks to the Comprehensive Partnership established in 2013, so upgrading the relationship to a Comprehensive Strategic Partnership is “just catching up with reality,” said Ted Osius, President of the US-ASEAN Business Council and former US Ambassador to Vietnam.
Since Vietnam and the US normalized relations in 1995, trade growth between the two countries has increased from 450 million USD in 1995 to more than 123 billion USD in 2022, an increase of 11% compared to 2021, contributing to bringing the total import-export turnover of the whole country in 2022 to a record level, surpassing the 700 billion USD mark.
2022 marked a turning point when for the first time, Vietnam's exports to a market reached over 100 billion USD. In the same year, Vietnam became the 8th largest trading partner of the US, up from 10th place two years earlier.
Supply Chain Transformation
The two sides are getting closer as US officials, especially Treasury Secretary Janet Yellen, have repeatedly pointed out the importance of "friend-shoring" (moving activities in the supply chain of goods to friendly countries, in order to both take advantage of the benefits of globalization and limit the risks of production disruptions).
From an industrial perspective, Vietnam has been booming for years, said Michael Every, global strategist at Rabobank. Relatively lower wages and a young population have given Vietnam a solid workforce and consumer base, driving investment into the country of 97 million people.
Manufacturing demand in Vietnam has outpaced supply in some cases, said Alicia García-Herrero, chief economist at Natixis.
There are so many companies coming to Vietnam, she said, because Vietnam has the advantage of being the first country in the region to build supply chain capacity for many sectors years ago.
Prime Minister Pham Minh Chinh and President Joe Biden attend the Vietnam-US Summit on Investment and Innovation on September 11, 2023. Photo: Hai Nguyen
Key Technology
Shortly after President Joe Biden arrived in Vietnam on September 10, the White House announced a new semiconductor partnership.
“The United States recognizes Vietnam's potential and important role in building a resilient semiconductor supply chain,” the White House said in a statement.
Former Ambassador Osius said the US needs a reliable partner to provide chips and Vietnam can do this.
Intel sees it that way, too. The California-based chipmaker has committed $1.5 billion to a sprawling campus just outside Ho Chi Minh City that will be the largest single assembly and testing facility in the world.
Former Ambassador Osius expects more investment in this sector as the US strengthens relations with Vietnam.
“Vietnam’s importance in that supply chain will increase. We will see an acceleration when it comes to cooperation in the technology sector,” he predicted.
Fast growth
The International Monetary Fund (IMF) forecasts Vietnam's growth at 5.8% in 2023, as it has to cope with lower export demand from abroad.
But that figure is still good compared with global growth forecasts of 3% and is significantly faster in many major economies around the world.
Vietnam will remain one of Asia’s fastest-growing economies this year, Natixis said in a recent research report, making it attractive to corporations looking for bright spots in a generally gloomy environment.
Such interest was noted in March this year, when the US-ASEAN Business Council led the largest business delegation ever to Vietnam. The delegation included 52 US companies, including major corporations such as Netflix and Boeing .
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