A golden opportunity for Vietnam-US economic relations.

Thanks to upgraded relations, Vietnam has the opportunity to shift its economy and participate more deeply in the global high-tech supply chain, according to experts.

Prime Minister Pham Minh Chinh, during his meeting with President Joe Biden on September 11, said that economics, trade, and investment should be considered the "eternal engine" of bilateral cooperation.

According to Ambassador Pham Quang Vinh, the announcement by Vietnam and the United States of establishing a Comprehensive Strategic Partnership "enhances trust and understanding between the two countries, certainly creating momentum for long-term economic cooperation." In the context of supply chain disruptions, shifts, and competition among major powers, he believes the US urgently needs reliable production locations.

General Secretary Nguyen Phu Trong held talks with US President Joe Biden at the Party Central Committee Office on the afternoon of September 10. Photo: Giang Huy

Many experts believe that the most significant aspect of the Vietnam-US relationship is the building of strategic trust, which serves as a foundation for long-term investment by businesses.

Dr. Nguyen Khac Giang, a visiting researcher at the Yusof Ishak Institute in Singapore, said that the Biden administration is pushing a de-risking strategy, shifting supply chains to friendly, ally partners. He added that the upgrading of relations between Vietnam and the US creates a foundation for exploiting this strategic opportunity.

"This is a necessary condition – that is, a political relationship that protects and facilitates the business development of both sides," assessed Mr. Nguyen Quang Dong, Director of the Institute for Policy and Development Research in Media. The premise for this is the favorable and mutually beneficial business relationship between Vietnamese and American enterprises over the past decades.

Prime Minister Pham Minh Chinh and President Joe Biden attended the Vietnam-US Summit on Investment and Innovation on September 11 in Hanoi. Photo: Giang Huy

The "friend-shoring" strategy was discussed by the US with Vietnam during Treasury Secretary Janet Yellen's visit in July. She stated that the US wants to expand trade relations and diversify supply chains among trusted partners such as Vietnam. This aims to mitigate global shocks and geopolitical risks. Since 2021, the US has intensified efforts to restructure global supply chains, particularly in the semiconductor industry, which contains many key technologies.

Vietnam's first opportunity lies in shifting its economy towards modernization, integrating it into high-tech supply chains.

In the joint statement, the US pledged to support Vietnam in training and developing a high-tech workforce and to support the rapid development of the semiconductor ecosystem in the country.

In fact, many American semiconductor companies have been increasing their investments in Vietnam recently. Amkor Technology (headquartered in Arizona) plans to complete its $1.6 billion semiconductor factory in Bac Ninh in September 2023, with trial production beginning in late October. The company stated that this is Amkor's largest factory globally. In mid-May, Marvell Technologies announced the establishment of a world-leading integrated circuit design center in Ho Chi Minh City – on par with Marvel's centers in the US, India, and Israel.

Vietnamese employees working at the Intel Products factory. Photo: IPV

Vietnam is expected to continue to advance in trade, especially as it faces a decline in export orders due to the slowdown in the global economy.

The joint statement by General Secretary Nguyen Phu Trong and President Joe Biden affirmed that Vietnam and the United States will create favorable conditions and further open their markets for each other's goods and services, support trade and economic policies, and address barriers to market access through the Framework Agreement on Trade and Investment.

"Traditional export items with strengths such as textiles, wood products, leather goods, and electronics will recover with positive growth rates," Minister of Industry and Trade Nguyen Hong Dien assessed. Vietnamese agricultural products also have greater access to the US market. In August, peeled fresh coconuts became the eighth fruit officially exported to the country.

According to statistics, Vietnam-US trade reached nearly $124 billion last year, a 275-fold increase in 27 years. The US is Vietnam's largest export market and second-largest trading partner. Conversely, Vietnam is the US's seventh-largest trading partner globally and the largest in ASEAN.

However, according to experts, Vietnam still has a lot of work to do, because this opportunity did not come about by chance.

For example, regarding participation in the high-tech supply chain, Mr. Nguyen Quang Dong said that it is necessary to re-evaluate the failures encountered by the supporting industries over the past decades.

The lack of a robust ecosystem for supporting industries means that Vietnamese businesses are mostly engaged in processing and remain at the lowest level. With high-tech supply chains, the requirements and demands will become even more stringent.

"We need to carefully analyze which link in this new supply chain we can integrate into, and then invest in domestic businesses in a systematic and strategic way. Don't think you can participate immediately," Mr. Dong said. This is to avoid repeating the supply chain failures for FDI businesses in the past.

"Vietnam itself must enhance its capacity to absorb new opportunities," Ambassador Pham Quang Vinh added. According to him, the government now needs to work with the US side to implement the major policies already outlined, focusing on the policy framework, infrastructure, and human resources.

Regarding trade, Minister Nguyen Hong Dien noted that the US is an extremely large and highly competitive import market worth $3.277 trillion, requiring businesses to adapt quickly.

Businesses must clearly define their product strategy, partnerships, and distribution channels; thoroughly understand export regulations and barriers, and potential involvement in trade defense cases; ensure that input materials have a clear origin; and research upgrading production facilities and factories according to "green production standards." Businesses also need to adopt a customer diversification strategy and seek niche markets to reduce risk.

Mr. Nguyen Khac Giang also believes that, at this time, the most important thing is to create conditions for domestic businesses to take advantage of opportunities and become an indispensable part of the global flow of goods and services.

"When this opportune moment passes, the Vietnamese economy itself must have sufficient internal strength to stand at a higher position in the world," he said.

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