18:12 | 17/08/2015 Cooperation
(VEN) - After 20 years of normalization of diplomatic relations between the two countries, there have been many US companies coming to Vietnam. Vietnam Economic News’ My Phung talked with Herb Cochran, Executive Director of the American Chamber of Commerce in Vietnam (AmCham Vietnam) about promoting cooperation between enterprises of the two countries, the current investment of US businesses in Vietnam, as well as the new trend after the Trans Pacific Partnership (TPP) agreement is concluded.
What has AmCham done to connect and promote collaboration between businesses of the two countries?
Most direct is the cooperation, especially between 2002- 2007, with VITAS and the Ministry of Trade to promote the healthy development of trade in textiles and apparel between Vietnam and the US. When we started in 2002, exports of textiles and apparel to the US were only about US$50 million. By 2014, they had reached US$10 billion, and could reach US$20 billion or more by 2020.
We cooperated closely with VCCI, VGCL, and MOLISA as part of the Tripartite Partnership in consultations between 2008 and 2012 regarding the revised Labor Code. In four years, we had about 40 meetings on the issue.
Most recently we have cooperated with VCCI, and leading business associations, such as VITAS, HAWA, LEFASO, and LBC (Leading Business Club) to establish the Vietnam Trade Facilitation Alliance (VTFA), mentioned above, which is part of the TFA Support Program organized by the World Bank and other donors to provide technical assistance to help Vietnam implement the WTO Trade Facilitation Agreement and achieve some of the objectives of Resolution 19/2015, to make Vietnam’s economy more efficient and competitive for global integration. One VTFA objective is to facilitate the conclusion of a Customs Mutual Assistance Agreement between the General Department of Vietnam Customs (GDVC) and the US Customs and Border Protection (CBP). It is strange that Vietnam is one of only two TPP countries that does not have a CMAA with the US, and even many ASEAN countries that are not TPP members have CMAAs with the US CBP.
The VTFA will also provide technical assistance to Vietnam’s enterprises, in cooperation with leading business associations, to help them become qualified to join global supply chains. Over two-thirds of Vietnam’s exports are from FDI factories; and Vietnam’s main contribution to the FDI production/supply chains is low-skilled labor. The cost of imported materials and components is estimated to equal 90 percent of the value of Vietnam’s exports of manufactured goods.
By way of comparison, more than 300,000 small businesses accounted for 97.8 percent of all US exporters and 34 percent (US$551.2 billion) of all US goods exported (US$1,612 billion) in 2014.
The VTFA will help Vietnam’s enterprises learn the new TPP rules and prepare to follow them, in order to join global supply chains and benefit from the TPP.
What has AmCham done to help Vietnam to attract more US investors?
In addition to helping to improve the business environment in general, AmCham has cooperated with Ho Chi Minh City, Binh Duong/BECAMEX, Dong Nai/DIZA in investment promotion missions to the US, and also to meet with AmChams in Singapore and in Bangkok. We regularly introduce prospective investors to them.
What do you think about the trade and investment relations between the two countries after two decades of normalization of Vietnam-US relations?
The numbers speak for themselves. Vietnam-US trade has expanded unbelievably in the last 20 years. Vietnam is now the largest supplier in ASEAN of imports to the US market, over 20 percent of total US imports from ASEAN. If present trends continue, Vietnam’s share could be more than 30 percent by 2020. This is a remarkable success story of integration into the global economy. With the TPP, the situation will improve substantially, and the US may be able to increase exports of goods and services to Vietnam, which is the lowest-ranked ASEAN importer from the US.
From your point of view, what do US companies in Vietnam think and expect as the TPP is concluded?
Based on an extensive economic quantitative analysis of the TPP, it is estimated that Vietnam’s exports will increase by 28.4 percent with the TPP.
The TPP would increase Vietnam’s exports from the expected “baseline” in 2025 without the TPP of US$239.0 billion (of which apparel and footwear exports would total US$113 billion) by US$67.9 billion to US$307 billion (of which apparel and footwear exports would increase by US$51.9 billion to US$165 billion). In percentage terms, total exports would increase by 28.4 percent over the baseline, and apparel and footwear exports would increase by 45.9 percent over the baseline. Total net exports increase: 67.9 / 239.0 = 28.4 percent; Textiles, apparel and footwear would be the sectors of most growth.
In addition, the expected GDP growth benefits are substantial, Vietnam’s GDP in 2025 with the TPP, would be 10.5 percent higher than the baseline estimate. This is particularly important now that Vietnam is in a “structural growth decline” period, according to the World Bank. Those are economic projections that give a general idea.
Already, more than US$3 billion of new FDI in Vietnam has been announced since 2013 by companies from the Republic of Korea, Chinese-Taipei, Hong Kong, China, Australia, and India to develop the textiles, apparel, and footwear supporting industries so that exports from Vietnam to the US and other TPP countries will benefit from duty-free rates.
Experts have predicted that Vietnam’s exports of textiles and apparel, in particular, could very quickly increase. One predicts that Vietnam’s apparel exports to the US under the TPP would be as high as US$22 billion by 2020. Another projects that Vietnam’s apparel and footwear exports would increase by 45.9 percent over the baseline by 2025. And Le Tien Truong, Deputy Director of VINATEX, said that Vietnam’s exports of textiles and apparel could reach US$50 billion by 2025.
Do you think that there will be a new investment trend of US businesses coming to Vietnam after the TPP is concluded?
Yes. In addition to the US$3 billion mentioned above, there is already increased interest by US businesses in new FDI in Vietnam. A number of US firms have been disappointed, and have left Vietnam. However, it was recently reported that Jabil, an AmCham member, will increase its investment in Vietnam by US$500 million. In addition, several US companies have expressed interest in investing in Vietnam. They range from large global companies with as many as 220 factories around the world and annual revenue of over US$25 billion, to small and medium enterprises (SMEs) with global manufacturing and sourcing operations, and SMEs with agricultural processing and trade. Not long ago, P&G Vietnam increased its investment by US$100 million to build a new Gillette razor factory in Vietnam to supply not only Vietnam, but for export to other countries in ASEAN and the Asia-Pacific.
Which industries are the strength and are suitable for US companies to invest in Vietnam?
According to the economic quantitative analysis mentioned above, the lead sectors will be textiles, apparel, footwear, and electronics.
However, all sectors are of interest, since Vietnam is strategically located in ASEAN and in the Asia-Pacific, which is predicted to account for 59 percent of global middle class consumer spending by 2030.
Growth of both multinationals, regional firms, and the global economy will depend increasingly on emerging market consumers, especially in Asia (India, ASEAN, and China). They are spending more on basic necessities like homes and food, but also extras such as meat, mobile phones, and air conditioners. Global middle-class spending should rise from US$21.3 trillion in 2009 to US$55.7 trillion in 2030. Asia’s share should increase from 23 percent in 2009 to 59 percent in 2030.
As the executive director of AmCham Vietnam, could you share the experience lesson to the new US investors who wish to do business successfully in Vietnam?
Keep in mind the road map, the strategic framework, the 2015 joint vision statement of and the 2013 comprehensive partnership between Vietnam and the US.
Seek out and work with partners in Vietnam, relevant business associations, companies, government leaders, and always keep in mind the need for mutual benefit for companies and associates.
Strive to help develop Vietnamese enterprises as suppliers and partners in global supply chains.
AmCham Vietnam in Ho Chi Minh City is an independent association of American and international businesses. With about 500 companies and more than 1,000 representatives, its membership of manufacturing and sales, transportation and logistics, professional and business services, and travel and tourism firms is unified by a common objective to promote trade and investment between Vietnam and the US.