Minister of Planning and Investment Bui Quang Vinh looks back over Vietnam - US economic relations in the 20 years since normalization.
The economic cooperation between Vietnam and the US is the focus of the comprehensive partnership agreed to in 2013, being not only the foundation but also the driver of bilateral relations. Both Vietnam and the US will benefit from effective coordination in regional and international cooperative forums such as APEC, ARF, and the AEC, etc.
The fact that Vietnam, the US and ten other countries are negotiating to reach an agreement on the Trans-Pacific Partnership (TPP) promises unprecedented opportunities for the two countries to push the comprehensive partnership to a higher level. The TPP is seen as a platform for economic integration across the Asia-Pacific region. The partnership will promote economic cooperation and strengthen comprehensive relations between Vietnam and the US, making the US become one of the leading investors in Vietnam.
After the TPP is signed export turnover from Vietnam to the US will rise considerably while the US will be in a position to become Vietnam’s largest foreign investor. Success in economic cooperation provides the necessary conditions for the two countries to upgrade their bilateral relations to the strategic partnership level.
Achievements in regard to economic cooperation along with cooperation in other areas over the last 20 years have provided a solid foundation for bilateral relations between the Vietnam and the US. Trade relations have accelerated significantly as a result. Within two years of the signing of the bilateral trade agreement (BTA), the US had become Vietnam’s largest export market and remains so to this day.
Trade relations, which were quite modest in 1995, at $450 million, had boomed by 2014 and reached over $36 billion, with Vietnam enjoying a handsome surplus of $25 billion. With such a sharp increase in trade turnover, Vietnam surpassed two other major exporters in the ASEAN region, Thailand and Malaysia, to become the leading exporter to the US.
The BTA gave a powerful boost to the two sides signing more economic cooperation agreements, such as the Agreement on Textiles and Clothing (ATC, effective from May 1, 2001), the Bilateral Aviation Agreement (BAA, effective from January 14, 2004), the Framework Agreement on Economic and Technical Cooperation, and the Memorandum of Understanding on Agricultural Cooperation (both in 2005). The bilateral negotiations over Vietnam’s accession to the World Trade Organization (WTO) in May 2006 opened up a new era for economic and trade cooperation between the two countries.
Development support from the US to Vietnam has been increasing steadily since 1995 and been kept at a stable level, with an annual average of over $120 million.
The development grants from the US to Vietnam mainly come from governmental agencies such as the US Agency for International Development (USAID), the US Trade and Development Agency (USTDA), the US Department of Agriculture (USDA), the Department of Labor (DoL), the Department of Health and Human Services (HHS), and the President’s Emergency Plan for AIDS Relief (PEPFAR), with a focus on various issues in economic development, trade, education, healthcare, the environment, State governance, tackling climate change, and dealing with the consequences of war. Typical projects include the $72 million project for handling dioxin at Da Nang Airport, the $45 million project to control HIV/AIDS transmission, and the $42 million project on State management for comprehensive development.
With results achieved in development cooperation,Vietnam and the US signed the Agreement on Economic and Technical Cooperation on the occasion of the 10th anniversary of diplomatic relations and the official visit by former Prime Minister Phan Van Khai to the US. The agreement created a legal framework for the US to implement many development support projects in Vietnam.
To bring the comprehensive partnership to a new level, USAID has launched its Country Development Cooperation Strategy (CDCS), which outlines its development assistance program in Vietnam from 2014 through 2018. The program will focus on improving policymaking processes in Vietnam in support of an improved regulatory environment and public administration and look to strengthen oversight, performance management, and other accountability mechanisms. The program will include capacity building support relevant to TPP commitments. Activities under the program will be designed to increase the economic and social participation of groups such as women, ethnic minorities, and the vulnerable within society.
The US ranks seventh among the largest foreign investors in Vietnam. To date it has 735 projects with total registered capital of $11.062 billion. These figures, however, do not reflect the flow of direct investment from the US due to US firms such as Intel, Coca-Cola, Procter & Gamble, Chevron, and ConocoPhillips investing in Vietnam via affiliates and subsidiaries registered in third countries, including the British Virgin Islands, Singapore, and Hong Kong.
Some large investments from the US to Vietnam are being developed, such as Winvest Investment with $1.4 billion, the AES-TKV Mong Duong Power Company with $2.14 billion, and Intel Products Vietnam with $1.04 billion, to name just a few.
US investment in Vietnam has contributed positively to Vietnam’s socio-economic development, improving the efficient use of domestic resources and supporting total social investment capital to bolster the capacity of key industrial sectors in the economy such as oil and gas, energy, information technology, and electronics.
The enactment of laws relating to investment, such as the Law on Investment and the amended Law on Enterprises, together with active participation in TPP negotiations, have helped Vietnam become more attractive to foreign investors, including investors from the US.
The US, however, is yet to recognize Vietnam as a market economy and there are barriers in place on certain export items from Vietnam to the US.
To mark the 20th anniversary of establishing diplomatic relations, the best way to promote economic cooperation is to build “strategic trust”, as Prime Minister Nguyen Tan Dung proposed at the Shangri-la conference in Singapore in May 2013. This is consistent with a comprehensive partnership and for the benefit of the two countries’ people.
In securing economic cooperation with Vietnam the US will also receive a great many benefits. These will help support its economic recovery and consolidate its position as the No.1 economic power in the world, given Vietnam’s strategic position within the dynamic Asia-Pacific region and the important role the country will play in the AEC.
2015 is a very important milestone in the 20 years of normalized relations between Vietnam and the US. It is not only a special year in celebrating the 20th anniversary but also a year of great opportunities and potential to strengthen and promote bilateral relations.
The upcoming historic visit by the General Secretary of the Communist Party, Mr. Nguyen Phu Trong, to the US once again confirms the commitments that leaders of both countries made when establishing the comprehensive partnership in 2013 to serve the people of the two countries and for security, peace and prosperity in the region and the world.