US-Vietnam trade and investment experiencing heyday

As Vietnam’s largest export market, the US economy is recovering powerfully, leading to a climb in demand for goods including those imported from the Southeast Asian nation, as the two countries enjoy a heyday in bilateral trade and investment ties.

Vietnam is becoming a sought-after destination for US investments
Vietnam is becoming a sought-after destination for US investments

Operating in Vietnam since 1995, US-backed Cargill today owns and operates 12 animal nutrition plants, two grain and oilseed warehouses, and two aqua technology application centres. Its operations include animal nutrition, animal protein, food and beverage ingredients, agriculture supply chain, and metals. The company employs almost 1,600 employees nationwide with up to 99% Vietnamese.

Cargill is now constructing a US$28 million feed mill in the southern region.

"Cargill has long recognised the importance and huge potential of Vietnam as a top growth market in Asia. Vietnam will continue to be a key market for us," said John Fering, regional managing director of Cargill Animal Nutrition South East Asia.

"Overall, as a growth company, we will keep investing in and growing our business here over the medium to long term. This includes expanding our capacity and capabilities besides building strong talent and resilient communities," Fering said.


Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi (AmCham Hanoi), said that not only Cargill, but also many other US firms have been operating well in Vietnam.

"American investors are optimistic about business prospects in Vietnam and we support the efforts to create a modern economy that will attract future investment and high-paying jobs for Vietnamese people," Sitkoff said. "AmCham members represent billions of US dollars in foreign investment, tens of thousands of direct employees, hundreds of thousands of indirect employees, and a significant share of Vietnam's exports and tax revenues."

Statistics from Vietnam's Ministry of Planning and Investment show that as of April 20, US investors registered over US$9.57 billion in Vietnam on nearly 1,100 valid projects, making the US the ninth largest foreign investor in the Southeast Asian nation. In the first four months of the year, the US ranked sixth in investment in Vietnam, with total newly-registered capital of US$181 million.

Currently many US firms are exploring opportunities in Vietnam, such as Morgan Stanley, ACORN International, General Dynamics, Nue Capital LLC, BlackRock's Asian Credit, Lockheed Martin International, Smart City Works, Google, Columbia University, and USTelecom.

Intel is now asking the Ho Chi Minh City government for special incentives for further investment. In January, the Intel Corporation announced it had invested a further US$475 million in Intel Products Vietnam.

"This new investment is in addition to Intel's US$1 billion investment in a state-of-the-art chip assembly and test manufacturing facility in the Saigon Hi-Tech Park, first announced in 2006. This takes Intel's total investment in its Vietnam facility to US$1.5 billion," Intel said in a statement.

According to AmCham Hanoi, US companies have had a transformative role in the development of Vietnam. From managerial practices and technologies, to service standards and ethics, the US business community here has affected Vietnam in many positive ways and foreign investment has helped promote economic and social development here.

Business activity started slowly for Americans here. In 1995, US-Vietnam trade was just US$451 million. It will soon hit US$60 billion and US companies and investors are now active in almost every sector of Vietnam's economy.

"It is important to know that while Vietnam's official investment statistics rank the US quite low, the truth is that the United States is one of the top investors in Vietnam," Sitkoff said. "The misunderstanding comes from complicated US tax laws, and corporate structures that utilize global supply chains and systems."

For example, Intel's US$1 billion assembly facility in the Saigon High-Tech Park is an investment made through Intel Hong Kong - so this counts as a Hong Kong investment even though Intel is an American company. Another example is P&G's US$100 million factory down in the southern province of Binh Duong, which is an investment made through P&G Singapore - so this counts as a Singapore investment even though P&G is a famous American company.

"There are many examples like this. We believe the United States is one of the top five investors here and they are also in Vietnam selling cosmetics, soft drinks and beer, cars, aircraft, software, industrial goods, educational services, mobile applications, financial and legal services, agricultural products, and so much more," Sitkoff noted.

Big impetus for trade

In the first four months of this year, the US was Vietnam's largest export market, with total turnover of US$30.3 billion, up 50.1% year-on-year.

It is now believed that with the US economy strongly recovering thanks to an expansion in consumption and production backed by the government's supports for enterprises and people, Vietnam's exports to the US will continue to increase.

Specifically, the extent of fiscal support in the US this year is set to be considerably larger than in most other economies. The US' Consolidated Appropriations Act enacted last December contained temporary new measures worth US$900 billion (4% of GDP), largely concentrated on emergency assistance for households and the unemployed.

On March 12, US President Joe Biden signed the US$1.9 trillion American Rescue Plan Act into law, sending much-needed aid to millions of Americans still struggling due to the COVID-19 pandemic.

The American Rescue Plan provides US$1,400 direct payments to individuals making up to US$75,000 annually, US$350 billion in aid to state and local governments and US$14 billion for vaccine distribution. The bill also provides US$130 billion to elementary, middle and high schools to assist with safe reopening.

The bill's economic-relief provisions are overwhelmingly geared toward low-income and middle-class Americans, who will benefit from the direct payments, the bill's expansion of low-income tax credits, child-care subsidies, expanded health-insurance access, extension of expanded unemployment benefits, food stamps, and rental assistance programmes. The bill contains little direct aid to high income-earners, who largely retained their jobs during the COVID-19 economic shock and indeed bolstered their savings.

Sitkoff said he expected US-Vietnam trade and investment cooperation will further flourish in the coming time , due to many reasons including the US new administration's positive stance towards both nations' bilateral ties.

In the US' National Security Strategic Guidance issued in March, US President Biden stated, "We will deepen our partnership with India and work alongside New Zealand, as well as Singapore, Vietnam, and other ASEAN member states, to advance our shared objectives."

Carl Thayer, emeritus professor at the University of New South Wales, said that there will be considerable continuity in the Biden administration's policy from that of the Trump Administration.

"President Biden's National Security Strategic Guidance issued in March intends to continue to engage Vietnam (along with India). The Biden Administration will set as a priority enhancing its comprehensive partnership with Vietnam in all nine areas of cooperation spelled out in the 2013 original joint statement during the Obama administration when Biden was vice president."

Specifically, the partnership covers furthering bilateral economic, commercial, and investment ties as one of the key pillars of bilateral cooperation.

In early 2021, Vietnam and the US agreed that bilateral ties have advanced across all fields over the past 25 years, vowing to cooperate in deepening the ties "in a more comprehensive manner, with a focus on economy-trade-investment, overcoming the war's aftermath, enhancing maritime capacity, fighting against COVID-19 and adapting to climate change."

The US affirmed it continues attaching great importance to Vietnam.

It is expected that in this year, there will be more connections and talks between both nations' high-level leaders, investors, and businesses.

However, Sitkoff suggested that much remains to be done for Vietnam to attract more American investments.

"Vietnam can attract more American business here by ensuring a fair, transparent, predictable, and streamlined regulatory environment that values innovation," he said. "An overly restrictive legal framework and burdensome administrative procedures open opportunities for "rent seeking" and illegal fees. In contrast, streamlined administrative procedures can encourage and expedite increased foreign investment and support economic recovery here. COVID-19 is likely to continue causing economic disruption. However, I believe the trade and investment relationship between Vietnam and the US will keep growing stronger in the days ahead."

As for Cargill, in spite of difficulties, the company remains faithful to the Vietnamese market.

"We have a legacy of making positive contributions to the country in the past 25 years and Vietnam will continue to be a key market for us. We bring our global expertise, know-know and supply chain capabilities to serve customers in Vietnam's livestock and aquaculture sectors," said John Fering, regional managing director of Cargill Animal Nutrition South East Asia. "We remain committed to growing with our strategic customers and through our capabilities help them become more profitable and sustainable. And most recently, we invested in a superior genetics farm to provide farmers access to better pigs with amped up attributes they need: litter size, growth rate, feed conversion ratio, appearance and adaptability to different environments."