Vietnam - U.S economic relation through 2 decades

(VLR) (Vietnam Logistics Review) Vietnam and the U.S has been comprehensive partners in many fields. Cooperation programs have become more and more diversified and brought higher and higher economic values as well. On the occasion of the impressive 3-day visit by Mr. Barrack Obama- the third u.s president coming to Vietnam since the normalization of relations in 1995, the article introduces remarkable achievements in the relationship of the two countries on fields of economy, trade and investments.

(Vietnam Logistics Review) Vietnam and the U.S has been comprehensive partners in many fields. Cooperation programs have become more and more diversified and brought higher and higher economic values as well. On the occasion of the impressive 3-day visit by Mr. Barrack Obama- the third u.s president coming to Vietnam since the normalization of relations in 1995, the article introduces remarkable achievements in the relationship of the two countries on fields of economy, trade and investments.

Remarkable milestones

The U.S- Vietnam economic cooperation started from February 1993, when Vietnam was reconnected to international loans, including loan capitals from World Bank (WB) and International Monetary Fund (IMF). At the end of April 1993, Vietnam America Trade and Investment Consulting Co. known as VATICO of James Rockwell (the first American company after 1975) opened its representative office in Hanoi. The year later, the U.S officially lifted the trade embargo to Vietnam. In 1995, the two countries announced normalization of relations and established diplomatic relations.

In 1998, the two countries sign the bilateral agreement OPIC. The U.S officially paved the way to activities of its companies and organizations in Vietnam. In 2001, the U.S- Vietnam Bilateral Trade Agreement was signed. In 2002, a U.S- Vietnam joint committee on trade relations was established. In 2005, an agreement on economy and technology, together with others on international approvals, intelligence and military cooperation between the two countries, was signed.

In 2006, the U.S passed Permanent Normal Trade Relations to Vietnam. In 2007, Vietnam joined World Trade Organization (WTO), then the two countries signed the Bilateral Maritime Agreement and Trade& Investment Framework Agreement (TIFA). In 2008, the, the first American center was established in Hanoi.

It is noted that the visits of the three Presidents to Vietnam have been in time of remarkable changes: in 2000, the visit of President Bill Clinton took place by the time BTA signed; in 2006, the visit of President George W. Bush to Hanoi is by the time of joining WTO; and in 2016, the visit of President Obama was after TPP signed.

Impressive growth

For the two decades, the U.S- Vietnam trade relation has had giant leaps. According to General Statistics Office of the U.S, the total turn-over of goods exchange between the two economies was at USD451m in 1995, reached USD 45.06bn in 2015, a 100-time increase. Compared to USD 36.32bn in 2014, bilateral trade increased 2407%, among which export from the U.S increased 23.32%, import from Vietnam increased 24.21%, trade deficit of Vietnam and the U.S was USD 30.92bn. According to statistics in 2014 from the U.S’s Ministry of Foreign Affairs, there were 6,031 medium and small-sized business exporting goods to Vietnam and 5,895 business importing goods from Vietnam – an impressive number.

In 2015, Vietnam ranked 19th among countries that has trade relations to the U.S, then ranked 26th in 2014. The US currently has been the second largest partner of Vietnam, (after China) and the largest trade partner in the America. Am Charm estimated bilateral trade will reach USD 57bn in 2020.

In the first four months of 2016, the total export turnover to the US reached USD 11.45bn: USD 3.4bn of garment, USD1.33bn of footwear, USD 1.5bn for phones of all kinds and spare parts, USD 407.7m of aqua-products, USD 225.2m of cashew, USD 143.3m of coffee… At the same time, Vietnam imported only USD 2.47bn from the US, mainly computer, electronic products and spare parts, means of transport and their spare parts… the trade balance leans to Vietnam side with the surplus of approximately USD 9bn.

Vietnam is the only country that the U.S has to have trade deficits in both absolute and relative values. In USD1.2bn of bilateral trade turnover of 200, Vietnam’s export accounted for 80% and the US, 20% only; in USD 9.7bn in 2006, 90% and 10%; in USD 41.3bn in 2015, 81% and 19%. Consuming goods as footwear, garment, furniture and food have become popular in the US market. According to the US’s newspapers, around 10m shoes “Made in Vietnam” selling in stores of Nike’s or retail systems as Macy’s, Walmart or Target…. a 13% of the US’s import shoe markets. According to Vietnam Cashew Association (Vinacas), the US in the largest cashew import market from Vietnam with over 50% of market share. In the first four months of 2016, the US market imported 29.349 tons of cashew from Vietnam, accounting for 1/3 of the total amount exported worldwide with turnover of USD 225.2m- a great increase year-over-year.

Investment activities have had remarkable advancements in the past two decades. According to Foreign Investment Agency’s data, the Ministry of Planning& Investment, the US currently is the 7th largest investors to Vietnam with over 806 valid projects with the total registered capital of around USD 11.7bn, ranked 7th in 101 countries and regions having investment projects in Vietnam. The fields of investments are various: from billion-dollar hi-tech industry by Intel to fields of hospitality, manufacturing and processing industries. At the end of 2015, there were 9 to the US market of over 40 foreign investment licenses issued to Vietnam business. However, the registered capital was relatively small, just over USD 50m.

The number of tourists coming to Vietnam has been on the increase. In 2000, there was 96,000 tourists; in 2015, 491,200 tourists, ranked 4th after China, Korea, and Japan. The number of Vietnamese tourists to the US has been on the increase too, not yet including many Vietnamese students studying abroad in the US. There have been 19,000 Vietnamese students to the US this year, the biggest number ever, which puts Vietnam in Top 10 countries that have the greatest number of students studying in the US.

Future expectations

According to trade data from UN Comtrade, in 2015, the US’s import turnover from Vietnam accounted for 1.6% of the total import turnover, and export turnover accounted for 0.47% of the total export turnover, showing potentials for trade expansion between the two countries.

The last visit by President Obama gave more strength for the US-Vietnam trade cooperation and investments. Vietjet and Boeing (the US) signed a USD11.3bn contract of purchasing 100 B737 MAX 200s. Vietjet also signed contracts of providing engines and of maintenance services with Pratt& Whitney (United Technologies Corp., US), which costs up to USD 3.04bn. Those large contracts, together with contracts of arms to be mentioned later, for arms embargo to be fully lifted, will balance the current trade balance.

On May 25, right at the time of Obama’s visit to Vietnam, the Senate voted to abolish the Catfish Surveillance Program by US Department of Agriculture (USDA) since 2015, which was criticized as being wasteful an unnecessary by many experts. In the coming time, with participations from both the US and Vietnam, when TPP come into effect, trade growth can be speeded up.

There have been positive signals on the field of investment. By the visit of the U.S President, General Electric Corp. and the Ministry of Trade& Investment had signed the memorandum of promoting renewable energy development in Vietnam. Another investor, Asian Coast Development Ltd., (ACDL)- an international company specializing on developing, investing and building complex resort from the U.S and the owner of The Grand Ho Tram Strip- signed a memorandum with Cotec Construction J.S Co., (CoteCons) on expanding the resort of USD 75m. It has not been mentioned about projects on trade and researches as an institute of international level on medicine and life science… that has been under negotiation by Saigon High-Tech Park (SHTP). According to the plan, at the end of 2016, the project of Saigon Silicon Park in SHTP with the total investment of USD 1bn (when full) invested by a group of Vietnam-American businessmen, will officially come into operation.

For a better future of economic cooperation, both the U.S and Vietnam have had many things to do and many challenges to pass as well. However, in general, it is obvious that the cooperation between the two countries has been provided more and more motivations and had new prospects in the future.

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