Vying for Stronger Footing, U.S. Firms Flock to Vietnam

U.S. heavyweight corporations have shown interest in expanding operations in Vietnam while asking for more changes to the regulatory framework.

A delegation of 29 U.S. leading companies have expressed intention to widen their presence in Vietnam as they consider the country one of the top investment destinations in Southeast Asian.

This was the first high-ranking business delegation to visit Vietnam after the inauguration of President Donald Trump in January. It was joined by nearly three dozens of big names including Amway, Apple, Coca-Cola, ExxonMobil, Ford, General Electric (GE), Google, General Motors, MasterCard and Visa.

U.S. Investment in Vietnam below Potential

Large U.S. corporations such as Intel, General Electric, Microsoft, AIG, Coca-Cola, and Chevron have made big investments in Vietnam so far.

According to the Foreign Investment Agency under Vietnam’s Ministry of Planning and Investment, American companies had committed to invest in 826 projects worth $10.2 billion in the Southeast Asian country as of February 2017.

This amount ranks the U.S. the ninth largest investor in Vietnam, far behind South Korea, Japan, Singapore and Taiwan.

In the first two months of 2017, U.S. companies poured $51.3 million in Vietnam, compared to $881.7 million from Singapore, $721.7 million from China and $637 million from South Korea.

The statistics does not provide a full picture of American investment in Vietnam as a number of companies including Intel, Coca-Cola, Procter & Gamble and ConocoPhillips enter Vietnam through their subsidiaries and affiliates in British Virgin Islands, Singapore and Hong Kong, said Minister of Planning and Investment Nguyen Chi Dung. 

Low investment flows from the world’s largest economy can be attributed to that country’s not recognizing Vietnam’s market economy status, poor transparency of the Vietnamese legal system, undeveloped infrastructure and shortage of skilled workforce, the minister pointed out.

Vietnam – Top Regional Business Destination

Amongst the over 150 US-ASEAN Business Council (USABC), Vietnam remains either No. 1 or No. 2 of the ASEAN countries that USABC are interested in looking for business opportunities, said Marc Mealy, vice president of policy at the USABC.

According to Christian Bennet, director of Communications at GE’s Asia-Pacific, 29 companies cover a wide range of sectors, spanning from agriculture to health, power, finance services, digital economy, among others.

“The diversity [of the delegation] highlights the significant interest that there is amongst the American business community to grow and strengthen the already impressive trade and investment links between the U.S. and Vietnam,” said Bennet.

General Manager of Amway Vietnam and the Philippines Boon Wang Leo noted that Vietnam is a highly potential market for U.S. companies thanks to its fast-growing economy, expanding middle-income class, and the government’s ongoing efforts to improve the investment climate.

Vietnam has good competitive edges to attract foreign direct investment (FDI) from the U.S., said Ambassador Michael Michalak, senior vice president and regional managing director of the USABC.

Ambassador Michalak noted that despite Trump’s promise to adopt an investment-friendly tax policy and a huge infrastructure stimulate package, American companies will still be looking for opportunities for outbound investment and support free trade.

U.S. companies will make investment decision based on the economic factors that exist at the time of the investment. Policy stability, particularly that of tax policy, will be crucial, Michalak said.

More Investments on Pipeline

At a meeting with the delegation, Minister of Planning and Investment Nguyen Chi Dung said Vietnam hoped for stronger American investment flows in the time to come.

A representative from Cargill Vietnam, which has been in Vietnam for over two decades, affirmed that the firm will continue its investment plan under which it will start providing service at the Phu My port in the southern province of Ba Ria-Vung Tau in early 2017.

Power firm AES expected to get involved in new thermal power projects in the country after finishing the investment in the Mong Duong 2 power plant.

Meanwhile, Coca-Cola Beverages Vietnam Company will make a fresh investment of $280 million to bring the tally to $1 billion in the country.

Policy Changes Sought

During its talks with Vietnamese government agencies, American giants proposed the government move ahead with efforts to better the business environment in order to further open up the economy to foreign investors.

U.S. companies will consider investing in Vietnam’s financial services if Vietnam ensures clarity and consistency of policies, especially when it comes to tax. In addition, the government should bring accounting and auditing standards to meet international practices, said Marc Mealy.

Enterprises such as Dow and Monsato are keen to investment in smart agriculture in Vietnam. The government should also work out measures to ensure a flexible and fast approval process so that technologies can reach faster to farmers, Michalak suggested

“We believe that Vietnam can be a very competitive investment climate place and that will be one of the things that we hope to help Vietnam do through our mission,” Michalak noted.

“Whether the Trans-Pacific Partnership (TPP) agreement remains on course or not, Vietnam will continue to deepen integration into the world’s economy and speed up the economic opening as well as the institutional reform,” Minister Dung affirmed.

Tuan Minh / BizLIVE