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HCM CITY — Việt Nam has become central to the US policy in the Asia-Pacific region as ties between the two countries have strengthened in recent years, Marie Damour, the US consul general in HCM City, said at a conference on Thursday.

Speaking at the Việt Nam Economic Outlook 2020 meeting in HCM City, Damour said: “Dedicating our support to assist a strong, prosperous, independent Việt Nam is one of our highest priorities. Since the US-Việt Nam bilateral trade agreement entered into force in 2001, trade between the two countries and US investment in Việt Nam have both grown dramatically." 

“We believe a strong Việt Nam will be our partner in promoting regional security and in supporting global peacekeeping operations. We believe an independent Việt Nam will choose to work with us and others in the region to ensure a rules-based order, open access to air and sea lanes, and resolution of disputes without coercion.” 

She noted that “we must continue to work together as partners to improve the transparency of Việt Nam’s regulatory environment, strengthen protection for intellectual property and the privacy and safety of data to encourage innovation, and invest in the education of the brilliant young people of Việt Nam.”

Damour said that Ted McKinney, undersecretary for trade and foreign agricultural affairs at the US Department of Agriculture, recently led a delegation of more than 40 US exporters and trade associations, as well as delegates from 11 US state departments of agriculture, to Việt Nam to seek agricultural export opportunities. 

Twenty-five years ago, bilateral trade between the US and Việt Nam was only US$200 million, but now is $60 billion. In 1994, Việt Nam was the 95th largest consumer of US goods and services but today ranks 12th. 

The US is Việt Nam’s largest export market, while Việt Nam is one of the US’s fastest growing export markets, according to Damour.

“Nobody can predict the future, but I believe that by working in partnership with one another, the next 25 years will continue to see the same dynamic growth as the last 25 did,” she said.

US-China trade tensions

Speaking at the event, Đặng Minh Phương, chairwoman of CEO Club in HCM City and founder and CEO of MP Logistics, noted that the US-China trade war had created capital inflows to Việt Nam from other countries, but that business activities had been affected by the trade war despite Việt Nam’s macroeconomic stability and stable inflation rate. 

Grant Dennis, general director of PricewaterhouseCoopers Consulting Vietnam, pointed out that the overflow of investment from China had resulted in dependence on Chinese sourcing, increased demand for land and labour, and currency fluctuation.

As China relies more on domestic consumption, it would export more goods to Việt Nam, reducing China’s need for imports from Việt Nam and other trading partners, he said.

In addition, FDI exporters in Việt Nam would continue to source raw materials in China, especially in food and manufacturing, which would affect origin-of-product scrutiny.

More foreign investment in Việt Nam would also drive up land prices, especially in Industrial Zones and Economic Zones. More international firms chasing the same labour pools would intensify the fight for talent, Dennis said.

For currency fluctuations, uncertainty with trading currencies in Việt Nam such as the US dollar and Yuan could cause challenges for exporters and importers, he noted.

The industrial and services sector remain key growth drivers in 2019 and 2020. “Strong economic growth is led by the service sector and industrial activity,” he said. 

The growth of Việt Nam’s top three service sectors this year includes banking and finance (8.4 – 19 per cent), tourism (10.8 per cent) and retail sales (9.2 per cent), according to Dennis. 

“If the US-China trade war escalates to a global trade war, risks to the global outlook will eventually overshadow world economic growth, which could linger at 2-2.5 per cent or worse,” he said.

In the short term, Việt Nam may benefit from trade tensions by replacing Chinese exports to the US and having more China-based manufacturers’ relocate to the country, experts said.  

However, in the long term, the trade war presents challenges to Việt Nam’s export-led and foreign investment-led growth model. 

Experts recommended the government address external trade tensions and enhance macro-economic stability, mitigate exchange rate volatility, and participate in trade agreements to maintain export growth. 

The annual Việt Nam Economic Outlook, organised by the CEO Club in HCM City, provides businesses with insights in the financial, banking, construction, and retail and industrial manufacturing industries in Việt Nam.

More than 200 CEOs of Vietnamese enterprises and corporations, government representatives, consulates and commercial counselors, and domestic and international business associations participated in the event. — VNS