Vietnam remains attractive for US firms despite future of TPP

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Vietnam remains attractive for US firms despite future of TPP

Vietnam remains an attractive investment destination for US companies despite President-elect Donald Trump’s statement to the press on the withdrawal of all trade agreements initiated by predecessor Barack Obama, including the highly anticipated Trans-Pacific Partnership (TPP) agreement.

According to a white paper “TPP: A Boost for Vietnam’s Manufacturing Growth” released by management consulting firm Solidiance, the TPP comprises of 12 member countries – the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru – and contributes to ~40% of global GDP. The expected ratification of the TPP had multinational companies placing bets on Vietnam, which experts say will benefit the most from the trade deal.

Michael Michalak, senior vice president and regional marketing director of the US-ASEAN Business Council (USABC) stressed upon the importance of TPP for US companies. “No matter what TPP may be, US companies still consider Vietnam a very important business and investment spot in ASEAN”, he said.

In this regards, the USABC brought a small group of delegates from Fortune 500 companies to Vietnam recently for its Asia Pacific presidents’ business mission. The visit was aimed to encourage the companies’ increased investments and business dealings in Vietnam.

US companies including AES Corporation, AIG, Archer Daniels Midland Company (ADM), Cargill, Coca-Cola, GE, and UL have already operated in Vietnam and plan to boost their presence in the near future. These companies represent a cross section of industries including aerospace, agriculture, consumer products, energy, financial services, IT, infrastructure, health, and manufacturing sectors.

Cargill, a US-based multinational producer of food, agriculture, financial, and industrial products and services, is said to open its 12th animal feed plant in Vietnam next year. Cargill is currently building a cargo handling service facility at Phu My port in the southern province of Ba Ria-Vung Tau, said Alan Willits, chairman of Cargill Asia Pacific. 

Archer Daniels Midland Company (ADM), one of the largest US-based agricultural processors in the world, is also set to take a bigger share in Vietnam. Ian Pinner, president of ADM’s Southeast Asia, Australia, New Zealand, and Global Destination Marketing Department said that the company regards Vietnam as a strategic market and will continue expanding their business in the country by investing not only in trading but in production and processing of products.

Another US company has officially opened its new consumer and retail services testing laboratory in Ho Chi Minh City. UL, an innovator of safety solutions, has expanded their 1,300 square metre laboratory capacity for testing toys, textiles, footwear, accessories, and jewellery. 

MPI Deputy Minister Nguyen Van Hieu said US investment participation is required in four key sectors: infrastructure development, supporting industry, high-tech, and high-quality agriculture. 

“Many multinational companies have already expanded their manufacturing facilities in Vietnam prior to the signing of TPP”, according to Michael Sieburg, Associate Partner at Solidiance Vietnam. “Once TPP goes into effect, exports to the U.S. and Japanese market will be accelerated due to a slash in tariff rates. This will drive investments in the manufacturing sector, specifically in textile and apparel industries”, he added.

More than USD 1 billion of investments in garment & textile supporting industries over the past few years has already been committed to Vietnam, with investors from Asia setting up specialized industrial zones for garment & textile material production, yarn factories, packaging facilities, and more.

According to the press, USABC is currently compiling a special report on the relationship between the US and ASEAN, including Vietnam, aimed at giving a better understanding about the relationship between US and ASEAN countries. The report will be submitted to Trump for approval.

The US is Vietnam’s ninth-biggest foreign investor as of 20th November 2016, with 816 valid investment projects registered at almost USD 10.1 billion.

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