September 13, 2023
Biden's Visit to Vietnam: Impact on the Economy
In a historic state visit to Hanoi, President Joseph R. Biden and General Secretary Nguyen Phu Trong elevated U.S.-Vietnam relations to a Comprehensive Strategic Partnership. This move, from a Comprehensive Partnership established in 2013 to a Comprehensive Strategic Partnership, marks a significant turning point in the relationship between these two nations. The visit not only signifies a new era of cooperation but also carries immense implications for Vietnam's current economy.
1. Semiconductor Supply Chains
One of the key focuses of Biden's visit was to deepen cooperation on critical and emerging technologies, and the semiconductor industry stands at the forefront. The United States recognized Vietnam's potential to play a pivotal role in building resilient semiconductor supply chains. This partnership aims to expand the capacity of the semiconductor ecosystem in Vietnam, further promoting manufacturing and industry development at home.
A newly-signed Memorandum of Cooperation on Semiconductor Supply Chains, Workforce, and Ecosystem Development formalizes this bilateral partnership. This collaboration is expected to strengthen Vietnam's position in the semiconductor industry and contribute significantly to its economic growth. An investment of $1.6 billion in a new Amkor factory in Bac Ninh Province, scheduled to start operations in October 2023, further exemplifies the importance of this sector.
The semiconductor industry is vital for the advancement of various fields, such as artificial intelligence, biotechnology, cybersecurity, and clean energy. By partnering with Vietnam, the United States hopes to secure a reliable and diversified supply of semiconductors, while also supporting Vietnam's aspirations to become a regional hub for innovation and technology.
2. Technology & Innovation Hub
As innovation continues to reshape the global economy, the United States and Vietnam are delving into deeper cooperation in technology and innovation.
This includes discussions on expanding technology and economic cooperation, particularly Vietnamese investments in the United States. A highlight of this cooperation is the U.S.-Vietnam Innovation and Investment Summit, which brought together industry leaders and government officials to discuss technology-related priorities.
Some of the topics covered in the summit were:
- Microsoft's generative AI-based solution customized for Vietnam and emerging markets, which leverages natural language processing and computer vision to create content for various domains and languages.
- Nvidia's partnership with FPT, Viettel, and VinGroup in AI deployment, which involves providing hardware, software, and training support to accelerate AI adoption in various sectors such as healthcare, education, and smart cities.
- The challenges and opportunities of digital transformation and innovation in Vietnam, such as the need for skilled talent, infrastructure development, and regulatory frameworks.
These developments position Vietnam as a growing technology hub in the region.
3. Agricultural Trade Expansion
According to the USDA Foreign Agricultural Service, Vietnam is the ninth largest export market for U.S. agricultural products, with a total export value of $3.9 billion in 2022. Both nations have expressed their commitment to expanding agricultural trade.
Recent announcements regarding market access for U.S. grapefruit and Vietnamese pomelos are just the beginning. Both sides anticipate further market access for additional agricultural products.
This expansion of trade can significantly boost Vietnam's agricultural sector, providing new opportunities for farmers and agribusinesses. IFAD states that better access to domestic and international markets allows small producers to reliably sell more produce with better quality and at higher prices. This in turn encourages farmers to invest in their own businesses and increase the quantity, quality, and diversity of the goods they produce. Thus, this expansion immensely contributes to the country's economic growth.
4. Education & Workforce Development
Investing in human capital is a crucial aspect of economic growth, and the United States and Vietnam understand the importance of this. Initiatives like the STEM Champions of Vietnam Initiative and the Upskill Vietnam program, with an initial investment of $12.75 million, focus on strengthening education and workforce development.
The STEM Champions of Vietnam Initiative is a new STEM-focused education initiative that targets the full spectrum of the Vietnamese education sector, from K-12 to post-graduate studies, to promote science, technology, engineering, and math education.
The Upskill Vietnam program is aprogram that aims to develop a skilled workforce capable of driving Vietnam’s digital economy and furthering innovation and growth.
These programs aim to develop a skilled workforce capable of driving Vietnam's digital economy and furthering innovation and growth.
5. Business Growth & Aviation
The visit also brought about several business collaborations that will have a significant economic impact.
Boeing's multi-billion-dollar proposal acceptance by Vietnam Airlines for the purchase of 50 Boeing 737 MAX aircraft not only bolsters Vietnam's aviation industry but also supports U.S. manufacturing jobs.
Additionally, partnerships like Nobu Hospitality's collaboration with Viet Capital Real Estate to introduce the first Nobu hotel, residences, and restaurant to Vietnam contribute to the country's growing tourism and hospitality sector.
6. Financial Services & Capital Markets
Enhancing access to capital for underserved borrowers and expanding financial services is another facet of economic cooperation between the U.S and Vietnam.
The U.S. International Development Finance Corporation (DFC) has invested in Vietnamese banks such as Tien Phong Commercial Joint Stock Bank and the Vietnam Prosperity Joint Stock Commercial Bank to promote financial inclusion and support climate-focused initiatives. Tien Phong Commercial Joint Stock Bank received a $100 million loan from the DFC, while the Vietnam Prosperity Joint Stock Commercial Bank secured a $300 million loan from the DFC.
These investments can help address issues like the financing gap for women entrepreneurs and promote sustainable agriculture.
7. Infrastructure Development
Infrastructure development is a cornerstone of economic growth. Collaborations like the one between Seattle-based port operator SSA Marine and Vietnamese private company Gemadept to develop strategic port projects, including the proposed $6.7 billion Cai Mep Ha Logistics Center, will not only boost trade but also create jobs and stimulate economic activity in the region.
The Cai Mep Ha Logistics Center is planned to be Vietnam’s premier logistics hub, spanning over 2,200 hectares. The initiative encompasses a dual-focused blueprint: a state-of-the-art logistics center twinned with the strategically poised Cai Mep Ha downstream port. The project will involve the construction of a deep-water port, an industrial park, a logistics center, and a residential area on a 1,760-hectare site in Ba Ria-Vung Tau province.
According to SSA Marine, this project will generate about 200,000 direct and indirect jobs and contribute about 3% to Vietnam's GDP. It will also enhance Vietnam's competitiveness and integration into the global economy, as it will reduce logistics costs and improve efficiency for exporters and importers. The Center is expected to start construction in 2024 and be completed by 2030.
8. Energy & Climate Resilience
The United States and Vietnam are launching new projects to promote progress in the areas of climate, energy, and the environment, as part of their strategic partnership and shared commitment to a low-carbon future.
These projects include the establishment of the U.S.-Vietnam Bilateral Climate Working Group, which will facilitate regular dialogue and cooperation on climate issues of mutual interest, such as mitigation, adaptation, finance, and technology.
Another initiative is the Climate Resilient Agriculture in the Mekong Delta project, which will support Vietnam's efforts to enhance the resilience and productivity of its agricultural sector, which is vital for food security and economic development. The project will provide technical assistance, training, and tools to help farmers adopt climate-smart practices and technologies.
Furthermore, the United States and Vietnam are expanding their collaboration on energy storage capacity, which is essential for integrating more renewable energy sources into the grid and reducing greenhouse gas emissions. One example is the battery energy storage system in Khanh Hoa Province, which will demonstrate the feasibility and benefits of using batteries to store excess solar power and provide grid stability.
These projects reflect the strong partnership between the United States and Vietnam on climate, energy, and the environment, and their joint efforts to address the global challenges of climate change.
Conclusion
In summary, President Biden's visit to Vietnam leaves a significant economic footprint on the country's current economy. It deepens cooperation in critical sectors, strengthens education and workforce development, expands trade, and fosters business growth.
These collaborations not only drive economic growth but also position Vietnam as a hub for technology, innovation, and trade in the region. Vietnam's economy, which has been resilient and dynamic amid the global challenges posed by the COVID-19 pandemic, is poised to benefit from these partnerships in the years to come.
As the Comprehensive Strategic Partnership between the United States and Vietnam takes root, it is clear that this visit will have lasting impacts on Vietnam's economy, contributing to its prosperity and sustainable development.
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