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TPP to usher in a new chapter of partnership and prosperity

In anticipation of US President Barack Obama’s visit to Vietnam, Virginia Foote, president of the International Center, chairwoman of AmCham Hanoi, and CEO of Bay Global Strategies, spoke to VIR’s Thanh Tung about investment and trade prospects for the two nations.

In anticipation of US President Barack Obama’s visit to Vietnam, Virginia Foote, president of the International Center, chairwoman of AmCham Hanoi, and CEO of Bay Global Strategies, spoke to VIR’s Thanh Tung about investment and trade prospects for the two nations.

How have the US and Vietnam developed their trade and investment ties since diplomatic normalisation more than 20 years ago?

It is hard to believe how far we have come in a little over 20 years of normalisation and 40 years after the war ended. We reached $41 billion in two-way trade last year, and the growth trend is equally impressive for 2016. We have tens of thousands of Vietnamese students studying in the US and thousands of American businesspeople and non-governmental organisations working in Vietnam. We are enjoying each other’s agricultural products, and vacationing on each other’s beaches. Commerce has helped bring our two countries and people together.

This month, we celebrate those advances with US President Barack Obama coming to Hanoi and Ho Chi Minh City to address such topics as economic and security co-operation, climate change, education, and the development of our growing friendship.

President Obama was a leader in the Trans-Pacific Partnership (TPP) signed in February by the US, Vietnam, and 10 other Asia-Pacific countries – another major milestone in our bilateral relationship.   
What will be our trade and investment co-operation landscape over the next 20 years, in your view, especially with positive impacts expected from the TPP?

We have worked for many years on the TPP. With the agreement now signed, we are working hard for its speedy ratification and diligent implementation. The TPP brings tremendous possibilities, but it also must be seen as a test for Vietnamese companies.

The Bilateral Trade Agreement (BTA) paved the way for great success in bilateral trade between the US and Vietnam, while the World Trade Organization (WTO) set standards for Vietnam’s global integration, and now the TPP will set new challenges and provide new opportunities. As a free trade agreement, it sets even higher standards than the WTO – but if a country or sector can meet those standards, the benefits are even greater. What we all need to focus on now is readiness and how to ensure that the commitments are embedded into laws, decrees, circulars, and importantly, in our mindset. 

Are our administrative reforms, corporate governance systems, regulatory systems, and soft and hard infrastructures ready? This is what we need to work on.

What are currently the biggest challenges to the bilateral trade and investment relations?

A few years ago, the US and Vietnam signed a nine-pillar Comprehensive Partnership in which the TPP and economic relations form a key part. The hopes and prospects for our economic relationship are great, but we all acknowledge it is a very competitive global environment – with standards and expectations rising daily. Soft infrastructure, such as education standards and workforce training, and the hard infrastructure of electricity, ports, and roads will continue to determine which countries do well in the global system. The challenge will be to support innovation, promote entrepreneurship, and keep competitiveness at the forefront of Vietnam’s aims.

But I think we all feel the future will be bright, as we have a solid foundation on which to continue to build. 

How have the International Center and the US-Vietnam Trade Council helped with co-operation between Vietnam and the US?

The US-Vietnam Trade Council (USVTC) was founded under the International Center in 1989, after we visited Hanoi led by my then-boss, retired Ambassador William Sullivan at the invitation of Deputy Prime Minister Nguyen Co Thach. Under their design, the International Center established the USVTC to work on normalising relations – as the US and Vietnam were still estranged in the post-war chill during 1989.

As negotiators during the war period, both Sullivan and Thach wanted the US and Vietnam to build a new relationship based on peace and prosperity, and saw economic ties as a key element. 

USVTC began working closely with veteran Senators Kerry and McCain and their staff – I spent much of our first five years on the POW/MIA issue as the initial step on the US roadmap for normalisation.

By 1993 we had reached enough of an understanding to see President Clinton lift the embargo, and by 1995 the two sides announced the establishment of diplomatic relations – a wonderful day to be included in the White House ceremony.

In Vietnam, Prime Minister Vo Van Kiet made the announcement from Hanoi. With USVTC member companies, foundations, and financial support from the US government, we continued to work on the next steps of the overall relationship, but with particular focus placed on the BTA and WTO accession – continuing fellowship exchange programmes, providing technical assistance, organising congressional and business visits, and we lobbied hard to see these efforts succeed.  The TPP is the next step.

The International Center also proudly houses the Vietnam Veterans of America Foundation (VVAF) – a non-governmental organisation devoted to addressing war legacy issues founded by Veterans Bobby Muller and John Terzano in 1978. 

The VVAF has worked on Agent Orange, land mine clearance, war victims issues, and policy development for many years and to this day. In partnership with our two governments, great work is being done. While building peace, we cannot forget or ignore the legacy of war.  

Now that Vietnam has been ratifying many free trade agreements (FTAs), how important is the country to US firms’ business strategies?

Vietnam is important to US companies, and the TPP’s strict standards increase that interest – but as we know, the competition is stiff. We cannot just compare Vietnam to its past and pat ourselves on the back for our accomplishments, we must honestly compare Vietnam to the world we live in today. 

The challenge is to prevent US companies from falling into the 3 L’s – we don’t want them to land, look, and leave. We need to look at what has led to success in other countries.

What is holding Vietnam back now? What is the role of the government, state-owned enterprises, the private sector, and foreign direct investment, and what are the partnerships among them? 

FTAs operate on a parallel track – WTO tariffs will co-exist alongside the TPP, meaning companies can choose to trade through the TPP with all of its benefits, or to stay with the WTO. The challenge will be meeting the new, higher standards for business practices.  

There is always a tendency to avoid difficult issues and pick the cheapest way forward. Short term gain is just that. But US companies are very interested in participating in long-term investments in agriculture, infrastructure, education, healthcare, tourism, energy, manufacturing, and financial services – I can’t think of a sector here that at least one US company is not interested in.

What policy recommendations can you make in order to drive the collaborative efforts of our two countries forward?

I think the issues outlined by the new leadership and the recent National Assembly session – echoing Resolution 19 – are extremely important. And I would also say one of the biggest problems for US companies in Vietnam is not getting chosen! 

This has led to a bit of a reputational problem; US firms hear that you can invest a lot of time and effort in Vietnam in order to fail. As the pace and sophistication of doing business continues to quicken worldwide, Vietnam needs to keep up and not get stuck as a lower-middle income country.

As the government recognises, we also have too much cash in the system here, an accounting system that is not up to international standards, and porous administrative procedures, building a growing sense that corruption is an increasing factor.
These problems can be tackled. As we all know, there is not a problem in Vietnam that another country hasn’t faced – there is much to be learned from others’ mistakes and successes. 

But with the TPP, the Europe-Vietnam FTA, the ASEAN Economic Community, and the other FTAs, Vietnam has a golden opportunity that many other countries do not have. I am very optimistic that the future is promising and confident about where we are going together. We are all delighted our president is coming here for this historic visit.

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