US-Vietnam Strengthened Trade Relations: a Boost to US Investors

The recent visit of VP Kamala Harris a boost to US and Vietnam’s trade relations paving the way for US investment opportunities.

The vice president of the United States, Kamala Harris, paid a historic visit to Vietnam in late August this year. In 1995, these two war-time foes decided to put aside their differences and stride down the path of diplomatic relations. 25 years later, the US and Vietnam’s trade relations have strengthened considerably, with achievements like support for a peaceful resolution of disputes, and freedom of navigation, etc. And the US VP’s visit attested to the fact that these two nations are in close economic partnership providing a great boost to the US investors who wish to set up or expand their businesses in Vietnam.

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Why Vietnam? A Promising Economic Outlook

Considered one of the fastest-growing economies in the world, Vietnam proves to be resilient in the face of trade conflicts and weaker growth rates as compared to China. The transition of labor from agriculture to industry and services, private investment, a robust tourism sector, increased wages, and rapid urbanization are all contributing to this quick economic growth.

Vietnam’s Exports are becoming a larger part of the country’s GDP, and some industries, such as industrial manufacturing, textiles, electronics, and seafood processing, have seen tremendous growth. In 2019, growth slowed to 7%, down from a 10-year high of 7.1% from the previous year. As a result of the Covid-19 pandemic, the growth lagged behind but still showed a promising 2.9% in 2020.

As predicted by the IMF, GDP growth in Vietnam is anticipated to rebound to 6.5% this year and 7.2% in 2022, subject to post-pandemic global economic recovery. Vietnam’s resilience and great export potential make it a hotbed for investors from the US, as the US-Vietnam trade alliance could be potentially a major turning point in the US-China Trade war (source).

US-Vietnam Trade Alliance: Past 25 Years at a Glance

The United States and Vietnam marked their 25th anniversary of diplomatic ties in July 2020. The two nations, who were once rivals in the Vietnam War, have now become strategic and economic partners.

In 2001, the US and Vietnam signed a bilateral trade agreement, encompassing goods commerce, intellectual property rights protection, trade in services, investment protection, and facilitating business and transparency. This bilateral expansion was accelerated in December 2006 as Vietnam became a WTO Member, gaining the status of a permanent Normal Trade Relations (NTR). The value of bilateral trading between the US and Vietnam had risen almost six times in 2007-2019 from USD 12.5 billion to USD 77.5 billion. 

Vietnam’s exports to the US mostly consist of clothes, footwear, furniture, and electrical machinery, totaling USD 77.07 billion during 2020 (source). The United States’ major exports to Vietnam are electrical equipment, cotton, aircraft, plastic goods, and oilseeds. It is quite evident that economic cooperation between the US and Vietnam in the last two decades has been increasingly cooperative.

RELATED: Vietnam’s Impressive GDP Growth Report for 2021 & Beyond

Vietnam – The Next Best alternative to China for US Investors

Since mid-2018, amid the US-China trade war, Vietnam’s relevance to the US economy has grown, particularly as a supply substitute to China.

The demand for Vietnam’s exports, particularly clothing and textiles, has increased. For investors benefiting from the “China plus one strategy”, which includes investors relocating or expanding to other countries to gain market access, Vietnam has emerged as the next best alternative to China.

Vietnam is largely preferred by foreign investors because of its relatively efficient and stable governing structure, regulatory and cultural familiarity for companies used to doing business in China, highly competitive labor costs, business-friendly tax profile with generous incentives, and proximity to pre-existing Asian supply chains. These benefits, together with major improvements in infrastructure this year, have gained Vietnam massive popularity among foreign investors, particularly from the United States.

How Can Cekindo Help?

For US investors looking to invest and form a company in Vietnam, it is to be noted that company incorporation consists of multiple procedures that are time-consuming and overly official. Having company registration professionals, like Cekindo, by your side can save you a great deal of time as well as provide you a hassle-free experience. Cekindo provides a wide spectrum of ancillary services related to company registration, like legal consultancy, license and other documents acquisition, tax and accounting, and HR services. Due to the global pandemic our services are now run entirely online and your business needs can be executed from wherever you are in the world.

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Tomas Svoboda - Cekindo - Vietnam Country Manager

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Ing. Tomas Svoboda

Tomas is the co-founder & Chief Business Development Officer responsible for Vietnam. His role is to define the key potential of the Vietnamese market and to ensure that Incorp's branch in Vietnam provides its clients with smooth and hassle-free market entry solutions.