The US visit by Vietnamese Party General Secretary Nguyen Phu Trong in July 2015 and US President Barack Obama’s visit to Vietnam in May 2016 display the two leaders’ commitment to foster bilateral co-operation. What do you think is Vietnam’s advantage over neighbouring countries in attracting capital from the US?
Compared to regional peers, Vietnam has four significant advantages: first of all, Vietnam has a stable political system as well as on-going economic growth. In the past decade, the Vietnamese economy has grown by 6.4 per cent a year, putting it in the top three in the Asian rankings. In 2014, the economy expanded by 5.98 per cent, in 2015 by 6.68 per cent, and the forecast figure for 2016 is 6.7 per cent. These numbers show the sustainable path of Vietnam’s growth.
Secondly, Vietnam is in the process of extensive global integration, with nine free trade agreements (FTAs) in practice, as well as the upcoming Trans-Pacific Partnership, the EU-Vietnam FTA, and the Vietnam-Eurasian Economic Union FTA. This is a great opportunity for Vietnam to attract foreign investment and technology.
Thirdly, the Vietnamese government is making great efforts to improve its investment environment, in order to attract large-scale capital. The legal framework is being enhanced to meet international standards. High levels of transparency, engendered by the FTAs will build a favourable, stable, and fair business and investment environment. Moreover, the new generation of FTAs enshrines certain protections for financial investors, ensuring their legal rights.
Finally, Vietnam is pushing the equitisation process of state-owned enterprises (SOEs), especially major state corporations. In the future, the total value of SOE equitisation will hit $25 billion, with $3.75 billion available to the public. The Vietnamese government welcomes foreign investors, including Americans, in joining this process, especially in becoming a strategic investor to assist firms with technology, market access, and governance.
What is your evaluation of the level of financial co-operation between the US and Vietnam, especially in the wake of promotional efforts made by the Vietnamese government in New York last year?
The US-Vietnam relationship is growing healthily within the global context of co-operation, and especially so now that negotiations on the TPP have been finished. In the financial sector, lots of large American financial groups are now operating in Vietnam, such as JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Metlife, together with several major investment funds. In the trade sector, bilateral trade turnover between Vietnam and the US was $35 billion in 2014, rising to $45 billion in 2015, and as Vietnam is currently the largest ASEAN exporter to the US, this figure is expected to continue rising.
Lots of American investment corporations have expressed their interest in Vietnam. Timothy Franz Geithner, chairman of the major investment fund Warburg Pincus, and previously the head of the US Treasury, recently met with the Vietnamese Ministry of Finance (MoF) to learn more about the country’s financial system and investment opportunities. I believe that with our background of stable economic growth, our efforts to integrate, and last year’s promotional activities in New York to welcome American capital into Vietnam, financial co-operation between the US and Vietnam will become much better.
Joining the TPP will be a historic decision, furthering Vietnam’s integration into the global market and enhancing its competitiveness. In the financial sector, what do you believe are the main opportunities and challenges facing Vietnam in this trade pact?
As a result of the TPP, Vietnam will cancel many tariffs, open the services sector, and make commitments regarding its SOEs. Commitments in the financial sector on tax, financial services, and customs are forecast to drive growth within the financial industry. High levels of transparency will also place pressure on reforming the economy, enhancing the legal framework, and improving the investment environment for foreigners. Protection measures for investors will also ensure fairness to all investors in the market.
Regarding challenges, the TPP commitments are extensive and high-level. It should be noted that Vietnam will face difficulties when entering the same arena as developed financial markets. The first obvious drawback will be the negative impact on government revenues from the tariff reduction. Also, Vietnamese companies will face stiff competition from other global enterprises, and increased openness and reduced taxes will play a large part in this. Higher commitments in the financial sector and cross-border trade will require a stronger legal framework as well.
However, challenges from the global integration process is a significant opportunity for Vietnam to reform its economy, improve the law, and expand export markets, thus enhancing the efficiency of the authorities and market participants. At the Ministry of Finance, we released Document 02/CT-BTC on February 18 to offer guidelines on opportunities and challenges in the financial sector, including taxes, insurance, securities, accounting, auditing, customs, and corporate finance. We’ll keep a close eye on the integration process to adjust our laws accordingly and increase promotional and educational activities. We aim to honour the international commitments and create a favourable investment environment for the sustainable growth of Vietnamese firms.
Following President Obama’s visit, what do you expect from US-Vietnam financial co-operation?
In 1995, the US and Vietnam normalised their bilateral relationship, opening a new chapter in collaboration between the two countries. Since then, financial, investment, and trade co-operation between the two nations has grown steadily, especially in recent years.
It is now a trend, both regionally and globally, to expand international co-operation. With this in mind, we hope that efforts from both Vietnam and the US, including the visit by President Obama, will promote economic collaboration between the two countries, including the financial sector. We should implement the rules to prevent double-taxing between the US and Vietnam as soon as possible. In addition, we should finalise the TPP to increase the quality and quantity of trade and investment in the future. This will contribute to both countries’ economies and the global economy as a whole.