Outcomes for Vietnam from Biden’s Visit to Hanoi

A lot of attention has been paid to the geopolitical implications of Biden’s visit to Hanoi. However, there were a number of other outcomes from Biden’s brief visit that foreign firms considering relocating to Vietnam should be aware of. Besides the government-to-government agreement, Biden’s business delegation also closed several deals for cooperation and investment in Vietnam impacting sectors like AI, cloud computing, semiconductors, and new energy.

President Joe Biden’s brief visit to Hanoi proved exceptionally fruitful. The crowning highlight of his trip was the elevation of U.S.-Vietnam diplomatic relations to a comprehensive strategic partnership. This is Vietnam’s highest tier of international partnership, which has also been extended to China and Russia. The development has garnered diverse reactions both within the region and on a global scale.

“Vietnam and the U.S. are critical partners at what I would argue is a very critical time,” Biden told Nguyễn Phú Trọng, general secretary of the Communist Party of Vietnam, during their public meeting at party headquarters. Trọng concurred, viewing their meeting as an “exceptional opportunity” to enhance bilateral relations. Biden has also extended an invitation to visit Washington soon, to which Trong extended his gratitude.

Reflecting on the historic significance of Biden’s visit, Kyle Freeman, Partner at Dezan Shira and Associates, says: “The U.S. and Vietnam have made great efforts to strengthen their relationship in recent years, so the upgrade in the official status of the relationship was well overdue and is a testament to the converging strategic interests as well as trade and investment ties between the two countries.”

US-Vietnam cooperation

Biden’s visit wasn’t solely focused on geopolitics. As Freeman points out, “In addition to the government-to-government agreement reached during the trip, the business delegation accompanying Biden also sealed a number of deals regarding cooperation with partners or investment in Vietnam. Many of these agreements pertain to key strategic sectors, such as AI, cloud computing, semiconductors, and new energy,” as outlined in the White House Facts Sheet and discussed below.

Science and technology

Vietnam and the U.S. will work to improve collaboration in crucial and emerging technologies, both in each other’s markets, and throughout the Indo-Pacific region. Biden, along with Secretary Blinken, hosted a U.S.-Vietnam Innovation and Investment Summit, which brought together leaders from both countries’ industries. Joining them were Vietnamese Prime Minister Pham Minh Chinh and Minister Nguyen Chi Dung, engaging in discussions centered on priorities for expanding technological and economic cooperation, including Vietnam’s investments in the United States.

FIND BUSINESS SUPPORT

Gain the Intelligence Needed to Make Informed Decisions for Your Asia Business

The future of semiconductor manufacturing (SCM) in Vietnam is a popular talking point in the burgeoning Southeast Asian nation, especially since the global chip shortage experienced in 2020.

For a long time simply an assembly point for manufacturing firms, Vietnam sees the global challenge as a domestic opportunity to make its way up the manufacturing value chain and is actively courting chip manufacturers (Samsung for example).

In this context, Biden’s visit was perceived as an opportunity to advocate for increased foreign investment and generate interest in Vietnam’s semiconductor industry. It was clear that this would be a top priority for Vietnam. However, from the U.S. perspective, supporting semiconductor manufacturing in Vietnam conflicts with its own ‘re-shoring’ policies and interests. More precisely, Biden’s CHIPS Act of 2022 aims to promote semiconductor chip production within the United States. Given this, any agreement related to semiconductor manufacturing will have limitations. Nevertheless, it’s important to note that there were some positive outcomes from the discussions in Hanoi.

Cooperation in semiconductor supply chain development

Though the CHIPS Act contains US$280 billion worth of funding for the US semiconductor manufacturing industry, it also sets aside US$500 million, over five years, for an International Technology Security and Innovation Fund (ITSI Fund). This fund is to assist ‘to ensure a more diverse, resilient, and secure global semiconductor supply chain’, according to the U.S. State Department website.

Vietnam has managed to tap into this fund with a Memorandum of Cooperation on Semiconductor Supply Chains, Workforce and Ecosystem Development, which will utilize the ITSI Fund “to further develop Vietnam’s current semiconductor ecosystem, regulatory framework, and workforce and infrastructure needs.”

There has also been US$2 million set aside in seed capital to develop teaching labs and training courses for the assembly, testing, and packaging (ATP) of semiconductors in Vietnam. Notably, these are relatively low-skilled jobs in the semiconductor supply chain.

See also: Q&A: Electronics and Semiconductor Industry in Vietnam

Regional integration of electronics supply chains

A third component of the U.S.-Vietnam semiconductor chip partnership will be the development of the Developing Electronics & Leading Technology Advancement Partnerships (DELTA) Network. This working group intends to bring in regional governments and industries to ‘promote talent cultivation, policy coordination, and sector efficiencies.

See also: Semiconductor Manufacturing in Vietnam vs. Taiwan

Joint research and development

Both countries have also committed to the establishment of the Vietnam-U.S. Science and Technology Agreement for Research (VUSTAR). This body’s mandate is to identify areas of collaboration between the U.S. and Vietnam in artificial intelligence, R&D and governance, health and medical science, climate science, biotechnology, and conservation.

Training and education

One of the biggest challenges identified in Vietnam has been a lack of high-skilled labor in the manufacturing sector. This is particularly true of the semiconductor industry. Earlier this month, Reuters pointed out that Vietnam currently only has about 5,000 to 6,000 semiconductor engineers but will need up to 20,000 in the next five years and up to 50,000 in the next decade.

In this context, Biden’s visit to Hanoi produced two key initiatives:

• STEM Champions of Vietnam Initiative: This initiative is about connecting U.S. and Vietnamese government educational institutions to strengthen science, technology, engineering, and math education.
• The Upskill Vietnam and Foster Digital Growth program: Through USAID, US$12.75 million of funding will be used to assist the Ministry of Education and Training (MOET) to ‘modernize and internationalize’ higher education in Vietnam.

Finance

The U.S. International Development Finance Corporation (DFC) will be instituting a number of large financing projects (worth over US$450 million) with several Vietnamese banks to assist underserved borrowers. These projects will see funds provided to women-owned, women-operated, and/or climate-focused businesses in Vietnam. This project is designed to broadly address financing gaps for women entrepreneurs, support climate change mitigation, improve energy efficiency, and promote sustainable agriculture.

Climate change

Establish a working group on climate: This working group will oversee joint projects between Vietnam and the U.S. with respect to climate-related projects and initiatives.

Help build climate resilience into Mekong Delta-based agriculture: Through USAID, US$11.41 million will be spent over two years, to build climate resilience into agriculture-based Mekong Delta economies. This is subject to the support of the U.S. Congress.

Vietnam is one of the most at-risk countries in the world with regard to climate change. Its tropical climate sees huge amounts of rainfall in very short periods of time and its low-lying major cities are prone to flooding already. As global temperatures rise, even greater investment will be required in climate resilience for Vietnam.

See also: Explained: Vietnam’s Just Energy Partnership Agreement

Energy

Develop battery storage in south-central Vietnam: A joint project between the U.S. government, Vietnam’s AMI AC Renewables, and the U.S.’s Honeywell, will see a battery storage system piloted in Vietnam’s Khanh Hoa province.

Vietnam has been prone to power shortages of late in its northern region. One option that has been considered for ensuring the power supply has been battery storage. This joint project may be one more step toward making large-scale battery storage a reality.

See also: Explained: Vietnam’s Electricity Sector Challenges

Rare earths

Stronger cooperation on rare earth elements (REE): A memorandum of understanding between Vietnam and the U.S. will see greater technical cooperation in REE development in Vietnam. Specifically, it will look to support Vietnam in quantifying its supply of REE and its value as well as to attract high-quality investment in the sector.

The U.S. Department of the Interior’s US Geological Survey 2022 estimated that Vietnam had the world’s third largest supply of rare earths with 22 million tons. These are key components in a huge number of electronic products and are becoming increasingly valuable. Vietnam aims to produce 2 million tons of rare earths by 2030, however, it managed to extract just 400 tons in 2021.

See also Rare Earth Mining in Vietnam: Industry Overview

Healthcare

FIND BUSINESS SUPPORT

Build Your Asia Business with Turnkey Market Entry and Cross-Regional Support

Increase capacity in Vietnam’s healthcare system: The U.S. will aim to assist in strengthening Vietnam’s public healthcare capacity, including increasing the capabilities of its laboratories, improving its surveillance systems, and enhancing its capacity in terms of disease prevention and control.

Better care for cancer patients: This will see expanded cooperation between academics and healthcare in training and mentoring medical professionals. The goal will be to improve their capacity to provide palliative care for cancer patients.

Regulatory development support: The U.S. Trade and Development Agency is looking to assist Vietnam in creating a single regulatory framework for medical devices.

Medical devices in Vietnam are divided into four categories with different degrees of regulation and paperwork attached to each. This can be somewhat confusing, and laws are prone to change frequently. In this respect, a single regulatory framework may benefit the medical devices industry specifically, and Vietnam’s healthcare sector broadly.

See also: Vietnam’s MedTech Industry: Building a Solid Business Foundation to Ride the Next Wave of Growth

Vietnam and the US moving forward

The upgrade of the relationship between the U.S. and Vietnam to a comprehensive strategic partnership is a coup for both parties. On the one side, the U.S. is able to solidify its role in the region, on the other Vietnam is destined to receive support, both financially and technically, to further develop its economy.

Moving forward, however, there is still room to grow. The current trade agreement between the two nations is now two decades old and in need of an upgrade. Furthermore, as ongoing geopolitical challenges strengthen the U.S.’s resolve to diversify out of China, Vietnam stands to benefit from even greater foreign direct investment from the U.S.

In this light, the economic relationship between these two former foes, at least in the near future, is likely to become even stronger and more robust.

• Previous Article US President to Visit Vietnam September 10
• Next Article Vietnam Moves to Tighten Legislation on Video Game Industry: Insights for Foreign Investors