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Here is your Mekong Memo Vietnam for February 1, 2024.
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Philippines and Vietnam Forge Closer Ties
During Philippine President Ferdinand Romualdez Marcos Jr.'s recent state visit to Hanoi, Vietnam and the Philippines took every opportunity to tout their strengthened bilateral relations. The two nations signed agreements to prevent incidents in the South China Sea and facilitate improved cooperation between their coast guards, a development likely to be frowned upon by China. The two leaders also agreed to boost agricultural cooperation, beginning with a rice trading agreement, and to explore new areas of collaboration including the ever-popular fields of energy transition and digital transformation. Trade between the countries is hoped to grow from the current $6.18B to more than $10 over the coming years.
The Role of Trade Strategy on Growth
Vietnam's involvement in major trade agreements like the CPTPP and RCEP, as well as its active participation in discussions around the Indo-Pacific Economic Framework (IPEF) have set the nation on a course for success. The country's focus on leveraging Free Trade Agreements and being attractive to Foreign Direct Investment has been crucial to the economic performance we’ve seen over the past several years (Covid excepted). In 2023, Vietnam reeled in $36.6 billion in FDI, a substantial increase over the previous year and all indications are for this year to see even better performance.
Read more: VnEconomy (Economic Performance), Vietnam Economic News (FDI Attraction), Vietnam Economic News (RCEP and E-commerce), VietnamPlus (Economic Framework), VietNamNet (IPEF Strategy), Vietnam News (Role of FTAs), Investment Monitor (January FDI Inflows)
US Investments for Semis and Clean Energy
Vietnam is set to receive substantial U.S. investments, with 15 American businesses, including semiconductor companies, planning $8 billion of investment in clean energy projects. The investment is hinging on Vietnam's progress in renewable energy regulations. Vietnam has been identified as a potential beneficiary of the U.S. CHIPS and Science Act, which will allocate $500 million globally for semiconductor training, cybersecurity, and business climate improvements. These projects and investments are part of the U.S. strategy to diversify supply chains and hedge on the global sources of semiconductor manufacturing, potentially giving Vietnam a huge leg-up in these sectors.
US Senators Challenging Market Economy Status
Bernie Sanders and seven other U.S. senators have voiced concerns about granting market economy status to Vietnam, citing non-compliance with Congress-established legal requirements. As the U.S. Department of Commerce reviews Vietnam's non-market economy status, these senators are claiming a need for an objective review based on data, not politics. They especially take issue with specific aspects of Vietnam's economy, including exchange rates, labor bargaining rules, government control of foreign investment, and the nation’s close economic ties with China. The review's outcome could significantly impact jobs and producers on both sides of the Pacific.
Read more: The Investor
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