US firms eye investments in Mekong Delta energy, agriculture: AmCham

Investments in energy and agriculture are of highest interest among U.S. businesses in the Mekong Delta, said chairman of AmCham Vietnam John Rockhold.

Attractive energy projects

Vietnam may need $10 billion for investments in energy in the next decade to fulfill its growing demand amid high economic growth, Rockhold told a Mekong Delta regional conference last week.

He also lauded Vietnam for boosting solar and wind power in its latest draft power development plan (PDP VIII), as part of the country’s energy transition. Vietnam is pursuing its COP 26 commitment to achieve net-zero emission by 2050.

Although the Mekong Delta accounts for only 20% of Vietnam’s coastline, the potential for wind, solar, and tidal power is high thanks to stable wind.

As investments in wind power do not depend much on infrastructure, they are attractive to U.S. businesses in the Mekong Delta regardless of the region’s underdeveloped transport system, Rockhold noted, adding that AmCham planned to initiate a plan next year to support development policies and credit access for Vietnam’s clean energy market.

The AmCham executive suggested the government update the legal framework on investment in wind power, particularly PDP VIII, bidding mechanism, new feed-in tariffs (FiTs), and direct power purchase agreement, in order to attract more foreign direct investment in wind power.

Currently, many solar and wind power projects with total capacity of up to thousands of megawatts are not connected to the national grid yet due to their missing preferential FiT deadlines and the underdeveloped transmission system.

"This causes concerns among potential investors. Long-term stability is essential to investment attraction in energy sectors," Rockhold noted.

Strong agriculture potential

The Mekong Delta accounts for 35% of the agricultural GDP in Vietnam as its rice and aquaculture make up 54% and 70% of the country’s outputs, respectively. The region with its favorable conditions for agricultural production plays a key role in global food security, said Rockhold.

However, farmers' incomes do not rise much despite the growth in output and export revenue of the sector. Other problems are climate change and water salination, which require the sector to update farming methods and produce new varieties. Additionally, the demand for investment in infrastructure for production areas is high.

Rockhold added that Vietnam and the Mekong Delta have an opportunity to attract strong FDI. However, the country should only prioritize projects which can boost the connectivity and create spillover effects in terms of productivity, technology and supply chains.

Nguyen Thu Trang, director of the Center for WTO and International Trade at the Vietnam Chamber of Commerce and Industry (VCCI), said Vietnam has become an attractive investment destination for U.S. firms partly thanks to its free trade agreements.

Per Vietnam’s global economic integration with 15 FTAs and three under-negotiation pacts, the country is subject to tariff preferences of the highest levels in the two sectors, she noted.

Taking the Europe-Vietnam FTA (EVFTA) as an example, Trang said 27 member countries eliminated 100% of taxes against vegetables-fruits, peppers, and the annual quota of 80,000 tons of rice; and 50-100% of tax lines against fishery products from Vietnam.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) also offers similar incentives for Vietnam, like eight nations removing taxes on rice, and two eliminating taxes on fisheries.

Agriculture is expected to attract more FDI to Vietnam in line with commitments of the CPTPP, EVFTA, and the Regional Comprehensive Economic Partnership (RCEP), Trang added.

Vietnam is the sixth biggest goods provider to the U.S., with export revenue of $101.9 billion in 2021, up 28.3% year-on-year or five times from 2011, according to the AmCham executive.

As the U.S. is expected to join the CPTPP, Vietnam-U.S. trade relations are set to further grow via the CPTPP and the Indo-Pacific Economic Framework for Prosperity, Rockhold said.

The U.S. is the second biggest trade partner of Vietnam with a two-way trade turnover of $115.1 billion in the first 11 months of this year. As of end-October, the U.S. invested in 1,203 projects in Vietnam with total registered capital of $11.5 billion, becoming the 11th biggest foreign investor in Vietnam.