U.S. Pivot to Asia Still Strong in Vietnam

Off the coast of Vietnam, an ocean farmer monitors Barramundi fish in an offshore net pen, where the fish are allowed to swim freely at low densities. With financing from OPIC, Australis Aquaculture LLC expanded operations to Van Phong Bay, Vietnam where it operates the world’s largest Barramundi farm, specializing in sustainable and eco-friendly aquaculture and employs one hundred local workers. (OPIC)

Many developed and developing country governments offer development assistance and loans to lesser developed countries for a variety of reasons, including efforts to win business opportunities for their national companies, to advance foreign policy goals, and for altruistic reasons. In recent years, Chinese offers of developmental assistance have drawn the most attention, not only due to their size and potential for environmental hazard, but also for their potential to influence foreign policy.  

One recent example of this influence concerns the Philippines, where Philippine President Rodrigo Duterte has decided to put aside his country’s favorable ruling on July 12 from The Hague over competing maritime claims in the South China Sea, or West Philippine Sea. Duterte’s decision to set aside the ruling, and criticize the Americans, has obviously been welcomed by Beijing. He recently returned from Beijing with an entourage of Filipino businessmen, coming away with some $24 billion of promised developmental aid and loans from China.  

Some analysts argue Vietnam may be the next Southeast Asian nation with competing claims in the South China Sea to move closer to Beijing. While not a formal treaty ally of the U.S., Vietnam has welcomed Washington’s intervention in the South China Sea, or East Sea as it is referred to here in Vietnam.

Ties between the two countries have grown under the Obama Administration, and have led to joint military exercises, cooperation on dioxin removal, the full lifting of the lethal arms embargo during Obama’s visit in May, and a port of call by two U.S. warships to the historic and strategic Cam Ranh Bay earlier this month—following a 21-year absence. All of this growing interaction is a result of Washington’s “pivot to Asia”, announced by Obama and implemented by his former secretary of state, Hillary Clinton from 2009-2013.

Of course, this pivot is part business, foreign policy and philanthropy, and one of the best tools the Obama Administration has to advance the pivot is the Overseas Private Investment Corporation (OPIC). As the U.S. Government’s development finance institution, the independent agency “mobilizes private capital to help address critical development challenges and in doing so, advances U.S. foreign policy and national security priorities”. Established in 1971, OPIC provides investors with financing, political risk insurance, and support for private equity investment funds, and operates on a self-sustaining basis at no net cost to American taxpayers.

Given the uncertainty created by Duterte over the strength of Washington’s pivot to the Philippines, a visit on October 25 to Ho Chi Minh City by OPIC officials was a timely reminder of the two countries growing bonds. Leading the delegation was Elizabeth L. Littlefield, president and CEO of OPIC, who announced the agency will seek to work with Vietnam’s private sector to provide a potential $500 million worth of financial assistance to Vietnamese projects over the next three years. While Littlefield acknowledged little investment by OPIC to date in Vietnam, she said U.S. investors were particularly interested in commercially-viable renewable energy, agriculture, and information technology projects which contribute to Vietnam’s development.

Finding these commercially viable projects, especially in renewable energy space where the feed-in-tariffs (a set price guaranteed by the utility) are not yet commercially attractive, will be the challenge for U.S. investors, OPIC and the Vietnamese private sector. And most of the $12.3 billion of foreign direct investment in Vietnam is currently earmarked for the processing and manufacturing sectors.

However, the mere offer of substantial assistance will go a long way in helping cement the bilateral relations between the U.S. and Vietnam, and will help reassure Hanoi that Washington will not be pivoting away from the region—despite worries in the region over the passage of the Trans-Pacific Partnership (TPP) and how the next American president will choose to engage (or disengage) with the region.