Regional Connectivity: Logistics and New Trade Corridors

Good afternoon. Southeast Asia's growth increasingly depends on how smoothly goods, capital, and data move across borders. Today we will discuss the new trade corridors and what it will take to turn connectivity into deeper integration. So please note that today one of our panelists, Mr. Canxin Xiong from CCPIT, will be speaking in Chinese for this session. So headphones are on the table for you to use. So let's start with the big picture, Vietnam's place in this rapidly changing global trade system. So, Ambassador... Napa, let me come to you first. Few people have seen the U.S.-Vietnam economic relationship from as close a vantage point as you have. You helped upgrade the bilateral relationship into comprehensive strategic partnership. Partnership. So, So how would you characterize Vietnam's position today, especially in the context of this U.S.-China rivalry? Sorry, so is it a beneficiary of? The supply chain diversification, sometimes we call this the China plus one phenomenon. Is it a buffer absorbing zone or is it a relay point for a global supply chain still deeply rooted in China or all of the three? So how much time do we have to answer this question? You have one minute. OK, well, first of all, congratulations to you and your colleagues. Fortune really terrific event, very well organized and appreciate being here. So, yeah, as I mentioned, 2023, the U.S. and Vietnam upgraded our relationship to a comprehensive strategic partnership, which is the top tier within Vietnam's foreign policy hierarchy. And really, that decision Thank was two things. It was a reflection of just how far the U.S. and Vietnam had come together over, you know, nearly 30 years of normalized relations, you but it was also as full-throated, invisible, and public a commitment as we could make to showcase to the region, to the world, very just how close Vietnam and the U.S. had become, but also how far we intended to go together. And within this new framework, this new partnership, much. we codified cooperation in areas of great importance to our two countries, whether it's semiconductors, whether it's reskilling, upskilling, critical minerals, you know, the sort of sectors that are going to be important for both the U.S. and Vietnamese economies. And so when we look at, as Phuong said, this, you know, China plus one phenomenon, absolutely, I think Vietnam has shown itself to be a beneficiary. I mean, just look in spite of the tariff, the tariffs imposed by the United States on Vietnam. Vietnam is the number one, has the number one trade surplus with the U.S., exceeding both now. China and Mexico, which is frankly, none of us could have imagined that, but I think it shows really the resilience of Vietnamese manufacturers. I think it shows the ability of Vietnamese manufacturers to adjust and pivot, given the change in circumstances in their largest export market, the U.S. But frankly, I think it shows the value, the attractiveness, the importance of Vietnamese Vietnamese made goods in the United States, American consumers, American manufacturers. Love made in Vietnam and so I think once when you have that kind of situation it's hard even with tariffs to try and put a dent in that and so I think, you know, China plus one for sure, whether it's sustainable or not, is going to depend, I think, clearly on what happens with the tariffs going into the future. But clearly, Vietnam's efforts to strengthen, build up its infrastructure are going to be important. Seaports, airports, ability to move goods out, ability to respond to, you know, continued demand from overseas markets, whether it's the U.S., the rest of North America, Northeast Asia, Europe. And so, but I'm confident, you know, Vietnam is doing what it needs to do to ensure that bottlenecks in its customs clearance procedures, for example, are being addressed, that bottlenecks at the port are being addressed, and I think Vietnam will continue to be, I don't see it as a buffer, I don't see it as a relay, I see Vietnam as a critical element in trade both within the region, but also between. The United States, North America, and Asia. So can I just follow up quickly? If you were to name a couple of things, the most important things that Vietnam needs to secure or develop at this particular moment, what would that be for the country to make this... Something, not a temporary gain out of the U.S.-China rivalry, but into something long-term. Well, I think part of it is continuing to position itself higher up in the value chain. I mean, we've heard a lot today about this, right? How do you move up the value chain? And it's things like ensuring that you've got stable supplies of energy. It's ensuring that your workers are receiving the kind of training, not for today, not just for today, but for tomorrow. it's ensuring that you've got a society and a Corporate culture and an academic culture that encourages innovation, because from innovation you get the kind of breakthroughs that are necessary to make that leap from, you know, whatever, escaping the middle income trap. So really, I mean, that's going to be key. I think connectivity is really important. I mean, of course, connectivity, most connectivity in Southeast Asia is north-south. Mm-hmm. But, you know, building east-west connectivity, allowing exporters in countries like Thailand, Laos, and Cambodia to be able to move their goods east. cross Vietnam to Vietnamese ports, which can then perhaps more quickly, more cost-effectively export then to overseas markets. Yeah, that's a question for Mr. Dr. Yap in a minute. So more west-east corridors to be built. So let me come to Mr. Xiong next. So, Mr. Xiong, you help Chinese companies build overseas partnerships through trade missions, exhibitions, and business matchmaking. So, this gives you a front row view of both the opportunities and obstacles that they face in ASEAN. So I would like to ask Minister Xiong to give us a more general perspective on the trade relationship between China and Vietnam and China and East China Sea, especially in the context of trade between China and the United States. First of all, I'm very happy to be invited to share in this panel. And I have a set of data that China and ASEAN has been the trade partner for the six consecutive year. And last year, the bilateral trade has achieved about close to one trillion U.S. dollar, and the bilateral investment is also all close to the five billion U.S. dollar. The overall Trade cooperation is very deep. And in the next five years, China and ASEAN cooperation trend, I will describe it as that is to have a deeper connection. And why I say so, in terms of the supply chain, we are going to go deeper in it. and also with the compliance to the law. And the overall model of the investment will focus on the localization, including the China industrialization and, in terms of supply chain deep integration, is going to be... It's going to be focused on the free trade zone and its bonus, and with the connectivities speed up, talking about the infrastructure development, it's going to be continuous efforts. And the overall cooperation, we can see some opportunities arise. And first of all, In terms of the manufacturing in the ASEAN, it is now going through the innovation and the transformation. In these recent years, we can see there are many mega projects, and thirdly, we can see the green and new energy arise, talking about the photovoltaic, that includes the digitalization and the service sectors, and these industries continue to be supportive of the economy. Fourthly, talking about the consumption and currently the major trade is in terms of the fresh produce like for example durian and fruits and in the recent years there's going to be a lot of this. cooperation breakthrough and just now you talk about the China and Vietnam trade cooperation it is full of potential and one last question to you in China we always heard that China is Vietnam is like a 20 to 25 years ago similar to China and for these two countries in terms of is the industrial Transformation, what are the similarities or differences? And first of all, the nature of our countries are different. The Vietnam development is different. And therefore, these two countries' industrial development are different. And just now you mentioned a few industries. And you said there are a few sectors in China in the past 20 years it doesn't exist. And now with AI and the green energy that is existing, that is leading to the advantage. And we can see that Vietnam industries are in the development stage. And just now you mentioned that whether it's is agriculture and also infrastructure, and it is really at this industrial development phase. And also with the prevalence of the information, it is contributing to the development. And in Vietnam, there are a lot of real estate companies, and it is also attracting a lot A lot of international real estate companies to come. come to here, and they have these success stories with them, and these will contribute to the Vietnam market, and so they can work together with the top players in this region. Let me come to you. You're the CEO of Vietnam Superport, which is a US$300 million investment multi-modal hub north of Hanoi, so you are directly involved in building the connections that would... So, could you give us your overall assessment of Vietnam's position in today's China Plus One? For example, the scenario or the whole trade situation? Your assessment. I think in view of the strategic competition and also strategic rivalry that is happening today, I see a more balanced view of what is happening between... The US, China vs Vietnam. Why do I say so? I think, number one, Data shows very clearly that exports are increasing, but exports are increasing to both countries, both in China and also the US. In China, 35%, in the US, 25%. We also see 9.95% of GDP growth for Vietnam just in this quarter alone, and we expect to move forward with that. Politically, The Vietnam government is now transforming very quickly, not just in its civil service transformation, but also in the way how it brings in FDI. It has reformed its Ministry of Finance. It is also now looking at going down at the business levels to bring in talent, global talent, if I may. And for the very first time, I see this transformation taking place all at one go. Again, how does this really affect national competition and so on? Actually, it does, because what happens internally will have a profound impact on how businesses will be conducted. And in this sense, between Vietnam and China, I can see Chinese companies getting more eager to fit in. In Chinese, they call it the Chu Hai strategy, which means getting out of China and doing Doing business in Southeast Asia and Vietnam very much so, the neighbor to China. While they have deep relationships in the past, I think this is completely a new age as we speak. And I think and I personally believe having working there in the north of Vietnam in Phu Tho province, right at the gateways towards China, I've seen that exponentially changing. And one more point that I would like to add is that the Vietnam-China rail, which is to be completed by 2030, billions of dollars have been put in by China, is set to be completed. We see a lot of traction between logistic flows, cargo flows between north of Vietnam all the way to Haiphong port, of course via China. We see that as a great breakthrough. The second point that I would like to add is that the Pinglu canal that is happening from Nanning, 134 kilometers all the way to Quang Tri province in the south of Vietnam presents a completely new method of waterways and how waterways would be able to benefit logistics and create new commercial and trade flows, which means more business for everyone. The question is, can companies come into Vietnam now, seize the opportunity and really gain a competitive advantage from it? In order to do so, I believe that we have to be strategically positioned. Sorry, what was that? For us we take a multi-model approach in doing this, The speaker is not listening. meaning to say we look at air options, Okay. we have an air cargo terminal, So, if I don't have that, just hang on. we are building an international dry port, we are really making sure I will grab the microphone and get you to come back in. that we are connected to not just the airports but the sea ports, It is important. but the integration of the air to sea ratios really make a difference Thanks. in how we make a differentiation today. And I am sorry, I do not have it. Oh, I see. Let me follow up quickly. Okay. So data show that Vietnam's logistics costs are estimated 16 to 18% So, I do not have it. Okay. of GDP, still relatively higher than the government would like to be. So zooming on to Vietnam Superport, which, as you said, integrates road, rail, air and sea logistics, how would a project... I see this happening on two levels, clearly we cannot do that alone as a business. We would need partnerships both with the government and also with key players, key logistic players, I mean global players, to come in to see how we can lower logistics costs. As I mentioned, one-way multi-model, you can travel by sea and then fly by air. That lowers the cost easily by 20 to 30 percent. Number two, your modes of efficiency, if you look at it very carefully, can be cut down. You take away all the red tape, bureaucracy, administration, that cuts down easily by 20 to 30 percent. And in our air cargo business today, we have seen it. We are very determined to make it happen, of course, with the help of the Vietnam government Our key customers, that has got to be a dual advantage that can make this happen. So in other words, we cannot make that happen alone as a business. We will need an ecosystem in order for this partnership to make it work. Thank you. So let's move from opportunities to pressure points. So, Ambassador Napa, so despite this upgrade of the bilateral relationship between the U.S. and Vietnam, there's still quite visible frictions in trade, in bilateral trade. For example, the U.S. has imposed 40% transshipment tariffs and is... Tidying up its origin compliance, especially against Chinese companies coming to invest in Vietnam. So if you were to advise the Vietnamese government, what is the one most important move that Vietnam should take to ease the pressure from Washington? Thanks, Phong. That's a good question. The trans-shipment issue is an interesting one because I think the term trans-shipment has come to mean different things to different people. Thank I think as most of us know, trans-shipment refers to a very specific fraudulent illegal act of making something in one country and then re-exporting it from another with that country's label on it. So it's made in China, and then it's shipped out of Vietnam, it's made in Vietnam. That's fraudulent, that's illegal. And as far as the data shows, Vietnam has been cracking down pretty hard on that so that a very you. small percentage of Vietnam's exports to the United States are actually trans-shipped in the true sense of the word. Unfortunately, the term trans-shipment has come to be used to actually refer to broader supply chain activity, right? The kind of things that every country does, including the United States, which is assemble things based on inputs from neighboring countries. In the case of Vietnam, of course, it's Chinese components, Taiwanese, Korean. Japanese, whatever, adding content, adding value, and then shipping it off. That's normal. And I think Vietnam has done a very good job of addressing concerns about so-called transshipment, the illegal kind, basically by ensuring that it's got good relations, its custom authorities have good relations with counterpart custom authorities, including those CBP, for example, United States. It's ensuring that its companies, exporters large and small, are able to have clear So statements of origin of their products to ensure, for example, that goods aren't in fact being transhipped. And it's really, it's about, you know, it's knowing who your suppliers are, it's knowing who your customers are. And I think, once again, the Vietnamese government has done a really good job of ensuring that, indeed, it's, you know, even though, again, some have falsely sort of labeled its normal supply chain activities as transshipment, that they are, in fact, also combating the real sort of legitimate trade law type of transshipment. Right. So, earlier in the day, we heard another ambassador, Mr. Osias. You mentioned the possible outcome of mid-term influencing the U.S., China, and ASEAN, the triangle kind of situation. So what's your take? What's your prediction? Well. Ambassador Osius is my predecessor's predecessor, and taking a leaf from his remarks, I mean, I would just say, look, there's an old adage in the United States, politics stops at the waterfront. You know, just like Ambassador Osius, I'm not going to try and guess what the outcome will be tomorrow. We'll all know tomorrow morning. But certainly, you know, in some states that are voting, I mean, this election is seen as a referendum on the tariffs, which have been quite damaging to state economies in places like Maine, Michigan, Alaska, Ohio. So, we'll see, but I think as Ambassador Rossi has also said, look, I mean, executive authority in trade is quite significant, using tools available to USTR through 301, for example, and so we'll just have to see sort of how the election results play out. Certainly, those of us who care deeply about the U.S. role in the world and who care deeply about U.S. relations with Southeast Asia and the rest of Asia hope that, however the results are, that it can lead to strengthening rather than a deterioration, I would say further deterioration of our role in the world and our relationship with countries here. Okay, Mr. Xiong, so you may closely relate what the Chinese companies go abroad, especially go to the Southeast region. So what's their pinpoint for these Chinese enterprises when they go abroad? And the second, Mark, talk about the regulatory of origin countries. From the CCPIT. So how to take care of these Chinese enterprises going abroad? So you – there are two questions. The first is how CCPIT help China's enterprises go abroad. And the second question is CCPIT how to help the enterprises going into Vietnam market. So the CCPIT. On the national level, we provide a lot of support, for example, we provide some regulatory policy assistance. And right now, for example, for Vietnam market, and so this period, we will organize some Some how to adapt to the Vietnam market. And how to get the beneficiary from the ASEAN regions, including the tax. And also, currently, we are considering the certificate of origin. So the CCPIT can provide such kind of help. I have two examples. One company which is provide equipment manufacturing is SME and it has the normal certificate of origin, and throughout the CCPIT, it can quickly enter into the Vietnam market, and it cooperated with a small retailing company in Vietnam. And this company provides the product which Vietnam cannot produce. And this is, as I mean, SME company use. the certificate of origin and to get the beneficiary. During the process, What I'm trying to say is this. we give them full support. Another example is SME, which produce the automotive spare parts. That's really cool. And they transfer their product with the correspondent and the trans-export to the Vietnam market. And during this process, there are some inspection of the certificate of origin. And this SME factory employee was affected by this certificate. So it cannot enjoy the tax fav And it couldn't enter into the ASEAN market. This is two examples. Another level, currently, as we know, in the Chinese enterprises in Vietnam, it's more than 5,000. They are conducting their business legally. But most of them encountered some difficulties. For example, the tax, the un-transparency of tax, and also the change of the investment law, so... In the perspective of CCP IT, we normally conduct some local law firms in Vietnam to organize some business activities. For example, in the Ho Chi Minh City, we organize a large capacity we call the Sino-Vietnam Expo, which will be conducted in December. and we will organize more than 300 Chinese enterprises to join this expo So, we not only to create some channels to cooperate or communicate communication, if you have any interest, you can join this expo. Let me come to you, we probably have to wrap up quite rather quickly. So how do you plan to prove that SuperPort actually anchors more local value capture in Vietnam rather than mainly rerouting China-sourced inputs. Yeah, I think one way to look at it is to really emphasize on logistics efficiency. We intend to go deep together and couple ourselves with AI, technology, etc., putting it into practice, integrating our platforms together with national platforms, national platforms together with Our global customers that we already have and I think that has already been set out. We have looked at logistics marketplace platform, we have looked at many intelligent platforms that enable cargo to move faster, better and we can also predict up to a certain extent. I think that is one area to get to. The second area will be an improve in human capital and I think human and social capital in this case, for Vietnam's case, will be new training and development. And in this case, we are not just looking at the training in AI, but training in business development, training in corporate relations, training in global partnerships. And I think that will really bring logistics to the next level, per se. We are already on it. Thank you so much. We've heard perspectives from China, the US, and Vietnam. This very interesting triangle. So our speakers contributed fantastic views from this interesting triangle, Tango, which brings up... A distinct and candid perspective. Thank you so much. A big thank you to all of you. Thank you. Thank you.