The United States Agency for International Development (USAID) and Vietnam’s Ministry of Planning and Investment on Wednesday virtually signed a US$42 million agreement to advance Vietnam’s economic competitiveness.

The U.S. Embassy and Consulate General in Vietnam said in statements the same day that the advancement will be made possible through strengthening private-sector competitiveness, innovation and startup ecosystems, and human capital.

Under this agreement, USAID technical assistance activities will enhance the capacity of small and growing Vietnamese businesses, including those led by vulnerable populations, by facilitating access to competitiveness-enhancing technology, business management skills, and capital.

The deal will also foster greater entrepreneurship; enable deeper linkages of Vietnamese startups to corporations, investment capital, and other supporting organizations in the international innovation and startup ecosystems; and churn out high-quality human capital needed for a robust knowledge-based economy.

The deal reflects the United States’ continued commitment to support the Southeast Asian nation’s efforts to become a more open, innovative, and inclusive economy, according to U.S. Ambassador to Vietnam Daniel J. Kritenbrink.

“Through close collaboration with the government of Vietnam, we can ensure that USAID’s development assistance will meet our two countries’ mutual vision for a prosperous and independent Vietnam,” Ambassador Kritenbrink was quoted as saying in a news release on the embassy’s official website.

Last September, USAID introduced a $22.1 million project to connect Vietnam’s small- and medium-sized enterprises (SMEs) with foreign partners and enhance their capacity to join global value chains.

Data from the General Statistics Office of Vietnam revealed SMEs accounted for a whopping 98 percent of all enterprises in the country, 63 percent of its employment, and 45 percent of the national gross domestic product between 2010 and 2017.

However, while the foreign direct investment sector made up a staggering 70 percent of export revenue, only 21 percent of local SMEs had joined supply chains for foreign firms.

USAID said the spillover benefits to Vietnam’s domestic economy have been dampened by the limited supply chain linkages of Vietnamese SMEs.

Therefore, the multimillion-dollar project aims to address this gap by strengthening the capabilities of the intermediary organizations in Vietnam, such as business associations, export development centers, and SME promotion agencies.

The goal is to facilitate the supplier-buyer relationships between Vietnamese SMEs and leading firms located in Vietnam and expand Vietnamese SMEs’ capacity to participate in manufacturing supply chains.

Total merchandise trade between the United States and Vietnam grew from $1.5 billion in 2001 to $77.6 billion in 2019, transforming Vietnam into the 7th-largest source of U.S. imports and 27th largest destination for U.S. exports, according to U.S. trade statistics.

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