VCN - The Comprehensive Partnership and Transpacific Progress Agreement (CPTPP) has only a few days left (January 14) to take effect for Vietnam. Along with other FTAs, the CPTPP Agreement will contribute to the positive effect of the international economic integration process on the economy when in effect. This is considered one of the most prominent highlights in Vietnam's "international" economic integration appearance in 2019.
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|Vietnam is forecasted to be one of the countries that benefit the most from the CPTPP Agreement. Accordingly, Vietnam's real GDP will increase by 6.5% from now to 2035. Photo: HUY KHAM|
"A boost" for export
Up to now, there have been 10 FTAs in force for Vietnam. Talking to the reporter of the Customs News, Minister of Industry and Trade Tran Tuan Anh emphasized: In general, the participation in FTAs such as CPTPP and EVFTA would promote the export of Vietnam's goods to major markets such as EU, Japan, Australia, Canada, Mexico..., especially key export commodities such as seafood, fresh and processed vegetables and fruits, electronics and electronic components, some textiles and footwear. This helps Vietnam diversify the export market, avoid too much dependence on a few specific markets, thereby enhancing the autonomy and independence of the economy in the context that the current world economic situation has many changes in a complicated and difficult way.
In addition, these FTAs will also help Vietnam get opportunities from newly formed supply chains after the Agreements take effect. This is an important condition to improve the development level of enterprises, increase labor productivity, reduce gradually the rate of processing and assembly stages, shift gradually to higher value-added production stages, and after that, step into the development phase of electronics, high technology, green agricultural products...
Further analysis of the CPTPP when close to the date of this FTA taking effect for Vietnam, Minister Tran Tuan Anh said: According to the commitment of the Agreement, CPTPP partners gave Vietnam a good level of market opening as soon as the Agreement comes into effect. In terms of common ground, about 78-95% of tariff lines of the Tariff would abolish the import duty immediately after the Agreement is effected. A few remaining items that have high sensitivity for the countries would have a tax elimination schedule within 5-10 years... Many key export products of Vietnam such as agricultural products, fisheries, textiles, footwear, furniture, electrical goods, electronics, electronic components, and rubber would enjoy the 0% tax rate when importing into CPTPP markets. "This will certainly be a boost for Vietnam's export activities. With these expectations, the CPTPP Agreement is expected to continue to have positive contributions to Vietnam's trade balance in the context that 2018 is the second consecutive year that Vietnam has achieved a trade surplus,” said Minister Tran Tuan Anh.
Around the issue of international economic integration in 2019 with the emphasis on the effective CPTPP Agreement, many experts pointed out: With CPTPP, Vietnam could also hope to be an attractive destination of foreign investment capital. In fact, many big corporations in the world such as Samsung, Intel, Microsoft, LG ... have invested heavily in Vietnam with the goal of turning Vietnam into one of the important bases in the production chain of high technology products such as computer processors, smart phones, household goods using new technology... This would be a great opportunity to raise the economy of Vietnam in the next 5-10 years.
Be careful and take appropriate steps
Looking at the "picture" of international economic integration of Vietnam in the coming time, Deputy Minister of Industry and Trade Do Thang Hai said: Besides opportunities, deep economic integration also forced Vietnam to face many challenges. Typically, the technical barriers with the aim of protection in the developed markets would require the Vietnamese enterprises to constantly improve competitiveness, adaptability and innovate science and technology. In addition, the point that cannot be mentioned in the coming time is that Vietnam faces the trade diversion impact from the US-China trade war. Some investors can relocate from China to Vietnam. At that time, the screening of projects in accordance with the requirements in both economic, social and environmental aspects would be a difficult task.
From the perspective of enterprises in the textile and garment industry, Mr. Cao Huu Hieu - CEO of Vietnam Textile and Garment Group assessed: One of the risks that Vietnam would face in 2019 was an increase in interest rates. Some countries might tighten monetary policy by raising interest rates like the US or EU and Japan. Global interest rates increasing affects exchange rates and capital inflows (from low interest rates to high interest rates). Therefore, Vietnam might have to increase the interest rate slightly in accord with world rises.
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With CPTPP and EVFTA agreements coming into effect, if the Vietnamese enterprises are not careful and take appropriate steps, they will have to cede market share to the FDI enterprises which have advantages in capital, experience, technology and human resource. Many FDI enterprises will set up production chains from yarn - fabric - garment in Vietnam, which take advantage of tax exemption and reduction advantages from FTAs, and avoid impact and reduce impacts if there is a risk of trade stress scenarios with the US in the future. "If so, the growth scenario of the textile and apparel industry will still be good, only the growth of domestic enterprises is a concern. The Vietnamese textile and garment enterprises need to come up with specific solutions for each market scenario. The garment enterprises will work closely with their customers as well as the thread and fabric enterprises, link in chain to overcome difficulties and challenges that market fluctuations cause," Mr. Hieu said.
According to a study by the World Bank (WB), the CPTPP Agreement will help Vietnam's GDP increase at 1.1% by 2030 in the context of basic economic conditions being maintained compared to 0.4% of the Regional Comprehensive Partnership Agreement (RCEP), and 3.6% of the TPP Agreement. With the assumption of growth in productivity, Vietnam's GDP growth can reach 3.5% when the CPTPP Agreement is in force. Accordingly, Vietnam's real GDP will increase by 6.5% from now to 2035.
For export, the fact that countries, including big markets such as Japan and Canada reduce import tax to 0% for Vietnamese goods, will create positive impacts on promoting export turnover. Commitments on elimination of import duty under the roadmap and service - investment liberalization in the CPTPP Agreement remain the same from the previous TPP Agreement.
Accordingly, the Vietnamese enterprises exporting goods to the market member countries of the CPTPP Agreement will be entitled to tariff reduction commitments as in the TPP Agreement, such as Australia's immediate tax reduction commitments of up to 93% of the tax lines (equivalent to 95.8% of Vietnam's export turnover to this market, about US$ 2.9 billion); Canada's commitment to cut tariffs up to 94.9% (equivalent to 77.9% of imports from Vietnam, about US$ 0.88 billion); pledging tax cuts of Japan much better than in the bilateral FTA agreement between the two countries (such as committed to immediately remove 86% of tariff lines, equivalent to 93.6% of Vietnam's export turnover to Japan , about US$ 10.5 billion)...
By Duc Quang/ Binh Minh