16:51 | 25/10/2015 Cooperation
(VEN) - Economic ministers of 12 Trans-Pacific Partnership (TPP) countries announced the conclusion of negotiations on October 5 in Atlanta, Georgia. This was seen as a huge victory after more than five years of negotiations.
Economic ministers of 12 TPP countries announce the conclusion of negotiations
According to the Vietnamese Ministry of Industry and Trade, the TPP Agreement could help the Vietnamese economy strongly grow. In addition, Vietnam will lure more investment from member countries.
Garments and textiles are one of six commodity groups likely to enjoy the benefits of the TPP Agreement. Around 70 percent of total export values of the Vietnamese garment and textile sector come from TPP countries. After participating in the TPP Agreement, the market share of the garment and textile sector is expected to double. Of this, garment and textile export turnover to the US could reach US$55 billion by 2025 thanks to zero percent tax rates. However to enjoy such incentives, Vietnam and member countries must comply with rules of origin. This is seen as a major challenge for Vietnam as only a few large-scale businesses have material projects.
Shrimp, octopus and tuna export businesses will have advantages in the Japanese market thanks to import duties of zero percent. The TPP Agreement will have no large impact on Vietnamese seafood businesses in the US market due to high anti-dumping duties. With an average duty of US$0.97 per kg in addition to fuel and labor costs, it will create a major challenge for Vietnamese seafood businesses.
Vietnam is the biggest and sixth largest furniture exporter in ASEAN and the world with the US and Japan as the main export markets. Vietnam’s furniture export turnover to the US and Japan recorded a growth of 12.5 percent and 18 percent in 2014. According to experts, a major challenge for furniture businesses was material sources because more than 80 percent of materials are imported, while the requirement to enjoy tax incentives is that the local rate must meet above 55 percent of total value.
Deputy Minister of Industry and Trade Tran Quoc Khanh said that many sectors such as agriculture and livestock would face difficulties. There will be massive competition in terms of pork and chicken as the US, Australia, New Zealand and Chile have massive advantages. In addition, dairy products, soybeans, maize and animal feed will also face challenges.
Industrial sectors such as paper, steel, auto, confectionary, detergents, jewelry, cookware, air conditioners, interior products, large displacement motorcycles, wine and tobacco will also create huge competitive pressure as import duties in Vietnam will reach zero percent.
International organizations to welcome TPP Agreement
Several foreign organizations expressed optimism about the effect of the TPP on Vietnam’s economy. American Chamber of Commerce in Vietnam (AmCham Vietnam) Executive Director Adam Sitkoff said that the conclusion of TPP negotiations was a positive sign for the US and Vietnamese companies and investors, workers, farmers and consumers.
“AmCham views the TPP as extremely important to the bilateral economic relationship and to US-Vietnam relations overall. The TPP will have a transformative effect on Vietnam’s business environment and offers new opportunities to help Vietnam’s strategy drive to industrialize, modernize, and globalize,” Adam Sitkoff said.
Hongkong and Shanghai Banking Corporation (HSBC) in Vietnam CEO Pham Hong Hai said that the TPP was a step forward to global economic integration. The corporation welcomed the TPP Agreement that will play a key role in promoting trade and investment in the Asia-Pacific region.
Vietnam will enjoy huge benefits from the TPP due to increasing demand on garments and textiles and footwear. A HSBC survey indicated TPP would be able to increase Vietnam’s gross national income by 10 percent by 2020.
Pham Hong Hai also said that Vietnam needed to make greater efforts to benefit from the TPP. The agreement could help the Vietnamese economy become more effective and competitive.
After economic ministers of 12 TPP countries including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam announced the conclusion of negotiations, representatives of large organizations such as the World Bank and the International Monetary Fund expressed their optimism about positive effects of the agreement.
Member countries will review the legal documents and then attempt to have their parliaments ratify the agreement prior to signing. This process could take at least 18 months.
Minister of Industry and Trade Vu Huy Hoang:
The TPP will help Vietnam’s gross domestic product increase by US$23.5 billion by 2020 and US$33.5 billion by 2025, while exports will increase by US$68 billion by 2025. Import duties back to zero percent in the US, Japan and Canada will create a breakthrough for Vietnam’s export-import activities.