TPP New benefits and challenges

08:02 | 29/08/2014 Cooperation

(VEN) - The Trans-Pacific Partnership Agreement (TPP) will bring Vietnamese businesses opportunities in terms of partnership, market, capital and skills but also require them to cope with new challenges as the TPP requires high supervision and transparency.

The agricultural sector must be restructured to create better domestic supply chains and advantages for businesses Photo: Can Dung

Dr. Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management, shared his opinion with the Vietnamese business community at a recent workshop entitled “TPP 2014 - New benefits and challenges for businesses” that took place in Hanoi.

According to him, when the TPP takes effect, taxes will possibly be reduced to zero percent, creating favorable conditions for Vietnamese businesses to boost the export of textiles and garments, footwear, seafood, wood and agricultural products to large markets such as the US, Japan, Australia and Canada.

The US is the largest export market for the Vietnamese textile and garment sector but Vietnamese textile and garment businesses currently have to pay taxes at an average rate of 17 percent and the highest rate of 32 percent. When taxes decrease to zero percent, exports will considerably increase.

The TPP will also help Vietnamese businesses, especially small and medium-sized companies in the fields of wood products, seafood and support industries, attract more foreign direct investment (FDI) from other member countries and some countries which are not TPP members. Technology transfer will help Vietnamese businesses increase the added value of products to withstand regional competition.

As a TPP member, Vietnam will balance its trading relations with major markets to prevent a heavy dependence on one regional market. There will be favorable conditions for Vietnamese businesses to persify their export markets.

However, in the opinion of many experts, domestic businesses will have to cope with fiercer competition when Vietnam implements its market opening commitments.

For example, Vietnamese beef exporters will have to prove that their products are toxin-free and that they meet certain employment requirements such as not using child labor. Textile and garment businesses must ensure that their products are made of fibers originating from TPP member countries.

“The TPP also requires its member countries to abide by many other regulations in fields such as e-commerce, environment, public investment and trade union rights. Therefore, Vietnamese businesses must quickly enhance their competitiveness through efforts to improve product quality and reduce dependence on material imports, especially from non-TPP member countries,” Dr. Vo Tri Thanh said.

From another aspect, in the opinion of Dr. Tran Du Lich, member of the National Assembly Economic Committee, Vietnam must create economic institutions and a business environment where businesses can bring their creativity into full play. The industrial sector must make a shift from outsourcing to manufacturing while the agricultural sector must be restructured to create better domestic supply chains and advantages for businesses.

“The TPP will create a new model of comprehensive economic cooperation through deep and broad commitments. Efforts to make use of new opportunities and overcome new challenges from the TPP will help Vietnamese businesses improve their positions in the global playing field. Businesses expect that the TPP will create a new impulse for Vietnam to promote institutional reforms of the market economy, helping businesses enhance their competitiveness in the international integration process,” Dr. Tran Du Lich emphasized./.

Dr. Vo Tri Thanh, Deputy Director, Central Institute for Economic Management:

“The TPP could cover nearly 40 percent of global gross domestic product (GDP) and 30 percent of global trade. Vietnamese businesses must take the initiative in grasping information and specific commitments related to their sectors and products so that they can make suitable strategies to improve their competitiveness, make use of opportunities and benefit the most from this agreement.”

By Hung Cuong