RCEP more important to Vietnam than ever

Dr. Vo Tri Thanh, former deputy director of the Central Institute for Economic Management

Given the US decision to pull out of the Trans-Pacific Partnership (TPP) agreement, economists expect Vietnam will be one of the main beneficiaries of the Regional Comprehensive Economic Partnership (RCEP), a free trade pact under negotiation between the ten member states of ASEAN and the six states with which ASEAN has free trade agreements (Australia, China, India, Japan, the Republic of Korea and New Zealand).

Many economists share the opinion that Vietnam and Cambodia will be the two biggest beneficiaries of the RCEP. What do you think?
Through assessments made by international research organizations, one can see that agreements with high levels of integration benefit countries with lower development levels. Vietnam and Cambodia are such countries among those involved in the RCEP.

Positive impacts of the agreement will help Vietnam achieve higher economic growth and deepen Vietnamese business involvement in regional and global value chains, allowing them to boost exports.
However, the opinion that Vietnam and Cambodia will be the biggest beneficiaries of the RCEP is based only on economists’ assumptions about the opening of the two economies. In fact, the size of the benefits depends mostly on institutional reforms and preparations by state authorities and businesses.

What do you think businesses should do to make the most of opportunities offered by the RCEP?
I think, to make the most of opportunities from the RCEP, businesses should accelerate their reorganization and intensify human resources training to enhance their competitiveness. At the same time, they should build suitable business strategies and promote the application of modern technologies in production.

Businesses should be aware of two special aspects of the RCEP. Firstly, it involves one of the most dynamic production networks worldwide, so businesses should join value chains rather than step alone on their development paths. Secondly, the RCEP’s value chains depend on foreign direct investment from large Japanese, European and US economic groups. To join value chains in the RCEP, businesses need to learn carefully about these groups.

What is the role of the RCEP in the context of the US withdrawal from the Trans-Pacific Partnership (TPP)?
The TPP was expected to have positive impacts on all member countries, so President Donald Trump’s decision to withdraw from the trade deal was really bad news. The TPP is also considered a model trade agreement of the 21st century that will promote institutional reforms in member countries. Therefore, I believe the TPP will have positive impacts on reforms in Vietnam and other member countries, even if it exists just on paper.

However, in the context of the TPP veering from its planned blueprint, the RCEP has become more significant to Vietnam because it involves the integration of the entire Asia-Pacific region, as well as global production networks and value chains. The RCEP will not only bring trade and investment opportunities, but it will also enhance the competitiveness of each member economy.