2020 is of great significance to Vietnam’s economy as the country has deepened its engagement with the international community through a string of newly-signed landmark trade deals.
Minister of Industry and Trade Tran Tuan Anh
Vietnam and its partners clinched the Regional Comprehensive Economic Partnership (RCEP) in November. What significance does this sizeable trade agreement have for Vietnam as well as the opportunities it can bring to the economy?
Signing the RCEP was of paramount importance in the context COVID-19 has created disruptions in regional and global supply chains, casting critical impacts on the global economy. It marks a crucial watershed in Vietnam’s economic integration, simultaneously ushering in multiple opportunities both short- and long-term.
With its wide-ranging open market commitments in products, services, investment, and product origin principles harmonisation through the application of a single set of origin principles, the RCEP will create new supply chains in the region with numerous chances to participate.
Secondly, the agreement helps constitute stable export markets for Vietnam. In such a volatile world with never-seen-before supply chain disruptions as recently, building one of the world’s largest free trade areas will have long-term benefits to Vietnam’s exports, from there helping the country to realise the policy on building on export-oriented production.
Thirdly, implementation shall constitute a binding legal framework in the region in trade and investment policies, intellectual property, e-commerce, and dispute settlement, playing a role in shaping an equitable trade environment in the region.
Based on some independent studies (that of the World Bank, for instance), Vietnam’s efforts on carrying out economic reform, simplifying administrative procedures, and creating an open and pro-business environment could entail the country more benefits compared to directly opening markets with other countries, helping to turn Vietnam into a trustworthy destination to international investors in the long haul.
In the role of ASEAN chair in 2020 Vietnam boosted cooperation with other ASEAN states to actively discussed with the bloc’s partner countries to find solutions for unsolved issues leading to ending negotiations and signing of the RCEP. This achievement of Vietnam was highly appreciated by other ASEAN countries and respective partners.
The Vietnamese garment sector will be one of the biggest winners as the newly-signed RCEP agreement is implemented
Without forming a competitive supporting industry, Vietnam will stay low on the global production ladder. How will participating in new-generation free trade agreements (FTAs) help to solve this matter?
Aware of the importance of developing strong local supporting industries, the government has been and is paying particular attention to industrial development as a top investment priority. This policy is attested through Vietnam having in place a full suite of legal documents in this field, including incentive policies and mechanisms embedded in the laws on investment, enterprises, and small- and medium-sized enterprises; as well as incentive policies in legal documents on taxes.
Along with this is the effective implementation of legal documents at ministry and sector levels, by localities and businesses throughout the country. Both the quality and quantity of supporting industry businesses in the country have seen marketed improvements. Products of the sector have met domestic demands and been exported to many countries. Several local manufacturers, through employing cutting-edge management tools in production, have reached international standards and become suppliers to global companies.
The RCEP particularly aims to bridge existing commitments between ASEAN and each RCEP partner in ASEAN+ FTAs and beef up trade facilitation, adding the development of new supply chains in the region that Vietnamese companies can participate. The regulations on transparency and harmonisation of customs procedures and the application of single set of origin principles helps Vietnamese companies to find more convenience in sourcing input materials, diversifying and optimising export production to RCEP member countries, and from there deepening their involvement in the global supply chains.
Leveraging these policies and commitments, the Vietnamese business community and players in the supporting industries can bolster their competitiveness and avail of the benefits the RCEP and other FTAs with Vietnam’s engagement could bring.
As for dissemination activities, the Ministry of Industry and Trade (MoIT) has crafted training courses to provide further information about the commitments and how to implement to support the services and sectors in which Vietnam has advantages to boost competitive edge and participate more deeply into regional and global value chains.
Moving forward, the MoIT has further worked out programmes on market development for products that the country has the potential and advantages for export into RCEP markets. The MoIT has also developed and improved technical measures aligned with international commitments to support the development of local businesses, locally-made products, and protecting consumers.
In addition, the MoIT has also strengthened cooperation with major partners like the World Bank and UN Industrial Development Organization; countries with advanced industry like Japan, South Korea, and the United Kingdom; and multinational corporations like Toyota, Honda, GE, and Bosch. These partnerships shall be tailored to fit capacity enhancement targets to enable local suppliers to satisfy strict requirements to join global value chains.
How do you assess Vietnam’s opportunities to attract foreign businesses, particularly those coming from China, South Korea, Japan, and Australia, to invest in the country via the advantages the RCEP brings?
Before signing of the RCEP, Vietnam was already an alluring destination for international investors. Statistics show that by end of October, of 10 countries and territories with big investment volume in Vietnam, six are RCEP members – South Korea with $70.38 billion, Japan $59.89 billion, Singapore $55.7 billion, China $18 billion, Malaysia $12.8 billion, and Thailand $12.5 billion.
The application of a single set of origin principles and face facilitation regulations between RCEP members shall enable countries to maximally avail of abundant material sources in the region to feed their business and production. With bountiful advantages in fruitful human resources, open investment policies, and political stability, Vietnam shall have enormous opportunities to lure investment from investors coming from RCEP members in all fields Vietnam has commitments, including in the supply of raw materials.
In recent years, the government and the MoIT have been and are introducing many policies and measures to increasingly improve the local investment environment, such as shortening approval times, simplifying business conditions and procedures to help investors save on costs, and stimulating innovations.
Vietnam has now enforced 13 FTAs, with each one requiring a particular action plan. Do we need an inclusive action plan in order to best avail of opportunities from these varying agreements?
The sweeping commitments and big coverage of these agreements are expected to leave broad impacts on local economy across the board. In light of international conventions, the National Assembly has assigned the government to craft particular action plans for implementing each agreement to ensure its utmost efficiency. However, it is also important to ensure unity of all action plans when all the deals are enforced. The MoIT, thereby, is carefully studying in order to report to the Inter-sectoral Committee on International Integration for enactment of an inclusive strategy for engagement into FTAs after 2020, to be able to present common orientations for all agreements at a later period. VIR
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Free trade agreements (FTAs) that Vietnam has signed with its partners have been an important factor attracting foreign investments to the country.