While the freshly-inked Trans-Pacific Partnership (TPP) has stirred controversy, the Vietnamese government believes it would do more good than harm in both economic and social terms.
“Most of other TPP nations do not compete directly with us, except in a few farming sectors,” Vu Huy Hoang, Minister of Industry and Trade told Vietnamese media after talks were wrapped up on October 5.
“Major markets such as the US, Japan and Canada will eliminate import tariffs, which will give a major boost for our exports. Key sectors including garment, textile, footwear and seafood are very likely to grow in terms of turnover,” he said.
Hoang expected the country’s garment and textile industry to attract investment in material production projects, thanks to huge exports.
A rule of origin under the deal requires the TPP nation to use raw materials, from the yarn forward, either made locally or imported from other TPP nations, in textiles to receive duty-free access.
Hoang said this rule would increase the use of local materials and help Vietnam add value to the production chain, which would allow the textile and garment sector to "grow sustainably."
At the moment, Vietnam mostly cuts and sews yarn, fabrics or fibers imported from China.
As the TPP nations make up about 40 percent of the global economy, the agreement is expected to create new supply chains and Vietnam would have many opportunities to join these chains, Hoang said.
Many tech giants such as Samsung, Intel, Microsoft and LG have invested in Vietnam, turning the country into an important place in the production chain for hi-tech items including computer microprocessor and smartphone.
“Following the TPP, this trend may grow and help our country develop the electronics and hi-tech sector. This is a great opportunity to move Vietnam’s economy to a higher level in the next five to 10 years,” said Hoang.
The 12-member trade pact is forecast to add US$23.5 billion to Vietnam’s GDP in 2020 and $33.5 billion in 2025. It would also increase the country’s exports by $68 billion in 2025.
As Vietnam’s export and import markets currently depend too much on Eastern Asian markets including China and South Korea, the TPP, along with other deals with the European Union and the Eurasian Economic Union, would give Vietnam an opportunity to have a more "balanced" market strategy, the trade minister said.
Hoang said the commitments in the TPP would force Vietnam to cut red tape, review policies to make them more transparent and less surprising, thus improving the country’s business climate and helping it attract more foreign and local investment.
“So, we believe that foreign investment will rise, not only in sectors producing products for export but also in other ones including finance, banking, and real estate, after the deal is signed,” he said.
The intensification of intellectual property right protection under the pact could also help the country lure more investment in intellectually-intensive areas like pharmaceuticals, according to Hoang.
Husbandry to be hit
But the trade minister warned that the livestock industry would face the biggest challenge under the TPP as its competitiveness is now low.
Van Duc Muoi, gerenal director of Vissan, a leading meat processor, agreed.
“Eighty five percent of livestock is now being bred on small-sized farms and only 15 percent is bred on large-scale farms,” said Muoi.
He said though Vietnam has the world’s third largest number of female pigs with 4.5 million ones, its pork output ranks 15th-16th.
“Low productivity makes Vietnamese pork prices higher than other countries’, so it will be difficult for local pork to compete with foreign one following the TPP,” said Muoi.
Muoi said the deal would force the livestock industry to change and fix its weaknesses, otherwise it will not survive.
The trade minister is well aware of this.
Vietnam would have to restructure its agricultural sector by applying high technology and switching to large-scale farms for cultivation and livestock breeding to reduce production costs and easily control quality and hygiene, Hoang said.
He said the TPP would also benefit Vietnam in social terms with more jobs to be created and employees’ income to be raised, thus reducing poverty.
After the conclusion of the TPP talks, the participating nations would review legal procedures to prepare for the official signing and submit to concerned agencies for approval, Hoang said, adding that the processes often take at least 18 months.