Vietnam has become the seventh country to ratify the CPTPP, after Australia, New Zealand, Canada, Japan, Mexico, and Singapore, as the time that the deal will officially take effect is fast approaching. Therefore, it is necessary for the country to immediately make the most thorough preparations in the aim of taking advantage of opportunities and neutralising the challenges posed by the CPTPP, as well as to implement the pact in an effective fashion.
Opportunities and challenges
Both experts and the business community share the view that the CPTPP promises to provide many benefits for Vietnam. First of all, joining the CPTPP as one of the founding members, Vietnam has shown a strong commitment to reform and comprehensive and extensive international integration. In addition, the CPTPP is expected to help Vietnam’s gross domestic product (GDP) and exports surge by 1.32% and 4.04%, respectively, by 2035. General Secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), Truong Dinh Hoe, said that there will be huge opportunities for Vietnamese aquatic products, as the CPTPP countries annually import nearly US$2 billion worth of fishery products from Vietnam, equivalent to 23% of the industry’s total export revenues.
After the CPTPP comes into effect, it could help generate much higher economic value because the potential remains large in these markets. Vice Chairman of the Vietnam Textile and Apparel Association (VITAS), Truong Van Cam, said the CPTPP has opened up many new markets for Vietnamese textile and garment products, especially markets with which Vietnam has yet to sign a bilateral free trade agreement (FTA), such as Canada, Mexico and Peru. Traditional markets, including Australia, will also be better exploited. Vietnam’s textile and garment exports to Australia only reach approximately US$200 million annually, a modest figure as each year this market imports roughly US$9 billion worth of products.
Most importantly, the CPTPP is considered a golden opportunity for Vietnam to accelerate domestic institutional reform, to promote the comprehensive operation of the market economy, and to create an open and transparent business-investment environment. According to Dr. Nguyen Anh Duong, Head of the Macroeconomic Policy Department under the Central Institute for Economic Management (CIEM), institutional reforms provide many benefits to Vietnam, but this is also a demand and a compulsory requirement when Vietnam accepts to join the common playground. Therefore, what’s important is that Vietnam has to maintain a continuous and quality reform momentum after joining the CPTPP.
On the other hand, when participating in the CPTPP, Vietnam will open the door for goods and services of partner countries in the domestic market, which means that Vietnamese enterprises and goods will face fiercer competition right on their home ground. Meanwhile, the difference in economic levels between Vietnam and the other CPTPP signatories still remains quite large, thus raising many concerns on the competitiveness of the country’s key economic sectors. Chairman of Hung Yen Garment Company (Hugaco), Nguyen Xuan Duong, said that the CPTPP is an opportunity for Vietnamese garment businesses to expand their market shares and boost growth in the future. Therefore, businesses have to invest and study the market in order to make best use of their advantages. However, the competition will be more severe, and if well-organised development strategies and directions are not deployed, it is a possiblillity that local firms will be overwhelmed by financially strong opponents from abroad, Duong added.
Expectations for breakthroughs
As a high quality agreement, the CPTPP requires Vietnam to make breakthrough reforms in a number of areas with the aim of creating a more favourable business climate and providing good premises for the business community, especially small and medium-sized enterprises, to develop pragmatically. In addition, the CPTPP is also a driving force for Vietnamese enterprises to focus on renovating their production methods, enhancing competitiveness and improving the quality of goods and services, in order to catch up with the development trend of the world, as well as to be able to compete against more rigorous standards, thereby effectively engaging in global supply chains.
Le Tien Truong, General Director of the Vietnam National Textile and Garment Group (Vinatex), stated that, in order to take advantage of opportunities, businesses need to invest in technology; improve productivity both through the skills of workers and systems of production, management, computerisation in administration and automation in each production stage; and be proactive in ensuring domestic sources of materials to be prepared for large orders from partners and customers.
The CPTPP also brings about expectations in the process of amending and supplementing the laws to conform to the CPTPP commitments. However, it is necessary to strengthen the law enforcement capabilities and sanctions against violations. Deputy Minister of Industry and Trade, Tran Quoc Khanh, said that growth in quantity is important but with the CPTPP, the Government is putting higher expectations on changes in terms of quality. As a high quality comprehensive agreement, the CPTPP will cause much bigger impacts on the policy environment than the previous FTAs. CPTPP participation is similar to the admission to the World Trade Organisation (WTO) for the second time. And if the WTO has brought about qualitative changes to the domestic institutional environment, the CPTPP will also bring about such dramatic changes.
When participating in the CPTPP, the core interests of Vietnam are guaranteed. Vietnam has also earned specific reserves and flexibility in order to implement the agreement in an effective and beneficial manner for the country. During the implementation of the CPTPP, the Government will continue to direct ministries and sectors to regularly update the overall impacts on the economy as well as each specific area, thereby designing appropriate adjustment measures.
