In the midst of the Covid-19 pandemic that disrupted global and regional supply chains, the signing of the Agreement for Regional Comprehensive Economic Partnership (RCEP) marks an important milestone in Vietnam’s economic integration process. Thus, this brings benefits both in the short and long term.
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RCEP helps Vietnam accelerate investment attraction
Together with ASEAN countries, Vietnam has absolutely the opportunity to become a hub to attract foreign investment, especially from countries participating in the Regional Comprehensive Economic Partnership (RCEP).
The agreement was signed on November 15, 2020. The FTA is expected to cover all aspects of business including trade, services, e-commerce, telecommunications, and copyright through negotiations over some aspects still need to be finalized. Tariffs are expected to be reduced within 20 years. The RCEP covers a market of 2.3 billion people and US$26.2 trillion in global output. This accounts for about 30 percent of the population worldwide and over a quarter in world exports.
Opportunities for Vietnam
1. The market is expanded
According to expertise, RCEP has created a market of more than 2.2 billion consumers with a scale of nearly 27,000 billion USD, accounting for nearly 30% of global GDP. Mr. Tran Ngoc Liem – Deputy Director of Vietnam Chamber of Commerce and Industry, City branch. Ho Chi Minh City – share: The effective RCEP will create a huge, stable and favorable market for participating countries.
Strongly boosting the regional and global value chains, helping the economy of Vietnam and other ASEAN countries develop faster, creating conditions for enterprises to expand markets, improve import and export turnover ( Import and export) and attract investment.
The global business community has also paid special attention to RCEP recently, because this is a large import-export market of many businesses, many potential export sectors (export). According to Mr. Nguyen Tien Chuong – Chairman of Dong Nai Import-Export Association, major export markets of Dong Nai and the South export enterprises focus on: Japan, Korea, ASEAN and European countries (EU).
Implementing the RCEP, enterprises are entitled to tax reduction and simpler customs procedures, making it easier for them to expand consumption markets in the countries participating in the agreement. In addition, with the member countries in RCEP, Vietnam has had a number of separate signatures such as: Vietnam – Japan Economic Partnership Agreement (VJEPA); FTAV Vietnam – South Korea … However, RCEP will still help increase and expand trade with major economies in the world.
2. Moving from Open Door to the global value chain
Vietnamese enterprises can more easily access raw materials from member countries to produce exports. For example, it is possible to import electronic chips from Japan and Korea; imported raw materials for textile and leather from China, then produced domestically and exported to other countries, at the same time, to satisfy the rules of origin within the bloc to take advantage of tariff preferences.
Vietnamese businesses will participate in the value chain and regional production, while also benefiting from the reduced transaction costs and a more friendly business environment through existing rules and general application in different ASEAN FTAs.
3. Importing cheaper goods, especially input materials for production.
According to the Ministry of Industry and Trade, in 2019, our country imports from ASEAN 32.1 billion USD, in 2020 is expected to import 32.2 billion USD, trade deficit is 6.85 and 8.6 billion USD respectively. RCEP will help open the door to importing cheaper goods, especially input materials for production.
At the same time, raw materials for business production imported by Vietnam from RCEP countries will also be considered as a source of raw materials for production in Vietnam when exporting products to countries that have a bilateral agreement. , multilateral with Vietnam.
4. Attracting more investment
RCEP will help Vietnam “open up” space for investment and trade in the long term, especially in the context of the Covid-19 pandemic.
Currently, China, Japan, Korea …, and even Singapore, Thailand, Malaysia are speeding up investment abroad to expand production and supply chains. Vietnam, as Minister of Planning and Investment Nguyen Chi Dung said, is a safe and attractive destination. The opportunity to accelerate investment attraction from RCEP member countries will be greater than for Vietnam, especially when Vietnam is building many outstanding mechanisms and policies to catch the shifting investment capital flows.
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Do not exacerbate the trade deficit
More about the agreement, Ms. Nguyen Thi Quynh Nga – Deputy Director of Multilateral Trade Policy Department (Ministry of Industry and Trade) – said that for all ASEAN countries, this was a non-value-added agreement opening the market since ASEAN already has FTAs with partners. Instead, the RCEP is essentially an agreement connecting ASEAN’s existing commitments with five partners to ASEAN in an FTA.
Ms. Nguyen Thi Quynh Nga cited, enterprises will only have to use 1 rule of origin instead of 5 separate rules of origin in previous FTAs. Similarly, customs clearance and trade facilitation rules were agreed and strengthened. “Therefore, basically will not create a commitment to open markets or new competitive pressure but mainly aim at creating favorable conditions for businesses, especially small and medium enterprises” – Ms. Nguyen Thi Quynh Nga emphasized.
With the view of harmonizing existing provisions of the existing ASEAN Agreements with partners, the agreement is considered to be of high value in reducing transaction costs, attracting foreign investment and enhancing its position.
For example, small and medium enterprises of ASEAN countries, including Vietnam, are difficult to take advantage of due to the different provisions between ASEAN Agreements and partner countries. With RCEP, these difficulties will be reduced because it will only share a single set of rules and allow the accumulation of content from all countries in the region.
Similarly, in the past, if there was a trade dispute with a major partner, it was more difficult for ASEAN countries to resolve. Now with a multilateral mechanism with all 15 participating countries, the trade rules will be followed more thoroughly.
“With such an angle, the RCEP Agreement will certainly not exacerbate the trade deficit, even possibly improve for Vietnam and ASEAN countries, especially in the long term” – Ms. Nguyen Thi Quynh Nga affirmed. concentration.
In fact, the process of negotiating market access commitments under RCEP involves close research and suggestions from relevant ministries and businesses to ensure the best interests of Vietnam.
Challenges facing the RCEP Negotiations
But with RCEP, the story is not just the investments between RCEP members. The prosperity and large market size of the RCEP bloc will also make this region the focus of global investors.
It is true that RCEP can bring competitive pressures on Vietnamese goods and services. Because the economies in the RCEP region have many partners with similar product structure to Vietnam, with stronger competitiveness than Vietnam, while the quality and value-added content of most of Vietnam’s products are still modest. Therefore, when RCEP comes into effect, competition pressure will increase.
Moreover, Vietnam’s investment in manufacturing still depends on imported sources, while the ability to improve its position in the regional value chain is limited, and the level of participation in the provision of trade in services.
Vietnam’s global economy is still quite modest. However, we also do not worry about the possibility of increasing the trade deficit because the commitments made with the process of tariff liberalization implemented for many years, the RCEP will not create a tariff reduction shock for Vietnam.
Reality with international integration experience shows Vietnam’s ability to join newly established value chains in the region. Vietnam also innovates strongly in administrative procedures, facilitating production and business activities and improving the investment environment.
To sum up, with commitments that are different and flexible from the signed Free Trade Agreements (FTAs), RCEP is forecast to provide a framework for simplifying procedures and facilitating trade liberalization. Therefore, it helps the businesses deeply participate in the global supply chain that pushes the Vietnamese economy.