RCEP: A Temporary Solution After TPP Demise

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APEC 2017 Annual Conference in Vietnam

Much has been written and discussed about the impact of the demise of the Trans Pacific Partnership on foreign direct in Vietnam. With the first quarter statistics on FDI now available we can confidently say that there has been no significant impact on FDI.

According to the Ministry of Planning and Investment newly registered FDI totaled almost US$ 7 billion and an increase of 70 percent over the corresponding quarter in 2016. Of this total, registered investments increasing their capital accounted for US$ 3.9 billion, up a staggering 200 percent plus on the same quarter in 2016.

The biggest investor by country, was South Korea accounting for over 50 percent, followed by large investments from Singapore and China.

Now the attention is also focusing on the Regional Comprehensive Economic Partnership (RCEP), which is under negotiation and is a likely replacement in the short term to TPP. The RCEP includes the 10 ASEAN countries and 6 ASEAN Free Trade Agreement partners: Australia, China, India, Japan, South Korea and New Zealand.

This bloc together accounts for 3.4 billion people, or half the world’s population and GDP of US$ 21 trillion or 30% of the world’s GDP.

The RCEP, while expected to have fewer benefits for Vietnam than the TPP offered, will have greater regional benefits and therefore more overall benefits for Vietnam. RCEP does not have the same strict requirements for institutional reform but will necessitate Vietnam improving it’s economic institutions including Corporate Governance and overall transparency.

This reminds me of a Chinese saying, that in English translates to “Something good always comes out of something bad.” Let’s hope the first quarter performance will be representative of the next 9 months.


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