TPP – A Key Driver for Vietnam Economy

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The basic argument for Vietnam as the biggest beneficiary of the Trans-Pacific Partnership (TPP) is simply this: As the least developed member of a largely developed club where two of its largest export markets are represented, and almost none of its direct competitors, Vietnam stands to develop at a much more accelerated pace over the next decade as a result of the TPP.

The four main reasons being:

  • Increased direct investment flows – North Asian and ASEAN manufacturers may consider relocating a substantial part of the vertical chain in certain industries to take advantage of lower tariffs and gain better market access.
  • More rapid pace of reforms. Commitments in the form of increased market access for government procurement and service sectors. Also, the rapid pace of privatization is more likely as the weight of the state owned enterprise sector is reduced.
  • Greater funding for infrastructure. The demand for infrastructure will increase as foreign industry floods to Vietnam, lifting demand for utilities; water; roads, and other basic needs. Private investment in this sector has been expanding following the new PPP rules.
  • Surge in trading flows. More factories will increase trading flows for Vietnam, welcoming in more imports, as well as increasing exports over time.

At the core of this comprehensive document is an old fashioned free trade agreement, which means tariff cuts or eliminations. We estimate that around 18,000-20,000 products will see tariff cuts over the next decade as a direct result of TPP. vSome of these will be fairly immediate after enactment.

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