With the aim to catch new opportunities when Vietnam officially becomes a member of the Trans-Pacific Partnership (TPP), many foreign companies have been looking for opportunities to invest in Vietnam. According to economic experts, this trend will continue to grow strongly as the commitments of TPP take effect.
Surging investment in Vietnam
Vietnam has concluded all TPP negotiations, attracting great interest from those who do business. So, we don’t need to talk much about the benefits and opportunities that Vietnam will have when participating in TPP especially in developing trade and attracting investment because when trade is opened, the tax barriers among 12 member states are removed. There will be a certain impact to intra-regional investment and other investment markets.
Vietnam has concluded all TPP negotiations, attracting great interest from those who do business. So, we don’t need to talk much about the benefits and opportunities that Vietnam will have when participating in TPP especially in developing trade and attracting investment because when trade is opened, the tax barriers among 12 member states are removed. There will be a certain impact to intra-regional investment and other investment markets.
Vietnam's growing economy and abundant labour market will attract foreign investors, especially investors from the 11 member countries. This is evidenced by the US leading textile HanesBrands recently announcing to raise total investment in Vietnam to nearly US$55 million with 3 factories in Hung Yen province and Hue city. Mr Ajay Godbole, HanesBrands' Director for Asia Operations shared that this is an important step ahead of opportunities brought about by Vietnam joining the TPP. Besides HanesBrands, there are quite many foreign textile enterprises that have decided to invest in Vietnam to capture the opportunities.
Along with textiles, the high-tech industry is also shaping an investment trend for foreign investors. The arrival of the big names in the world like Samsung, LG and Jabil with the investment capital up to billions of dollars, in which Samsung alone has invested US$14 billion is the most obvious evidence showing the steadily growing attraction of joining the TPP of Vietnam.
In addition, Vietnam also welcomed the presence of big names in the global retail sector like Aeon, Auchan, Metro, Cash & Carry, Lotte and Big C. Up to the present time, Vietnam has attracted more than US$290 billion FDI.
According to experts, to unfreeze the flow of FDI and attract more capital flow into Vietnam, the TPP has become an important catalyst. This catalyst not only comes from the opportunities of a vast trade market but from the commitments compiled by members of TPP.
According to Hoang Manh Phuong, Deputy Director of the Legal Department (MOIT), one of the participants in the negotiations concerning Investment Chapter in TPP, there are many commitments between Vietnam and other member states that will bring great advantages for foreign investors in Vietnam. For example, commitments related to the investment enable unrestricted transfer of capital and assets in and out of Vietnam. According to Mr Phuong, this is a very important commitment. Compared to the past, it is more transparent and more open.
Mr Phuong said that the most important content in the Investment Chapter of the TPP is "no discrimination". Accordingly, TPP is using pick-and-choose principle. Previously, in bilateral agreements, we also mentioned the pick-and-choose principle but in the TPP, this principle has been liberalised to the highest level. Additionally, TPP also uses going-forward mechanism which will bring great advantages for investors. Speaking in an understandable way, investors are also allowed to invest and do business in areas that are not prohibited.
In commitment to the WTO, there are portfolios that foreign investors must not do. But in the TPP, the conditions are removed; the investor may invest and do business in all sectors, from the professions and fields still in the category of "reserves".
Terms of Vietnam’s Most Favoured Nations are also the basis for Vietnam to attract FDI. Especially Vietnam as well as other member states should remove the barriers that require unnecessary investment conditions contrary to international practice such as regulations on localization rate and technology content. "Of course, there are exceptions, and also elimination of transfer pricing cases," Mr Phuong said.
The commitment of TPP is expressed clearly and transparently on the basis of non-discrimination and elimination of unnecessary barriers. Along with that are commitments to the protection of investors so the TPP has become "catalyst" for promoting FDI in Vietnam.
Many risks for local businesses
Besides the advantages brought about by the TPP, the experts also warned about the risks associated with it. Dr Ho Quoc Tuan, lecturer at the University of Bristol, UK said, joining the TPP would help Vietnam increase the flow of international capital, which besides the advantages, there are also certain risks such as possible amplify the inherent risks of the economy. For example, the trend of foreign capital squeezes internal capital at home, or troubles of small and medium enterprises of Vietnam will become small.
Mr Tuan said that if we do not to take appropriate steps, after 10 to 20 years participating in the TPP, Vietnam will have few big domestic businesses besides foreign enterprises. If an economy is heavily dependent on foreign capital, it will face more risks.
This was reiterated by Minister of Planning and Investment Bui Quang Vinh, besides stepping up to attract FDI, Vietnam must create favourable conditions for domestic businesses to develop in parallel and become partners of the FDI.
Si Son
Vietnamese
