RCEP: 5-in-1 FTA and Opportunities for Vietnamese Businesses

With the impact scale of a free trade area considered the largest in the world, the RCEP Agreement is expected to open up huge opportunities for investment, trade and export boom in the region. The pact will officially enter into force 60 days from the date of its adoption by at least six ASEAN member countries and three non-ASEAN member countries. Vietnam Business Forum has an exclusive interview with Ms. Phung Thi Lan Phuong, Head of FTA Department, the WTO and Integration Center, VCCI. Anh Mai reports.

The Regional Comprehensive Economic Partnership (RCEP) Agreement features commitments to open markets for goods, services, investment and the harmonization of rules of origin (instead of applying five sets of rules of origin in the five current FTAs) among all parties involved and enhanced trade facilitation measures. How great are the economic benefits that the RCEP Agreement brings to Vietnam?

RCEP is Vietnam's 14th free trade agreement (FTA) and also Vietnam's largest FTA by partners involved. This agreement was negotiated on the basis of existing FTAs between ASEAN and five partners - Japan, South Korea, China, Australia and New Zealand. So, it can be called a 5-in-1 FTA, promising to bring numerous benefits to the Vietnamese economy in general and Vietnamese businesses in particular.

The first benefit of an FTA is the opportunity to expand the market and trade with other FTA member partners. The RCEP market accounts for 30% of global GDP and 2.2 billion consumers. Although RCEP does not help Vietnam access new markets (because Vietnam and other RCEP partners already have FTAs), it helps Vietnamese enterprises with easier access to these markets. Notable advantages include a unified set of rules of origin, removing non-tariff barriers, and strengthening commitments on transparency, harmonization and trade facilitation.

In addition, RCEP’s commitments to opening service and investment markets, opening public procurement, and establishing general principles on intellectual property, e-commerce and competition will help Vietnam’s economic and legal environment become transparent and favorable, and better protect interests of foreign and domestic businesses and investors. Then, Vietnam will become more attractive in the eyes of foreign investors, not only from partner countries in RCEP but also outside RCEP when investors see Vietnam as an open market with many attractive opportunities from RCEP and other FTAs of Vietnam.

If import, export and investment opportunities are realized, it will gradually help Vietnamese companies to participate more deeply in regional production chains, thus connecting platforms, increasing opportunities and reaping sustainable benefits for our businesses.

Besides benefits, it is said that RCEP is likely to benefit China, Japan and South Korea more than other member states. What do you think about this?

RCEP provides equal opportunities for all members. However, how to make use of these opportunities and to make use of them more or less depends on each country. Even in a country, the degree of taking advantage of FTA benefits also varies from business to business and from sector to sector. So, it is not right to say that RCEP is more likely to benefit China, Japan and South Korea than other member countries, but it can be said that companies in these countries are able to make better use of RCEP than the rest if businesses of the latter do not actively adapt and reform to increase the ability to make the most of RCEP.

However, it can be said that RCEP is quite flexible, taking into account the development level of each member country, and aiming to provide the most favorable conditions for each business, especially small and medium one. Therefore, it is expected that businesses from developing countries like Vietnam can also take advantage of benefits from this agreement.

Like previous FTAs that Vietnam entered, they are bringing both advantages and disadvantages to the Vietnamese business community. In your opinion, what opportunities will Vietnamese businesses have to expand and what difficulties will they face when Vietnam joins RCEP?

RCEP, like other FTAs, not only brings opportunities but also poses potential challenges to Vietnamese businesses, including competition of goods and services from RCEP partner countries. The commitment to harmonization of rules of origin and trade facilitation will help “pave the way” for familiar trading partners to increase commodity exports to Vietnam, triggering a “fiercer battle” to compete for market share in Vietnam. It should be noted that many countries in RCEP have similar but highly competitive product structures to Vietnam’s. Combined with advantages gained from RCEP, they can dominate the Vietnamese market if local ones fail to make change to improve their product and service quality.

Not only in the domestic market, Vietnamese businesses are also likely to face challenges from export markets as our competitors have more opportunities to access export markets in RCEP. For example, China previously did not have an FTA with Japan, the RCEP will pave the way for its goods to enter Japan and compete with Vietnamese rivals there.

Even so, I still believe that our businesses have been integrated for more than 20 years and are used to competition both domestic and export markets. Therefore, the RCEP is not expected to cause a great change or a strong shock to Vietnamese businesses. In the meantime, we are waiting for them to realize great opportunities to reap practical benefits from this agreement.

What should Vietnamese businesses do when this agreement is enforced?

Although RCEP is not a high standard FTA like CPTPP or EVFTA, its content is also very broad and complex because it includes many members and covers many different contents. Therefore, what businesses need to do now is learning about its contents, identifying commitments that can affect them and then preparing a strategy to effectively take advantage of it.

For example, a commodity exporter should immediately study tariff commitments that partner countries have for Vietnam and apply to its commodities, compare them with tariff commitments and rules of origin in other existing FTAs to find out more favorable ones.

In the long run, in order to take advantage of RCEP or any other FTAs, businesses need to improve the competitiveness of their products and services to stay strong at home and expand their presence in RCEP partner markets or any other export market.

Source: Vietnam Business Forum