Ho Chi Minh City, Vietnam, March 12, 2016 --(PR.com
)-- Vietnam will reap significant economic growth from its manufacturing sector as part of a member in the Trans-Pacific Partnership (TPP), a regional trade agreement among 12 countries. Drivers leading to the benefits of Vietnam’s manufacturing landscape as a result of the TPP agreement include higher trade volumes with the U.S. and Japan, a more competitive manufacturing environment due to Vietnam’s low labor costs, as well as cuts in tariff rates on export and import goods. Solidiance’s latest white paper titled “Trans-Pacific Partnership: A boost for Vietnam’s manufacturing Growth” highlights the investment opportunities in Vietnam’s manufacturing through the TPP trade agreement.
To date, the Trans-Pacific Partnership comprises of 12 countries, ~40% of global GDP, and ~11% of the world’s population. The TPP’s main objectives revolve around four principles; reduction or abolishment of trade barriers, expanded market access, intellectual property protection, and increased transparency.
Three drivers behind Vietnam’s benefits from TPP
- Accelerated high trade volumes with the U.S. and Japan. As TPP signatory countries account for ~40% of Vietnam’s total exports, the TPP’s passage will accelerate Vietnam’s exports to TPP member countries, as well as increase the country’s total export by an additional USD 68 billion by 2025.
- Vietnam’s market competitiveness in manufacturing sector. Vietnam’s fast-growing manufacturing sector is driven by the textile & apparel and electronics sector. Vietnam is well-positioned to capitalize on increased trade with TPP member countries due to its low labor costs.
- Tariff rates on import and export goods to be slashed. Once TPP goes into effect, export tariff rates from Vietnam to the U.S. (from the current 7.9% on average for textiles and 11.4% for clothing) will be gradually reduced to zero. This will drive investments into the textile sector in Vietnam, especially into its supporting industries.
Potential impacts of TPP on Vietnam’s manufacturing
- TPP and other trade agreements will attract additional Foreign Direct Investment (FDI) into Vietnam’s manufacturing sector, expected to reach USD ~20 billion by 2020.
- Increased financing, skills transfer, and capacity buildings are crucial factors driving manufacturing enterprises in Vietnam to scale up, leading to an increase in production scale, and industrial deepening, leading to higher productivity.
- Opportunities for investors will come from both directly and indirectly affected (supporting) industries.
- Strategic development of supporting industries (raw materials & machinery) and accompanying infrastructure (port, construction & logistic) will be needed over the medium to long-term for the economy to fully absorb TPP’s benefits.