RCEP helps Vietnam in accelerating absorption of investment

Along with other ASEAN members, Vietnam has a great opportunity to become a centre of foreign investment, especially in terms of investment from other countries in the Regional Comprehensive Economic Partnership (RCEP).

Entering the global value chain with an open door

RCEP was finally signed after eight years of negotiation. Although time is still needed for the 15 members, including 10 ASEAN members and five partners (namely China, Japan, the Republic of Korea, Australia and New Zealand) in order to approve the deal, evaluations about the impact of RCEP on the Vietnamese economy have been proven multiple times.

Moreover, the Minister of Industry and Trade, Tran Tuan Anh also mentioned “timing, harmony, convenience” as RCEP has been signed at a time when the world is positioning and reorganising its supply chains, with other investment activities are tending to shift.

In fact, commitments regarding market opening and tax reduction in RCEP are not that different. With RCEP, Vietnam has no commitments going beyond that of the framework of the existing free trade agreements with other partners, especially between ASEAN and its partners.

However, regulations on the harmonisation regarding the origin of goods procedures in RCEP will bring considerable advantages to Vietnam, whose economy relies heavily on imported material. Vietnam is seeing a large trade deficit with the Republic of Korea and China on the importation of raw materials for export production and is always “being stonewalled” about the origin of goods while exporting its goods to many major markets around the world.

For RCEP, Vietnamese enterprises can get access to materials more easily from member countries in order to manufacture exports. For instance, electronic chips can be imported from Japan and the Republic of Korea while textile and leather materials can be imported from China for domestic production and then exported to other countries, simultaneously satisfying intra-bloc rules of origin in order to optimise the preferential tariff.

Not only in Vietnam, foreign experts also agree that RCEP is a favourable opportunity for all countries to restructure and reposition their supply chains and join the global value chain. With RCEP, ASEAN is expected to become the heart of the global value chain. Should it happen as such, the opportunities for Vietnam are huge.

“Vietnam has a chance to reshape and better utilise its new positions, thereby building up a strong position on the map of global supply chains,” said Minister Tran Tuan Anh.

Following that, undoubtedly, will come an opportunity to attract investment. “RCEP can help Vietnamese companies widen their market, join regional chains of supply and attract foreign investment,” said Tim Evans, CEO of HSBC.

Accelerating the absorption of investment

Most of the remaining 14 members of RCEP are major investment partners of Vietnam. Noticeably, six RCEP partners are listed among the 10 nations and territories having the great level of investment in Vietnam. The greatest partner is the Republic of Korea (US$70.38 billion), followed by Japan (US$59.89 billion), Singapore (US$55.7 billion), China (US$18 billion), Malaysia (US$12.8 billion), and Thailand (US$12.5 billion).

Even without RCEP, foreign investment from these countries is still pouring into Vietnam, especially as Vietnam is currently the focus of foreign investors, with investment flows shifting due to the COVID-19 period.

However, according to Professor-Doctor Nguyen Mai, President of Vietnam’s Association of Foreign Invested Enterprises, RCEP will help Vietnam “widen” the room for investment and trade in the long term, particularly in the context of the COVID-19 pandemic.

Currently, China, Japan, the Republic of Korea, and even Singapore, Thailand, and Malaysia are accelerating investment abroad so as to expand their production and supply chains. Vietnam, according to the Minister of Planning and Investment Nguyen Chi Dung, is a safe and attractive destination. Opportunities in accelerating the absorption of foreign investment from RCEP member countries will be greater for Vietnam, especially as Vietnam is building many exceptional policies and mechanisms to receive the shifting investment inflows.

But with RCEP, the focus does not simply lie in capital investment between RCEP members. The prosperity and large market scale of the intra-RCEP bloc will also make this region become the focus of global investors.

When proposing negotiations on the RCEP, ASEAN member countries also hope to devise a favourable environment for connecting economies, design opportunity for enhancing production capacity towards building ASEAN into a dynamic economic region, unique in the field of production and market.

“Along with other ASEAN members, Vietnam has a great opportunity to become a hub of foreign investment, especially from countries in RCEP,” said Minister Tran Tuan Anh.

Currently, China, despite the COVID-19 pandemic and going against the shifting tendencies of investment, is still a compelling market for foreign capital investment. Instead of a downward trend like many other countries, including Vietnam, foreign investment into China still witnessed a slight increase over the last few months. This signals a more intensive race in absorbing foreign investment over the coming years.

Even the Foreign Investment Agency (Ministry of Planning and Investment) admits that it is not easy for foreign investors to leave the Chinese market. Meanwhile, Thailand, Indonesia, Malaysia, and others are increasing measures to welcome the shifting capital investment. Thus, in order to accelerate the absorption of investment from RCEP and other potential partners, Vietnam also needs to speed up improvements in its investment environment while proposing appealing policies to welcome the new investment flows.

Source: Nhan Dan Online