Charting new path for growth in Vietnam as TPP falls through

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Charting new path for growth in Vietnam as TPP falls through

The U.S. President’s bold move in signing an executive order to withdraw from the Trans-Pacific Partnership (TPP) made global headlines on 23rd January 2017.

The TPP, one of the most highly anticipated trade agreement among 12 nations, make up 40 per cent of the global gross domestic product (GDP) and one-third of world trade.

This would have given Vietnamese exports easy access to a vast market once it takes effect, according to a white paper published by management consulting firm Solidiance titled “Benefits for Vietnam’s manufacturing under a TPP-like agreement”.

Donald Trump’s decision to disavowal from the TPP means that the agreement – as it currently stands – would die. But while the fall of TPP is seen as a major setback for Vietnam’s industrial economy, manufacturing companies are determined to find new opportunities for foreign expansion, including in other ASEAN countries.

As an alternative to TPP member countries, Vietnam’s largest garment manufacturer and exporter Garco 10 (Garment 10 Corporation) is now eyeing on South Korea for mutual trade benefits since late December 2015 when the two countries made a free trade pact. Going forward, European Union (EU) is also taken into consideration, which is claimed to have a functioning free trade agreement with Vietnam by 2018.

The small domestic market and fast-growing industrial sectors Vietnam possesses are key success factors that make the country Southeast Asian’s manufacturing hub in electronics and garment making.

Longing for benefits of freer trade with other nations, Vietnam signed trade pacts with more than 10 economies to date, including Australia, Chile and the ASEAN Economic Community, allowing the country to make trade deals with fellow members of the Association of Southeast Asian Nations.

Unlike the TPP, these deals do not include rules of origin for products and materials. This means that exporters can compete on quality alone. In this regard, Vietnam’s manufacturing, particularly in textile and electronic industries, will be able to enjoy rapid outsized growth that combine low wages with high quality goods.

No longer able to count on the future of TPP, corporations in Vietnam must chart a new path for growth through other means in order to accelerate Vietnamese exports on a global stage and take advantage of economies of scale.

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