Last update: 13:24 | 12/03/2018
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has just been inked by ministers of the 11 member countries in Chile. All businesses expressed delight at this global milestone.
Alex Crane, general manager of Cushman & Wakefield Vietnam
The negotiations are closed out and by doing this, the partners have set standard stating clearly that the pacific nations are open for business, led by a resurgent Japan, softened by Canada and without the US.
Yes, CPTPP, is in a lesser form than the original TPP without the US, Mexico, the Philippines, South Korea and Indonesia however it is successful in integrating and creating a trade bloc that could offer some balance to China’s growing influence in the region.
The key to this is that the door is still open for others with Thailand, Taiwan and the UK previously declaring an interest in joining and if the US is to change its stance by the next election cycle, it is anticipated that Indonesia, South Korea, the Philippines shall follow suit.
Canada has successfully included more progressive elements, such as guarantees on labor, gender, indigenous people and the environment. These were serious concerns for opponents of the original TPP and the strength of Canada negations has brought about a more palatable agreement. The block itself has removed provisions allowing investors to sue governments which is a welcome step for those who did not wish to see corporations gaining leverage over sovereign nations.
There are still sticking issues with respect to Vietnam’s labour rights, the Japanese auto industry and Canada cultural goods, but these shall be dealt with separately in November by way of side agreement.
A report published by the Eurasia Group with respect to TPP suggested that GDP in Vietnam will be boosted by 11 per cent and exports by 28 per cent by 2025 as companies move their manufacturing bases to the country to take advantage of the low wages. There will be compression on these estimates, however the outlook is still very positive and again places Vietnam firmly into the targets for global investors and manufacturers.
Increase in investors and developers looking to the corporate real estate market (CRE) with respect to light and heavy industry. Exporters will benefit from the trade liberalization, domestic private firms will be able to tap into global value chains and it has the potential to accelerate domestic reforms. All factors combine to show an increase in foreign direct investment of which CRE will absorb a healthy proportion.
Stephen Wyatt, country manager at JLL Vietnam
After the disappointment of the US pulling out of the original TPP, the signing of the CPTPP is a major boost and we believe will have a positive impact on the Vietnam economy and a further step forward towards integration into the international community. As with the original TPP agreement, this agreement will take time to take effect and each country will need to ratify, however, once in the agreement is in place, Vietnam stands to benefit, even without the inclusion of the US.
Signing of the CPTPP should provide both foreign and domestic investors more confidence, as the country will develop a more mature legal structure in line with international legislation. We expect foreign investors will see this as a very positive step forward for the country and we fully expect more investors to consider Vietnam within their investment strategy.
We will see significant increase in our business over the coming years as the CPTPP comes into effect. As JLL is a truly global business, we operate in all the countries that are participating in the CPTPP. This means that we are already in communication with our colleagues in these countries and working on a strategy of how to connect companies and clients.
We are already assisting a number of new companies moving into Vietnam that will be setting up operations, mainly in the manufacturing sector and we expect this activity to increase as and when the CPTPP comes into effect.
Neil MacGregor, managing director Savills Vietnam
Savills believe that the CPTPP can bring significant opportunities to Vietnam, although it would certainly be advantageous to have the US as an additional signatory.
The agreement will strengthen trading relations with many of Vietnam’s key partners, as well as offering significant additional benefits. We are particularly interested in the impact of the agreement upon the long term stable growth of the industrial real estate sector in Vietnam, with manufacturing representing Vietnam’s key growth engine.
Increased transparency and government support will certainly assist the industrial sector to grow and add additional momentum to other areas of the economy. Sustainable development of the manufacturing sector will support the continued growth of the middle class, allowing for more even distribution of wealth and supporting demand for the residential, hospitality and retail real estate sectors, as well as industrial and logistics.
Kenneth Atkinson, executive chairman of Grant Thornton
Of course before we get too excited about the signing of the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) we must remember that this Agreement still needs to ratified by the Governments of each of the 11 member countries. Only when ratified by 6 countries will the Agreement come into effect.
The opportunities are of course driven by the fact that trade between the member countries will be the agreement to reduce tariffs on goods and services traded between member countries, and although the size of the market is greatly reduced from that of the TPP because of the withdrawal of the USA the market created by the member countries still accounts for approximately 13.5 per cent of global trade.
The initial beneficiaries are likely to be those companies engaged in manufacturing in Vietnam’s traditional export sectors, such as garments and footwear plus seafood expirters and those companies and sectors not currently trading with the member countries but basically any industry that will benefit from tariff reductions is likely to benefit in the longer term.
The Agreement does contain provisions on environmental and social safeguards and whilst some of these are likely to pose a challenge to Vietnamese companies in the short term they will deliver longer term benefits. The other major challenge is for Vietnamese SME’s being able to become part of the global supply chain.
I believe the benefits are the same for both domestic and foreign investors and largely revolve around the potential opening of new markets and the standardised trade procedures included in the Agreement, especially those provisions concerning the rules of origin.
As a professional service firm I do not think and expect there to be any direct impact on our business however it will benefit many of our clients and also should have a positive impact on new Foreign Direct Investment which should have an indirect impact on the growth of our business.
Ross McCullough, president of UPS Asia-Pacific Region
UPS congratulates all the countries signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It will significantly contribute to the development of the Asia-Pacific, create opportunities for firms to break open new markets, and attract potential clients.
The CPTPP would remove cross-border transaction barriers, create a modern e-commerce platform, and form standard principles to become an important precedent for regional trade. When the CPTPP is signed, UPS will support every business to learn of the benefits of the agreement and take the opportunity to enhance their competitiveness over the globe.
Pham Hong Hai, CEO of HSBC Vietnam
Today the CPTPP has been signed in Chile, showing the fruit of great efforts by the 11 countries around the Pacific Rim. I highly appreciate the resilience of the members for their continuous dialogues to reach the necessary agreements leading to the signing of the deal today, especially after the biggest partner, the US, withdrew from the TPP in January 2017.
The CPTPP not only embraces trade but also investment, intellectual property, and other principles, therefore it is really a comprehensive deal and is much more progressive than the previous TPP. For me, the signing of the CPTPP is a milestone for the global economy, especially as protectionism is rising.
Without the US, Vietnam’s benefits may be less than in the TPP. For example, GDP will only move up by 1.32 per cent instead of 6.7 per cent and exports will increase by 4 per cent instead of 15 per cent. However, in general, industries like garment and textiles, leather footwear, and especially labour-intensive businesses will benefit a great deal. Vietnam will be able to take advantage of increased access to member markets, especially those on the other side of the Pacific like Canada and Mexico. This is amplified by the fact that some other countries and markets are expressing good will to take part in the deal, including Taiwan, Korea, Thailand, Indonesia, and the Philippines, which will triple the benefits for all members, bringing in roughly $500 billion per year.
As a global bank operating at 3,700 offices in 67 countries and territories, HSBC has access to 90 per cent of the world trade, processing more than $1 million trade turnover every minute. HSBC welcomes the opportunities brought by the CPTPP. Being present at 9 of the 11 member countries (and all 5 nations that now want to take part in the CPTPP), HSBC commits to working closely with clients in Vietnam, connecting them with potential partners in these markets, and providing optimised financial solutions that support individual and corporate customers to realise their potentials. We wish to contribute to building a strong banking industry and large local corporates in Vietnam to enhance integration and create a highly competitive international market to take advantage of all the opportunities that the CPTPP brings about.
Matthias Dühn, LL.M, general director of Viet Diligence Legal
It is unfortunate that the United States of America withdrew from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as without the US, the CPTPP’s member economies now only make up about 13.5 per cent of the global GDP, instead of the circa 27 per cent under the original TPP. However, signing the CPTPP will still advance and improve the Vietnamese economy significantly: specifically, the agreement will boost the export of goods in sectors such as the garment and textiles, footwear, food processing, alcoholic beverages, tobacco, fisheries, and electronics. The CPTPP’s changed or delayed terms also present a rather good opportunity for Vietnam, as it leaves the Government more time to comply with all conditions.
However, the CPTPP also presents a lot of challenges for Vietnam as the agremeent’s least developed member country: the Vietnamese economy is still not prepared, and the supporting industries are rather weak. The flexibility of Vietnamese enterprises is still not up to modern market economy standards. Specifically, the increasing competition from goods imported from other member countries of the CPTPP will be a challenge. While Vietnamese enterprises are currently still protected by high tariffs, demands for zero-tariff rates will increase from CPTPP members in the future.
Despite the challenges, the CPTPP will urge Vietnam to continue tackling issues it is already working on, such as administrative reforms, corruption, transparency, reduction of the influence of State-Owned Enterprises (SOEs), and the further work towards legal and factual market-economy status. Although adjusting the regulatory and administrative framework is difficult and costly, Vietnam’s commitments under the CPTPP should therefore be regarded as a “good” external force to improve the Vietnamese economy towards more efficiency, transparency, and competitiveness.