Hot money to flow to Vietnam in TPP period

The Vietnam economy is expected to see major changes after it signs the Trans Pacific Partnership (TPP), which includes member countries that make up 40% of the world’s trade.

Analysts believe that Vietnam would see the highest GDP growth rate changes among TPP members. 

GDP growth rate changes have been predicted by the Vietnam Institute for Economic and Policy Research (VEPR), an arm of the Hanoi National University and Japanese Nagoya University. They forecast that the GDP growth rate changes would be between 0.11% and 2.04%.

The researchers also believe that the investment growth rate in Vietnam would be higher than in any other TPP member countries, between 6.86% and 30.62%, nearly the same as the investment growth rate in Japan and nearly double that of Australia, Malaysia and the US, if counting value.

Regarding the economic structure, Vietnam would see the narrowing of the production and business fields with weaker advantages or decreasing advantages, such as pork, chicken, milk, forestry, mining and industries. 

But there would be expansion of some advantageous business fields, such as textiles & garment, footwear, services and construction. 
hot money to flow to vietnam in tpp period hinh 0
As for trade, the report showed that the import/export turnover with TPP member countries will increase. 

Meanwhile, higher imports and slight export decreases would be seen in trade with non-TPP countries.

Vietnam’s textile & garment and footwear exports to the US are expected to increase sharply, while the total export turnover would decrease slightly.

Dr. Nguyen Duc Thanh, VEPR’s director, said Vietnam needs to make immediate adjustments in the labor force to adapt to the new economic structure. 

The adjustments include the mobility of the labor force from rural to urban areas, from untrained to skilled.

“If Vietnam cannot do this, it will lose the opportunity for development,” Thanh warned.

The foreign direct investment (FDI) to Vietnam would increase significantly. However, Vietnam does not want to see bad consequences as before.

The FDI to Vietnam once soared rapidly after Vietnam joined the World Trade Organization (WTO). Large amounts of hot money were injected into Vietnam at that time, causing asset bubbles, which had a negative impact on the real estate and securities markets and harmed the business system.

An expert said he agreed with Thanh that hot money, if it cannot be “absorbed”, would do more harm than good. 

“In the first years of the WTO period, foreign hot money flew to Vietnam, which made asset prices soar dramatically,” he said.
Vietnamnet