Investment set to soar with advent of TPP deal

Duane Morris Vietnam LLC’s general director Oliver Massmann, told VIR that the Trans-Pacific Partnership (TPP) would create “a new foreign direct investment (FDI) trend in Vietnam as a result of the TPP”, which would also have a positive impact on the country’s improvement of investment climate.

“The TPP will offer Vietnam a chance to continue creating institutions for facilitating a functioning market economy, and provide support for Vietnam’s economic restructuring process”, he said.

He noted that determining the actual working of the new FDI trend required a detailed analysis of the content of the agreement and its implementation.

Vietnam, following the TPP provisions, must adhere strictly to principles such as transparency, predictability, the stability of the investment environment, and the strengthening of protection for intellectual property rights. This will also create an attractive environment in Vietnam, he explained.

Meanwhile, head of the Central Institute for Economic Management (CIEM), Nguyen Dinh Cung also commented that the TPP, which would create a free trade zone that include 40% of the global economy, would impact FDI in two distinct ways.

First, the deal will include provisions that directly reduce barriers to investment by improving intellectual property protection, removing barriers to investment in services, and raising the consistency and transparency of regulatory regimes across partner countries.

Second, reducing barriers to trade will help increase FDI as trade and investment complement each other.

“The signing of the TPP is expected to give many trade and investment jackpots to Vietnam. The wave of FDI coming into Vietnam has been progressively increasing in recent years and is expected to continue for years to come”, said Cung.

Garment and textile firms are expecte4d to greatly benefit from the TPP.

Sesto Vecchi, member of the AmCham Board of Governors and managing lawyers of Russin&Vecchi, told VIR that the skills of Vietnam’s workforce and Vietnam’s low cost of doing business “have already attracted garment and shoe investments for years”.

“The TPP will allow Vietnam to build on this. Many investors pursue a “China Plus One” strategy, whereby investments in China are balanced by investments in Southeast Asia. The TPP will reinforce Vietnam as a natural choice for investors with such a strategy”, he said.

Other investors in the textile and shoes sectors are also preparing their entry to the Vietnamese market to cash in on the windfalls from the TPP.

Since the deal does not include China, India, and Thailand, which are Vietnam’s direct competitors in the textile industry, Vietnam will have a price-related competitive advantage over them due to the preferential taxation that TPP countries will grant to Vietnam, according to Oliver Masmann.

It is no surprise that just a week after the deal’s negotiations, an Indian textile and garment delegation entered Vietnam aiming to set up an Indian textile industrial park to tap into the TPP advantages for Vietnam.

However, Phan Huu Thang, former director of the Ministry of Planning and Investment’s Foreign Investment Agency, said the TPP would affect multiple sectors, not only textiles and garments. “It is expected that Vietnam will lure more investors into agriculture, seafood, logistics, ports, and industrial parks”, he said.