Vietnam is anticipated to enjoy the highest trade and income gains among members of Regional Comprehensive Economic Partnership (RCEP), according to a latest World Bank report.
The average trade weighted tariff imposed by Vietnam declines from 0.8% to 0.2% while the tariffs faced by the country are reduced from 0.6% to 0.1% between 2000 and 2035, it said.
In the most optimistic scenario, where all benefits are applied, Vietnam has the highest gains of all RCEP member countries, newswire Vietnam Briefing cited the report as saying. Vietnam’s income levels increase by 4.9% relative to the baseline, higher than other countries, where the income level increases by 2.5%.
Trade also increases the most in this scenario, with exports expanding by 11.4% and imports by 9.2%, relative to the baseline.”
All RCEP member countries will see an increase in exports and imports. Vietnam’s exports expand by 11.4% and imports by 9.2%.
Sectors that recorded the highest growth were motorised vehicles manufacturing with 18.6%, followed by textiles and garments 16.2% and apparel 14.9%, mainly due to the reduction of non-tariff measures.
In the scenario where only the tariff reduction is implemented, the impact on Vietnam’s economy is negligible, with real income close to zero. Trade also sees a small reduction relative to the baseline, with both exports and imports declining by 0.3%. It is attributed to the fact that Vietnam enjoys relatively low tax rates thanks to other free trade agreements.
According to the WB’s report, RCEP also provides an opportunity to promote growth and support recovery after the COVID-19 pandemic.
Vietnam and Malaysia are the countries that are expected to benefit the most from this agreement. RCEP will help Vietnam access consumer markets which is twice the size of the markets in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as RCEP includes China, the Republic of Korea and Japan. However, it required Vietnam to raise standards to meet higher demand and stiffer competition.
Another advantage that RCEP brings to the country is that it is creating more equality in the job market because sectors that employ women are expanded, such as textiles, apparel, electronics and some service sectors. The wage of female workers will increase faster than that of male ones, especially in Vietnam.
About 50% of the population in RCEP, or 1.1 billion people, contribute US$10 or more per day based on purchasing power. The agreement can help boost the middle class by 27 million people for all member countries by 2035, of which Vietnam is expected to benefit the most when it has an additional 1.7 million people enter this class, according to the World Bank.
The WB report said that the simplification of procedures such as customs and rules of origin will help reduce bureaucracy, allowing more small and medium enterprises (SMEs) to participate. These enterprises account for 98% of the total number of enterprises in Vietnam, contributing 40% of GDP. Thus, RCEP offers a chance for Vietnamese SMEs to increase the value chain.
Vietnam's economic growth will come from a deeper and more inclusive commitment through RCEP intra-regional trade, common rules of origin and greater openness to goods and services in accessing markets, especially the Chinese market, it said.