ACCORDING to calculations by the National Centre for Socio-Economic Information and Forecasting under Vietnam’s Ministry of Planning and Investment, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will boost Vietnam’s GDP by $1.7 billion and exports by more than $4 billion by 2035, up 1.32 per cent and 4.04 percent respectively.

Vietnam officially became the seventh member of the CPTPP on Monday, which is expected to help strengthen mutually beneficial links among member economies and boost trade, investment and economic growth in Asia Pacific.

According to the Ministry of Industry and Trade, besides zero tariffs for coffee, tea, pepper and cashew nuts, many tariff lines on key export products such as rice, garments, seafood and wood products had also started to enjoy an itinerary of tax cuts.

The National Assembly passed a resolution approving the deal and related documents on November 12, 2018.

With comprehensive commitments, high standards and balances, the impact of the CPTPP on the economy depends greatly on the country’s ability to obtain opportunities and overcome challenges.

The agreement will open new opportunities for trade and create more motivation for Vietnam to reform its economic institutions and business environment.

According to Vietnam Chamber of Commerce and Industry chairman Vu Tien Loc, the CPTPP will open both opportunities and challenges for Vietnamese enterprises. To turn these challenges into opportunities, enterprises needed to diversify their partners and delve into the global value chain.

Loc said market size would be expanded while most tariff barriers would be lifted. Vietnamese businesses would have the chance to push exports to CPTPP members, especially in the sectors of garments and textiles, footwear, bags, electronics, seafood and agricultural products.

“Vietnamese businesses will have more opportunities to lure investment and import hi-tech facilities. In addition, commitments in the CPTPP will also boost reform of local economic mechanisms towards more transparency and competitiveness, creating a better eco-system for enterprises’ development,” said Loc.

The steel sector had been forecast to post good growth this year, but businesses would still have to deal with many difficulties.

According to Vietnam Steel Corporation CEO Nguyen Dinh Phuc, there had been no signs of recovery in the domestic steel market. A number of public investment projects had been halted, while the real estate market remained unruffled.

“The gap between the cost of materials and products is narrowing, which will steel producers’ results this year,” Phuc said.

Although a number of free trade agreements (FTAs) have been signed, non-tariff barriers have been increasing, having a significant impact on the local steel sector. The application of anti-dumping duties from US, Canada, EU, Indonesia, Thailand, Malaysia and India has caused many difficulties. In addition, rising interest and foreign exchange rates will also affect business costs,” Phuc said.

Ministry of Finance’s Department of International Cooperation official Tran Thi Thanh Huyen said gaining tax incentives from FTAs was not a simple matter, especially with new types of comprehensive FTA like the CPTPP.

“To enjoy tax incentives, Vietnamese goods must meet strict standards in addition to technical barriers while the competitiveness of the Vietnamese economy in general and businesses in particular is still weak compared with its partners,” Huyen said.

Thanh Hung Company (footwear) director-general Doan Thi Thu Ha said despite the tax incentives, the true profit Vietnamese leather and footwear enterprises received was low because they were mainly processing for foreign brands. New markets such as Mexico and Canada had been using footwear brands from other countries and were largely unaware of Vietnamese leather and footwear products.

“On the other hand, it must be recognised that Vietnamese enterprises have continued to focus on exploiting traditional markets such as the US, EU and Japan without really focusing on new markets in the Americas,” Ha said.

In order to convince new markets that demand high quality goods, Vietnamese enterprises must invest in research, product development, brand building and added value.

“This takes time in terms of resources,” Ha added.

Economist Le Dang Doanh said Vietnam had implemented 10 bilateral and multilateral FTAs before the CPTPP came into effect, but the use of incentives from several FTAs were decreasing.

“Vietnamese businesses need to build action programmes to improve their production capacity to exploit tax incentives effectively, not only in the CPTPP but also all FTAs,” Doanh said.

Doanh said that CPTPP partners would gradually cut 78-95 per cent of import tariff lines for normal commodities over five years to 10 years, before heading to 98-100 per cent.

On the contrary, Vietnam had committed to lift 65.8 per cent of import tariff lines for all CPTPP partners already, with the rate to be increased to 97.8 per cent from the 11th year, Doanh added.

The 11-member CPTPP officially came into force on December 30, 2018. The trade deal was signed by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam in Santiago in March last year.