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The Trans-Pacific Partnership Agreement: Opportunities, Challenges and Action
2/6/2016 15:9' Send Print
Former Prime Minister Nguyen Tan Dung. Image: VGP

Viet Nam’s signing the Trans-Pacific Partnership Agreement (TPP) is not only the result of 5 years of persistent negotiations in the spirit of cooperation and struggle for national interest as the highest national target but also the achievements of 30 years of renovation, including international economic integration-an important content which is strongly confirmed and interpreted in the resolutions of the Party. This is also the experience drawn from practical integration of Viet Nam after the signing and implementation of the Viet Nam-US Trade Agreement, accession into the ASEAN Free Trade Area, the free trade agreements between ASEAN and its partners, and accession into the World Trade Organization (WTO). International economic integration is also an important procress in the socialist-oriented market economy which we are building.

I. Implementing the policy of positive and proactive international integration, in the 10th and 11th Congresses, the Politburo of the Party Central Committee approved the proposal of the Government on negotiations to join in a number of new free trade agreements. These are agreements with levels of commitment on opening market higher than those to WTO and other free trade agreements (FTA) that Viet Nam signed previously. Specifically, TPP and FTA with the EU are comprehensive agreements with balance of interests, extensive and deepened commitments on market opening trade in goods, services, investment, intellectual property rights at a high level as well as committments on market economy institution, state-owned enterprises and public procurement to facilitate a transparent business environment and fair competition. These agreements also includes contents which do not related to direct trade, such as environment and labor. Given the major features mentioned above, TPP and the Viet Nam-EU FTA are called free trade agreements of the new generation.

The Trans-Pacific Partnership Agreement is a comprehensive approach to market, ensuring the freedom of movement in the higher levels of goods, services, capital and technology through commitment to remove rapidly taxes on export, import and non-tariff barriers, creating a fair and non-discrimination business environment, facilitating trade and investment, thereby bringing more benefits for production, business, laborers and consumers.

The Trans-Pacific Partnership Agreement will promote the formation of new production network and supply chain in the market of the 12 member states, create conditions for thriving internal trade, improve economic efficiency, promote growth, support job generation, increase income, improve people’s life, contribute to addressing challenges of the contemporary economy, encourage innovation, creativity and development of the digital economy, develop competition policy and rules of operation of state-owned enterprises as well as protect the fundamental rights of laborers and environmental protection. The agreement also contains provisions to ensure that member economies with different levels of development and businesses of all sizes can benefit, assist small and medium-sized enterprises to overcome challenges, and leverage opportunities for growth. The Trans-Pacific Partnership also includes commitments on technical assistance, capacity building and flexibility to implement the roadmap in accordance with the difference in the level of development of parties so that they can meet the commitments and fully leverage the benefits of the agreement at the same time regulates mechanisms for monitoring and sanctions of violations.

The Trans-Pacific Partnership Agreement respects the political institution of each country, recognizes requirements to fullly comply with national legislation, align with international commitments and not to include contents relating to defense and security. The agreement is also expected to create a new foundation for regional economic integration and open opportunities for other countries in Asia-Pacific to participate.

While the level of development of Viet Nam’s economy is slow and there remain difficulties, its decision to proactively participate in the new generation of FTAs, especially TPP, while accepting competition, making efforts to overcome challenges and seizing opportunities to strive for rapid and sustainable development demonstrate the political acumen, wise thinking and epochal vision of the Party and State. This is also a confirmation of confidence in the will, capacity and power of the people of Viet Nam.

II. The Trans-Pacific Partnership Agreement and FTA with the EU will bring more favorable opportunities but also pose difficulties and challenges to Viet Nam.

These agreements will provide further impetus for socio-economic development, especially in attracting investment and promoting exports to largest economies in the world, including the EU with 28 members and a GDP of US$ 18.000 million and TPP currently with 12 members and a GDP of over US$ 20,000 million. These are regions with source technology and export market and the largest investment of Viet Nam for many consecutive years. If these agreements’impacts are combined with FTAs which have already signed or are under negotiations, opportunities will be much higher as Viet Nam will have free trade relation with 55 countries, including 15 G20 countries.

Export and investment play a decisive role for economic growth, job creation, improvement of people’s life, especially when per capita income and domestic consumption in Viet Nam are still low. Higher proportion of exports and imports to these markets help balance trade relations with these countries. Commitments in the agreements are the framework and standards to contribute to perfecting the modern market economy and accelerate the process of restructuring, and transformation of growth model. Joining these agreements is a new step to consistently implementing the foreign policy of independence, self-reliance, multilateralization and diversification of relations, enhance the position of Viet Nam in the international arena, especially in an area where strategic competition is getting fiercer.

Along with favorable opportunities, the agreements also pose difficulties and challenges. Fierce competition will take place not only among countries participating in the agreements, but also in domestic market on all three levels: products, businesses and country-especially competition in institutional quality and business environment. Under competition pressure, some enterprises which cannot strive forward after their transition and restructure are likely subject to dissolution or bankrupt, and a number of employees will lose their jobs; agricultural sector and farmers are vulnerable; the rich and poor gap will be widened if we do not implement effectively, rapidly and sustainably the development strategies to ensure that all people benefit from the fruits of growth. Challenges to implementation of these agreements also very large, from perfecting the legal system to training human resources, capacity building of officials and civil servants, and legal and technical experts. The contents on labor and trade union also pose new challenges and requirements to the Vietnam General Confederation of Labor and the political system of Viet Nam.

It is necessary to be aware that the opportunities and advantages do not translate themselves into economic power, interest and competitiveness in the market but through efforts and results of activities of stakeholders, the state, citizens and businesses. Challenges and difficulties will be big pressure. However, the pressure extent depends of each stakeholder’s response capacity. If they make good use of opportunities and advantages, opportunities will repel challenges and difficulties and create opportunities, and bigger new advantages; on the contrary, if challenges and difficulties prevail, actors will lose and will be difficult to overcome. It should be stressed that, in the FTAs, opportunities always accompany challenges and the challenges contain opportunities; this is the dialectics of the development process.

III. In the context of deepened and widened globalization and international integration, with the formation of the ASEAN Economic Community, accession into new FTAs, especially the new generation FTA, the TPP and FTA with the EU, explosion of information technology and the internet, cross-border transactions have increasingly accounted for high proportion of global trade and services; along with advances in multimodal transport and logistics services, the boundary between the domestic market and foreign market almost disappears. Consequently, the import substitution industrialization or export-oriented models no longer retain their classic meanings. Many countries turn to competition-based industrialization, exploitation and creation of comparative advantages, changing comparative advantages into competitive advantages, participation in global production and value chains while striving to dominate stages with high added value in that chain.

To take advantage of opportunities and advantages and overcome challenges and difficulties, it is urgent now to enhance the competitiveness of the whole economy. In particular, the role and actions of each actor should be clearly defined to implement the decisive tasks.

Businesses are able to decide the competitiveness at micro level, reflecting the strength and competitiveness of the economy. Enterprises must bravely accept the competition and be proactive and creative in implementing synchronous and drastic solutions to constantly improve the competitiveness of goods and services they supply, not only in domestic market but also region and the world. However, businesses cannot themselves decide all. Enterprises must act within the framework of the determined institutional and business environment. This entirely depends on the State.

Numerous studies and practices from countries confirm that, institutional governance is the most decisive factor to macroeconomic competitiveness and economic development. Rapid and sustainable development or stagnation and backwardness are mainly due to institutional quality. Good institutions which ensure rule of law government, democratic rights of the people and are in line with modern market economy will bring into play synergy and resources for development. And so, institutions have a crucial role to the efficiency and competitiveness of enterprises.

To have good and high quality institutions, the relationship between the state, market, and society must be clearly identified. The State must well implement it function as an agitator of development, especially macroeconomic stability, build legal systems, policies, strategies, plans and organization of structure of management to create a transparent business environment, ensure business freedom and fair competition, use State resources, policy and regulatory instruments for cultural development, make social progress, exercise social equity, ensure social security, improve social welfare and living conditions of people, protect environment, ensure essential public services, develop system of socio-economic infrastructure, train human resource, strengthen defense potential, and maintain political security, social order and social safety.

The market determines the mobilization, allocation and efficient use of resources. Businesses have the rights to decide on their areas of operation which are not prohibited by law, and to promote social responsibility and business culture. Society, through people, organizations, professional associations representing them, experts, independent researchers contribute critical opinions, and monitor policy implementation in order to limit constraints of the market and the State.

Building upon correct awareness of the above-mentioned relationship, Viet Nam must urgently continue to improve the institutional and legal systems to meet requirements of a modern market economy, international integration and commitment in FTAs, especially the new generation FTAs in a spirit of politically and economically comprehensive and synchronous renovation. Focus all efforts to build and perfect the rule of law State of the people, by the people, for the people and respect for law. Citizens can do what the law does not prohibit. Officials, public servants can also do and should do what stipulates by law.

Continue reforms to ensure compatibility, synchronization between legal, and organizational structure of the contingent of cadres and civil servants. Organizational duplication and overlap will cause waste of resources and hinder development. Boldly accept renovation, overcome inertia and conservatism to complete organizational leadership and management, improve governance, and meet the requirements of building and protecting the country in the period new development.

Improvement of business environment must be part of institutional reforms. The institutions create framework and the limits on the business environment improvement. There cannot be a good business environment if there are no appropriate institutions. Progress in institutional reforms must be fully transformed to business environment improvement. This does not only relate to apparatus organization but also closely ties to the quality of cadres and civil servants. Efforts made be made to build a contingent of qualified and ethical officials and public employees who devote to work for the people. Special attention is to be given to training a team of legal experts, and business administrators who can live up to requirements of integration, competition and development.

Only by renovating governance can we enhance the quality and efficiency of restructuring, transformation of growth models, application of science and technology, labor productivity, and improvement of the competitiveness of products, businesses and the entire economy. The appropriate institutional renovation will facilitate the accumulation and concentration of lands, forming of large areas of commodity production and a clean agriculture, with high added value, stable supply to increase Viet Nam’s share of the world market. If not, Viet Nam will not be able to take advantage of the favorable opportunities brought about by TPP, FTA with the EU and the new FTAs.

The Trans-Pacific Partnership Agreement as well as the FTA with the EU require state-owned enterprises to be open, transparent and engage in fair competition with enterprises of different economic sectors. The process of restructuring, and improving the efficiency of state-owned enterprises must be accelerated, while Vietnamese businesses especially private enterprises are encouraged to develop strongly to act as motivation for the enhancement of competitiveness and economic autonomy.

To ensure success in international integration and effective implementation of the FTA, especially TPP and Viet Nam-EU FTA, it is essential to have the Resolution of the Party, National Assembly and a specific program of action of the Government, levels and sectors of the business community. Information and communication must be stepped up to build consensus in awareness, unity of action, efforts to improve competitiveness, given Viet Nam's economy rapid and sustainable development.

We live in an era of evolution and rapid growth; the world is entering the fourth wave of industrialization, and the process of industrialization is increasingly shortened. With strong will to strive forward, creative spirit and sound growth strategy, a late comer can catch up and surpass countries with higher levels of development and new and small scale businesses can quickly become big businesses.

Joining these agreements, Viet Nam also has an opportunity to improve the economic efficiency due to broaden economic scale, facilitate the formation of large enterprises along with privatization of enterprises. This is also an opportunity to foster the spirit of renovation, creativity, encourage entrepreneurship startup of people and elevate the level of development of the economy.

Let the entire Party, people and army and the business community in Viet Nam uphold national pride, join hands, actively take the best out of opportunities and advantages, strive to overcome challenges and difficulties in integration, enhance comprehensive national power, firmly safeguard national independence, sovereignty, territorial integrity and build the socialist Viet Nam into a strong country with prosperous people, democracy, equity and civilization to advance with the times and on par with powers of the five continents as aspired to by our beloved President Ho Chi Minh.

Nguyen Tan DungFormer Prime Minister of the Socialist Republic of Viet Nam