Domestic enterprises join their foreign counterparts in sizing up the opportunities the TPP may bring.
Even before the TPP was signed foreign firms had plans to invest in Vietnam and Malaysia - two of the fastest-growing countries in Southeast Asia with export-led economies.
The TPP will bring changes to both economies, according to The Peterson Institute for International Economics in Washington D.C. By 2025 the TPP is expected to increase Vietnam’s exports by 29 per cent and Malaysia’s by 12 per cent.
With 12 members that account for 40 per cent of global GDP, the TPP is said to bring greater benefit to the less-developed of its members. Vietnam and Malaysia, for example, are yet to have free trade agreements with the US so their exported products are currently subject to tariffs.
When these tariffs are cut, however, their products will have major advantages compared to competitors such as China, Thailand, and Indonesia, which are non-TPP members. Tariffs on the clothing products of non-TPP members, for example, are about 10 per cent.
All supply chains will change after several years, according to the General Director of United Sweethearts Garments Tang Chong Chi. He has looked forward to the TPP being signed for some time and is planning to open a second factory in Vietnam.
Mr. David Hon, General Director of Dahon, a folding bicycle manufacturer in California, is waiting for official TPP documents to be released to see the incentives in each TPP member. He will then consider whether to move his manufacturing from China to Vietnam or Malaysia, depending on the tax incentives and commercial conditions in each country.
When the TPP comes in effect investors will tend to buy products from TPP members, Mr. Hon added.
Not only foreign enterprises but also Vietnamese enterprises are actively preparing for the TPP. On October 7 the Vietnam National Textile and Garment Group (Vinatex) began construction of a factory in Son Duong district in northern Tuyen Quang province, with initial investment of VND130 billion ($5.85 million). Vinatex CEO Le Tien Truong said the new facility is targeted at utilizing the opportunities presented by the TPP.
In September the Century Synthetic Fiber Corp., a Vietnamese fiber manufacturing company, opened a new factory in southern Tay Ninh province with a capacity of 30,000 tonnes of fiber per year and total investment of over VND735 billion ($33.1 million). General Director Dang Trieu Hoa said that when the TPP comes into effect it will drive the corporation forward.
Textiles and garment companies are said to gain the most from the TPP but the “yarn forward” rule on input materials is the most challenging problem. Several factories have been built recently and many others are expected in the future.
- "yarn forward" rule