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Vietnam Today

TPP to add $23.5 billion to GDP in 2020

Released at: 16:39, 10/10/2015 Trans-Pacific Partnership

TPP to add $23.5 billion to GDP in 2020

Agreement to the benefit of the country, its enterprises, and the economy as a whole, Deputy Minister tells local media.

by Hung Nguyen

The Ministry of Industry and Trade (MoIT) met with the media on September 9 to discuss the signing of the TPP, chaired by Deputy Minister and head of the negotiating team Tran Quoc Khanh.

All things remaining equal, he said, the TPP will add $23.5 billion to Vietnam's GDP in 2020 and $33.5 billion in 2025.

In terms of imports and exports, import tariffs in strong economies such as the US, Japan, and Canada being cut to 0 per cent will be a major boost for Vietnam’s exports.

Textiles, in particular, will increase significantly, by $68 billion in 2025, and every $1 billion in extra exports will create 250,000 jobs. The footwear sector will also have the opportunity to boost its exports.

Vietnam has trade surpluses with strong economies in the TPP, such as the US, Japan, Australia, and others, he said, and the existing trend of exports growing will continue after the TPP comes into being.

Tariffs being cut or removed in the 12 member countries will increase the price competitiveness of Vietnamese products, though prices are also affected by other factors such as demand and inflation. The government, meanwhile, will still have control over internal matters such as taxation to influence prices.

Regarding investment, a number of huge multinational corporations are already investing or considering investing in Vietnam, to make the country part of their supply chains.

The TPP will see stronger interest from investors and provide Vietnam with the opportunity to develop new and existing sectors using high technology.

Agriculture products, however, will be face challenges under the TPP, with a huge amount of imported products to come from Australia, New Zealand, and Chile, in particular chicken and pork.

Other goods likely to struggle include milk, soybean, corn, and raw materials for animal feed, though large qualities of these are already imported so the impact of the TPP will be less dramatic than for meat.

Other products imported to Vietnam currently subject to high import tariffs include confectionery, cleaning liquid, jewelry, kitchen utensils, air-conditioners, alcohol, and cigarettes. The removal of tariffs on these products will have an effect on State budget revenue, Mr. Khanh said, but not make them more competitive in the market.  

As for the State budget, revenue from import tariffs will decline over the years but follow a certain timeframe, so will not present a “shock” to the budget. Other taxes may be increased to make up the shortfall.

In answering concerns expressed by Vietnamese enterprises about their competitive capacity, Mr. Khanh said that Vietnam joining the TPP is to the benefit of the country, its enterprises, and the economy as a whole.

The final result of negotiations is acceptable, he added, and he believes that Vietnamese enterprises are strong enough to cope with the new challenges it presents.

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