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US firms scope TPP benefits
07/09/2013 10:02 am

Vietnam’s involvement in high-profile Trans-Pacific Partnership (TPP) negotiations is drawing attention from international investors.

VIR’s Hien Hanh spoke with Richard Vuylsteke, president of the American Chamber of Commerce (AmCham) in Hong Kong, who headed a business delegation to Hanoi last week, regarding opportunities AmCham members are eyeing in Vietnam in anticipation of the TPP accord.

TPP is a regional free trade agreement that includes the US, Japan and Vietnam among the 12 negotiators. The 19th round of TPP negotiations started last week in Brunei after reportedly a "successful" round in Malaysia last month. Is the aim of your delegation's visit to lobby the Vietnamese government to expedite the negotiations, so the deal could be signed by the end of the year as many expect?

There are two major reasons behind our trip. Over the last couple of years we have witnessed changes in China’s policy. China’s policy has shifted to encouraging investments in high-tech sectors, and away from labour-intensive fields or sectors which are big consumers of natural resources. Also, the Chinese government has now encouraged products earmarked for domestic consumption, instead of exports. For this reason we are looking for other more suitable investment venues.

Most of our delegation members are textile and footwear companies which account for $3 billion in Vietnam exports. Before coming to Vietnam, we made field trips to Bangladesh, Myanmar and Cambodia. From my perspective as president of AmCham in Hong Kong, Bangladesh may not be a good place for investment due to safety concerns, while Vietnam is high on our radar screen. Vietnam has political stability, which makes it an attractive place to expand investment.

The second reason behind our visit to Vietnam is the TPP negotiations. As TPP is a high-standard regional free trade agreement, Vietnam being part of the TPP means there would be lots of improvements in Vietnam in the future, from government management, business environment, transparency and custom issues to labour relations.

I think the great thing is that the US knows that Vietnam is at a very low level of development, but the US is interested in inviting Vietnam to join the TPP. It would be great if Vietnam is successful. Our message to the Vietnamese government is TPP is a great opportunity for Vietnam. If Vietnam becomes part of TPP, the country will attract much more foreign direct investment. That’s a big message.

Under the TPP, for Vietnam’s export items like textile and footwear to enjoy very low import tariffs or be duty free, a high ratio of materials must be sourced domestically. This “Yarn-Forward” restriction has raised concerns for Vietnam as up to 70-80 per cent of materials used for making textile and footwear exports in Vietnam now are imported, mainly from China. But you contend this can create lots of opportunities for foreign investors and benefit Vietnam, right?

That’s correct. We know that Chinese mills are already looking to move into Vietnam. They aim to produce materials and end products to enjoy the tariffs when the deal comes into force. And Korean firms are expanding in Vietnam, while Japanese companies have built a lot operations in Vietnam. So the Yarn-Forward doesn’t make any difference because everything can be made here, right?

As I understand it, countries like Malaysia and Vietnam are lobbying other negotiation members to allow them to enjoy tax preferences despite not being able to meet the condition of domestic content in export products. Is there possibility Vietnam can get its way to go?

Yarn-Forward is a very tough point for negotiators. US negotiators are aware it is Vietnam’s prime concern. But the negotiations are confidential, so we will wait and see what will happen. But I think several years ahead, no matter what happens on the Yarn-Forward matter, Vietnam can still have chance to enjoy the duty free tax rate because investors are coming here, they create local sources of materials which will help eliminate difficulties, helping Vietnam’s exports to enjoy the TPP tax.

Do you expect that the TPP deal would be signed by the end of this year?

We hope that the negotiations would even close by October this year. Negotiations might then be over but the governments procedures might take time. The great thing is that the US can bring expertise to Vietnam to implement this deal.

What are the biggest concerns for US investors when weighing investment decisions in Vietnam?

Our concerns are issues of land, power and infrastructure. For instance, power supply is yet to be reliable in Vietnam, while investing in generating our own source of power is too expensive. Going green is also very important. Water treatment, waste water recycle is very important for our operation. For soft infrastructure, we wish to see more skilled workers, a better education system and easier administrative procedures in Vietnam.

Source: VIR

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