Reason to reform
Mr. Peter Ryder, Chief Executive Officer of Indochina Capital, shares his thoughts with VET on the effect of the TPP on Vietnam’s economy.
During Party General Secretary – Nguyen Phu Trong’s official visit to the US from July 6 to 10 he met with President Barack Obama and the two sides hailed the positive progress achieved during negotiations over the Trans-Pacific Partnership (TPP) and underlined the importance of the pact for regional development and its contribution to global growth and stability. Do you think the TPP will have a major effect on Vietnam’s economy?
Absolutely, the impact should be really quite remarkable and quite positive. The TPP is an expansive agreement covering 40 per cent of the global economy. Vietnam is clearly the junior partner in the group, which includes the US, Japan, Australia and other economies that are bigger, in some cases significantly, than Vietnam, but Vietnam will outgrow many of these economies relatively quickly. It’s a great opportunity for Vietnam to become a charter member of this club.
On the other hand, the TPP will force Vietnam to speed up its reform process, particularly as it relates to State-owned enterprises (SOEs). SOE reform is a key point and a big must for Vietnam to reach its potential from my perspective. One of the other positive things about the TPP is that it sets certain global climate, ecological, environmental, and renewable resources standards that will be critical for Vietnam to meet, not just to help the economy but to improve the quality of life in Vietnam for the Vietnamese people.
Given that Vietnam conducts a great deal of trade with the US and that the TPP will slash major trade protections, will Vietnamese goods be more competitive post- TPP?
In the context of competitive export pricing, the TPP is much to Vietnam’s advantage. Two- way trade today between Vietnam and the US is enormous. Trade exchange, which was quite modest in 1995 at $450 million, had boomed by 2014, reaching over S36 billion.
Vietnam’s exports to the US are much greater than US exports to Vietnam. That’s to be expected and is a typical trading relationship between a developed, established economy and an emerging market. I’m sure there are also demands within the TPP for some tariffs on US goods entering Vietnam to be lowered, but the impact on the US economy will be negligible. On the other hand, because the TPP will lower tariff barriers as it relates to a wide variety of goods that are manufactured in Vietnam, the effect will be to make Vietnamese goods even more price attractive and competitive in the US.
What are the major challenges facing Vietnam’s economy at present?
The world is so dynamic, things are changing so quickly. The need to stay nimble and adaptive is critical. When it comes to technological applications, for example, every week somebody is coming up with a better way to do things. So really staying totally plugged in is an essential, and generally speaking I think the Vietnamese do a really good job at that. It is amazing to me how “wired” Vietnam and the Vietnamese people are as it relates to understanding technology, technological changes, communications, etc.
What are the prospects for the US and Vietnam after the TPP is signed?
From my point of view, the US should be moving closer and closer to Asia as a whole. Yes, Europe is important to the US, and of course we can’t ignore the Middle East, or US-Russian relations, or relations within the Western hemisphere. I have been living in Asia for the last 30 years so I’ve long believed that Asia is the global future. The greatest benefit for America is to become more and more socio-economically and geopolitically integrated with Asia and Asia- Pacific. That’s the big picture. And then, within Asia, in my mind, the three most critical relationships for the US are Japan, China, and Vietnam.
Call me biased, but I believe that of all the ASEAN countries, Vietnam has the greatest potential, from a people perspective, from a cultural perspective, from a geographical perspective, and from a natural resources perspective. Obviously Vietnam and America have a complex relationship born of conflict that is only now becoming a close relationship as both countries and their people have taken enormous steps to heal the wounds and build a special relationship. To my mind, again, Asia is critically important to the US, and within Southeast Asia the most important relationship for the US is with Vietnam. And l would argue that the most important relationship for Vietnam, within the Western world, is with the US.
[Source : Vietnam Economics Times No.258 August 2015]
