Foreign investors unfazed by Trump’s TPP trade deal rebuff

Vietnam’s investment minister says reforms to continue

HANOI, June 22, (RTRS): Every 45 seconds or so, a neatly wrapped VanHeusen dress shirt destined for a J.C. Penney store in the United States drops off a new production line at a factory north of Vietnam’s capital.

Next door, rice paddies the size of 40 football fields have been filled for the $320 million textile mill which Hong Kong based TAL Group plans to build so it won’t need to import cloth for the shirts.

As elsewhere in Vietnam, there has been no sign of an impact on investment plans since US President Donald Trump abandoned the proposed Trans Pacific Partnership (TPP) trade deal which had been expected to benefit Vietnam more than any country.

In fact, foreign direct investment rose 6 percent year-on-year to $6.15 billion in the first five months of 2017. Cheap labour is an obvious lure for foreign investors. TAL’s chief executive, Roger Lee, said Vietnam also scores highly on middle management, work ethic and government policy.

Though the removal of US import tariffs under a TPP pact would have been a bonus, Lee said he had no second thoughts about investment plans after Trump pulled out of the deal soon after taking office.

“Vietnam is a very compelling proposition,” said Lee.

The wage for garment workers is $250 a month in Vietnam, compared to $700 in China, where TAL recently shut a factory for cost reasons.

The removal of tariffs of up to about 30 percent would have made clothing firms particular beneficiaries of the TPP deal, which had been forecast to add 28 percent to Vietnam’s exports and 11 percent to its gross domestic product over a decade.

Other clothing firms were also not discouraged by the scrapping of the deal. Lawsgroup’s chief executive, Bosco Law, told Reuters it was now seeking to expand from its three factories with 10,000 workers.

Vietnam’s trade surplus over the United States — the sixth biggest last year — has come under scrutiny as a result of Trump’s “America First” policy to bring manufacturing jobs back File photo shows a seat belt parts manufacturing factory of Takata in the town of Aisho in Shiga prefecture. Takata shares suffered another hair-raising dive on June 22, plummeting by more than 50 percent on fears the troubled

airbag maker is headed for bankruptcy and plans to sell its assets to a US company. (AFP) Takata suffered another crushing collapse on Thursday, plummeting more than 50 percent on fears the airbag maker at the centre of the auto industry’s biggest-ever safety recall is headed for bankruptcy.

The Tokyo-based car parts giant, facing lawsuits and huge recall-related costs over a bag defect linked to at least 16 deaths globally, has tumbled for four straight days.

It is now worth less than a quarter of

to America. But it hasn’t discouraged investment.

“We have started working for a couple of American manufacturing companies that contacted us after the TPP’s demise and that are willing to relocate part of their operations from China,” said Oscar Mussons, Senior Associate at Dezan Shira and Associates professional services firm.

Vietnam has been a big winner as Chinese manufacturing costs have risen and China itself is now one of the three biggest investors in Vietnam.

The TPP deal would have further improved access to US and other markets for manufacturers based there, but also its value from just a week ago when a report by Japan’s leading Nikkei business daily said it would seek bankruptcy protection and sell its assets to a US company.

At Thursday’s close, the embattled stock had plummeted 55 percent to 110 yen ($1) from a day earlier.

“The shares are going to keep falling because the only buyers are day traders hoping to lock in gains from fluctuations in the price,” Hiroaki Hiwata, a strategist

bound Vietnam to reforms meaning everything from opening up food import markets to strengthening labour rights.

Investment and Planning Minister Nguyen Chi Dung told Reuters that Vietnam planned to go ahead with its commitments under TPP anyway — both to strengthen the economy and because of other trade deals, such as one with the European Union. The 11 remaining TPP members are also still trying to keep it alive.

Dung said Vietnam had a target of $10 billion a year in foreign direct investment over the next five years — compared to nearly $16 billion in 2016 alone — as it sought a change in the type at Toyo Securities, told AFP earlier.

Another Nikkei report Thursday said Takata, with liabilities exceeding one trillion yen, would file for bankruptcy protection as early as Monday.

Takata’s major automaker clients reportedly support the bankruptcy filing plan.

The scandal-hit airbag firm and some of its car customers are facing legal claims they knew about the problem and kept silent about it. (AFP)

of investment it wants to draw.

“Before we focused on quantity, now we switch to quality,” Dung said. “Higher technology, higher added value, less use of energy, less use of raw materials, less cheap labour.”

That is where Vietnam has a greater challenge. It lags competitors for top skills. The proportion of secondary school leavers going on to further studies is a third higher in China and over three times higher in South Korea.

“Vietnam is still a very attractive country, but companies might not invest as much as expected because they find the employees lack the skills for that added value,” Mussons said.