In­dus­tries pre­pare for Pa­cific trade pact

Outlook - - CONTENTS - By Hoaøng Haø-minh Höông

Op­por­tu­ni­ties and chal­lenges await lo­cal busi­nesses when the Trans Pa­cific Part­ner­ship is fi­nally agreed, but fol­low­ing a num­ber of stick­ing points that arose at the last round of ne­go­ti­a­tions in Sin­ga­pore this month, the 12 mem­ber coun­tries will have to wait un­til next year for a deal to be signed.

Tex­tile ex­ports from Vieät Nam to the US could grow by 13-20 per cent a year by 2017 and could even hit US$25-30 bil­lion by 2025 if and when the 12 na­tions in the Trans Pa­cific Part­ner­ship reach an agree­ment.

This is the opin­ion of Leâ Tieán Tröôøng, vice-pres­i­dent of the Vieät Nam Tex­tile and Ap­parel As­so­ci­a­tion (VITAS) and vice-pres­i­dent of the Vieät Nam Na­tional Tex­tile & Gar­ment Group (VI­NA­TEX).

Ac­cord­ing to his cal­cu­la­tions, each $1 bil­lion of turnover could cre­ate about 200,000 jobs for lo­cal em­ploy­ees.

Tröôøng said among TPP mem­bers, the US ac­counted for 43 per cent of Vieät Nam's gar­ment ex­port turnover, Ja­pan for 11 per cent and other mem­bers for 4 per cent of lo­cal tex­tile ex­ports, which reached $11 bil­lion in 2012. When the im­port tax was re­duced from the cur­rent 17 per cent to zero un­der TPP, lo­cal tex­tile in­dus­tries, which earned an ex­port turnover of $17.2 bil­lion last year, would gain.

Min­is­ters from the 12 coun­tries in­volved in the Trans Pa­cific Part­ner­ship have so far failed to con­clude the free-trade pact af­ter a four-day meet­ing that ended in Sin­ga­pore on De­cem­ber 10. Hav­ing missed the much touted end-of-year dead­line, they now await so­lu­tions to thorny trade is­sues in­volv­ing farm prod­ucts and au­to­mo­biles in­volv­ing Ja­pan and the United States.

The trade min­is­ters and rep­re­sen­ta­tives de­cided to con­tinue talks next month and will try their best to end them as early as pos­si­ble, ac­cord­ing to Deputy In­dus­try and Trade Min­is­ter Traàn Quoác Khaùnh, head of the Viet­namese del­e­ga­tion to the ne­go­ti­a­tions. Khaùnh told a Viet­nam News Agency re­porter the many is­sues that had to be re­solved in­cluded in­tel­lec­tual prop­erty rights and re­form of State-owned en­ter­prises. If the ex­port in­ter­ests were not sat­is­fac­to­rily met, it would be hard to ne­go­ti­ate other fields, he added.

Khaùnh said that when the TPP was put into place, Vieät Nam would ben­e­fit from its po­si­tion as a TPP mem­ber, es­pe­cially the coun­try's ex­port sec­tor, as all im­port taxes would be re­moved.

Khaùnh said Vieät Nam would have a chance to par­tic­i­pate in global pro­duc­tion chains, which would pave the way for the coun­try to fur­ther pro­mote the re­struc­tur­ing of its econ­omy and re­form model, thus in­creas­ing job op­por­tu­ni­ties and im­prov­ing the busi­ness en­vi­ron­ment to at­tract more in­vest­ment.

At ple­nary ses­sions of the TPP meet­ing from De­cem­ber 7-10, be­sides tack­ling is­sues such as trade lib­er­al­i­sa­tion in goods, ser­vices, in­vest­ments, and govern­ment pro­cure­ment, del­e­gates dis­cussed ar­eas such as in­tel­lec­tual prop­erty rights, tech­ni­cal bar­ri­ers to trade, labour, the en­vi­ron­ment, agri­cul­ture, in­vest­ment, fi­nan­cial ser­vices, telecom­mu­ni­ca­tions and state-owned en­ter­prises.

Ad­dress­ing a press con­fer­ence af­ter the meet­ing, US trade rep­re­sen­ta­tive Michael Fro­man said the par­ties reached a con­sen­sus on many is­sues and iden­ti­fied ex­ist­ing ones for fur­ther de­bate.

Re­gard­ing the gar­ment sec­tor, one of the im­por­tant is­sues of the con­cerned par­ties, in­clud­ing Vieät Nam, Fro­man said the US side had held dis­cus­sions with Vieät Nam and its TPP part­ners about mar­ket ac­cess.

Voõ Trí Thaønh, deputy head of the Cen­tral In­sti­tute for Eco­nomic Man­age­ment said: "To over­come the chal­lenges that will face the coun­try once TPP is re­alised, it is nec­es­sary to take mea­sures to sup­port small and medium-sized en­ter­prises, while im­ple­ment­ing spe­cific tar­get pro­grammes and per­fect­ing Vieät Nam's so­cial wel­fare sys­tem.

In­dus­try and Trade Min­is­ter Vuõ Huy Hoaøng, said when the TPP agree­ment was reached, it would help boost ex­port de­vel­op­ment and in­crease for­eign di­rect in­vest­ment (FDI) in Vieät Nam. Fur­ther­more, he said it would of­fer Vieät Nam a great op­por­tu­nity to ac­cel­er­ate the re­struc­tur­ing process in as­so­ci­a­tion with the in­no­va­tion of an eco­nomic growth model.

How­ever, ac­cord­ing to Hoaøng, the agri­cul­tural sec­tor would be the most vul­ner­a­ble be­cause Vieät Nam was ba­si­cally an agri­cul­tural coun­try with small-scale man­u­fac­tur­ing, low labour pro­duc­tiv­ity and high costs.

There­fore, dur­ing the ne­go­ti­a­tions with the US and other mem­bers, Vieät Nam asked for con­sid­er­a­tion to be made of the dif­fer­ences in de­vel­op­ment be­tween mem­ber coun­tries.

Vieät Nam had asked for a suit­able roadmap to im­ple­ment TPP com­mit­ments for slow de­vel­op­ing coun­tries like Vieät Nam in fields such as tax re­duc­tion and ex­emp­tion.

On the other hand, Vieät Nam's agri­cul­tural busi­nesses, in­clud­ing seafood firms, needed time to de­velop a roadmap to over­come short­com­ings and to im­prove prod­uct com­pet­i­tive­ness. Ac­cord­ing to the WTO cen­tre at the Vieät Nam Cham­ber of Com­merce and In­dus­try, a TPP agree­ment will chal-

lenge lo­cal seafood traders be­cause taxes on im­ported seafood would be slashed to al­most zero, mean­ing lo­cal traders would face more com­pe­ti­tion.

Mean­while, the cen­tre said that zero tar­iffs on ex­ports to other TPP coun­tries would have lit­tle af­fect on the fish­eries in­dus­try, which is mak­ing bil­lions of dol­lars in an­nual ex­ports each year, es­pe­cially to TPP mem­bers such as the US and Ja­pan.

For in­stance, in the US, one of the largest im­porters of Viet­namese seafood, most im­port tax lines for Viet­namese seafood are al­ready a low 0.3 per cent for fresh seafood and 4.7 per cent for pro­cessed seafood.

The cen­tre said that, when reached, the new TPP agree­ment would not re­duce food hy­giene and safety stan­dards, tech­ni­cal bar­ri­ers or trade reme­dies that Viet­namese seafood ex­ports have of­ten faced in the US, the EU or Ja­pan.

The ex­port value of Viet­namese seafood in the first 11 months of this year in­creased year on year by 9.1 per cent to US$6.11 bil­lion, ac­cord­ing to the Min­istry of Agri­cul­ture and Ru­ral De­vel­op­ment. The US was the largest im­porter, ac­count­ing for 22 per cent of to­tal ex­port value. The ex­port value of seafood to other coun­tries also went up, with ex­ports to China ris­ing 58.6 per cent; to Canada, 28.2 per cent; and to Thai­land, 8.3 per cent.

In the last quar­ter of 2013, the ex­port value of seafood is es­ti­mated to reach $1.7 bil­lion, 6.5 per cent higher than the same pe­riod of last year. The value for the whole year is ex­pected to in­crease 5 per cent to $6.5 bil­lion.

This meant that any TPP free trader agree­ment next year would not boost lo­cal fish­eries or, on the other hand, have a neg­a­tive af­fect. The WTO cen­tre added that in the post TPP pe­riod, seafood en­ter­prises should be ready to face fierce, but fair com­pe­ti­tion.

While most of the lo­cal me­dia draw a beau­ti­ful pic­ture of the re­la­tion­ship be­tween the Viet­namese tex­tile in­dus­try and the TPP, few men­tion the sit­u­a­tion for small and medium tex­tile com­pa­nies which may en­joy noth­ing from a big­ger mar­ket.

Nguyeãn Ngoïc Anh, di­rec­tor of DHA Tex­tile Com­pany in Baéc Ninh City, does not think his com­pany will have a much bet­ter fu­ture when the Tran-Pa­cific Part­ner­ship (TPP) Agree­ment is signed.

He wel­comes the news as pos­i­tive for many com­pa­nies, but not his. The com­pany, a suc­cess­ful busi­ness pro­vid­ing work for 3,000 work­ers since it opened in May with fore­cast an­nual rev­enue of 200 bil­lion ñoàng (US$9.5 mil­lion), ex­ports 95 per cent of its prod­ucts to the US.

DHA tex­tiles, one of 6,000 gar­ment ex­port­ing en­ter­prises in Vieät Nam, was mak­ing prod­ucts for fa­mous brands such as Columbia, Tim­ber­land, E-land, Valentino, For­ever 21, Bella, Chico's, Kmark, Un­der Amor, A.Fu­sion, ShyWoon, Foot­looker, GEOX, CoterFiel, Jack­WoflSkin, Lyle&Scote, Ac­cess, said Nguyeãn Ngoïc Anh, di­rec­tor of the com­pany in Baéc Ninh City.

"At the be­gin­ning we can ben­e­fit from mak­ing or­ders from the US," he said, but added that in the long run, un­der the TPP's ' yarn for­ward' or Rule of Ori­gin, mem­bers were re­quired to use TPP mem­ber-pro­duced yarn to re­ceive duty-free ac­cess, mean­ing that com­pa­nies like us won't see a big change, said Ngoïc Anh. He said his com­pany was us­ing fab­ric ma­te­ri­als mostly from main­land China and Tai­wan. He only uses five per cent of do­mes­tic fab­rics, which are al­ways in short sup­ply.

Anh added that he could not find any fab­ric part­ners in the US, New Zea­land, Brunei, Chile, Vieät Nam, Sin­ga­pore, Aus­tralia, Peru, Malaysia, Canada, Mex­ico or Ja­pan.

At present Vieät Nam can­not pro­duce enough cloth for the ex­port gar­ment trade so many man­u­fac­tur­ers must im­port it from China, Tai­wan and Korea, which are not TPP mem­bers. As those com­pa­nies can­not meet the TPP's "yarn for­ward" or Rule of Ori­gin.

There are thou­sands of gar­ment com­pa­nies in Viet Nam, but they don't di­rectly ex­port their prod­ucts but make them for the oth­ers so the TPP's tax-free ben­e­fits will be earned by the ex­porters, not the gar­ment com­pa­nies.

Vi­na­tex's deputy Leâ Tieán Tröôøng, said com­pa­nies that pro­duced both ma­te­ri­als and gar­ment tex­tiles would ben­e­fit. He re­ferred to Vi­na­tex's Phong Phuù Tex­tile Com­pany, as a good ex­am­ple of a com­pany which had a full pro­duc­tion chain.

The few com­pa­nies in Viet Nam that pro­duce fi­bre, clothes and ac­ces­sories and make gar­ments will cer­tainly ben­e­fit from any new agree­ment as they meet the "yarn for­ward" de­mand that ev­ery­thing be pro­duced and made in a TPP mem­ber coun­try.

Tröôøng said there were plans to pro­duce gar­ments con­tain­ing 60 per cent of lo­cal ma­te­ri­als by 2015 and 70 per cent by 2020. While only a few lo­cal Viet­namese com­pa­nies are able to pro­duce the full chain from fi­bres to gar­ments, many For­eign Di­rect In­vested (FDI) firms have al­ready man­aged to lock into lo­cal fi­bre pro­duc­ers. This, of course, means they can take full ad­van­tage of the new sys­tem when it comes.

Ac­cord­ing to Viet Cap­i­tal Se­cu­ri­ties Com­pany's July re­port on the TPP, Vieät Nam has at­tracted more for­eign man­u­fac­tur­ers of fi­bre, cloth and ap­parel to set up busi­ness in Viet Nam and pro­vide ma­te­ri­als for Vieät Nam-based gar­ment and tex­tile firms.

Ex­am­ples in­clude the Chi­nese Tex­hong Tex­tile Group, which started work on a $200 mil­lion fab­rics plant in July. It plans to build another $400 mil­lion plant in south Viet Nam next year, South Korea's Hyosung has also ex­panded its pro­duc­tion fa­cil­ity of span­dex in the south­ern prov­ince of Ñoàng Nai.

The Viet Cap­i­tal re­port also said TAL Hong Kong De­vel­op­ment Com­pany also planned a $200 mil­lion ex­pan­sion of its ex­ist­ing $40 mili­ion fac­tory to make fab­rics, gar­ments and tex­tiles. South Korean tex­tile and gar­ment maker KyungBang has also opened a $40 mil­lion high-qual­ity cot­ton yarn fac­tory in the south­ern prov­ince of Bình Döông.

Last year, Tian Nan, a Chi­nese-Viet­namese tex­tile and dye­ing joint ven­ture, was es­tab­lished to de­velop a $24 mil­lion cloth mak­ing pro­ject in the north­ern prov­ince of Nam Ñònh.

Min­is­ter of In­dus­try and Trade Vuõ Huy Hoaøng said Vieät Nam au­thor­i­ties at all lev­els, en­ter­prises, so­cial or­gan­i­sa­tions and peo­ple should join ef­forts to take ad­van­tage of op­por­tu­ni­ties the TPP agree­ment would cre­ate be­cause, even­tu­ally, they would pro­mote the coun­try's eco­nomic growth.

Hoaøng said in­te­gra­tion should be part of the re­form and re­struc­tur­ing of the econ­omy and the change of eco­nomic growth model of Vieät Nam. There­fore, sec­tors and en­ter­prises should pre­pare thor­oughly in or­der to in­te­grate suc­cess­fully.

In­stead of more price com­pe­ti­tion, en­ter­prises should pay more at­ten­tion to im­prov­ing the qual­ity and de­sign of prod­ucts through ad­vanced tech­nolo­gies and us­ing more highly skilled work­ers.

Work­ers at the Ñöùc Giang Gar­ment Cor­po­ra­tion check gar­ments for ex­port. Vieät Nam ex­pects to at­tract in­ter­est in the gar­ment and tex­tiles in­dus­try once the TPP agree­ment is signed.

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