PM Nguyen Tan Dung has released an article on opportunities, challenges and actions needed following Viet Nam’s signing of the Trans-Pacific Partnership. The following is the translation of the article for reference.
The Trans-Pacific Partnership (TPP) was signed on February 4, 2016 by 12 countries, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Viet Nam, representing 40% of global GDP and 30% of global trade. This is a new-generation free trade agreement (FTA) which is expected to become a model for regional and international trade development with higher standards in the context of fast production force development, increasingly deep and wide international integration.
Viet Nam’s signing of the TPP was not merely the outcome of the five-year persevering negotiations under the spirit of both cooperation and struggle, based on the top objective of national interest. More profoundly, this is the fruit of the 30-year renovation, in which economic integration is a vital component which has been strongly asserted and clearly interpreted in the resolutions of the Party. This is also experience withdrawn from the country’s international integration realities following the signing and implementation of the Viet Nam-US bilateral trade agreement; the participation in the ASEAN free trade area, FTAs between ASEAN and its partners, and the accession to the World Trade Organization, etc. Economic integration is also an important content of the modern socialist-oriented market economy institutions that are under construction.
In pursuance of the orientation of proactive and active international integration, the Politburo (tenures 10th and 11th) approved the Government’s proposal of joining talks on several new FTAs. These are the agreements with higher commitments to market access compared to the commitments of the World Trade Organization and other FTAs inked earlier. Especially, the TPP and the Viet Nam-EU FTA are the comprehensive and balanced trade pacts featured with higher commitments on market access to trade in goods and services, investement, protection of intellectual property rights as well as commitments on market economy institution, State-owned enterprises, public procurement, etc in order to create a transparent business environment and equal competition. These agreements also cover trade related issues like environment and labor. The aforesaid contents make the TPP and the Viet Nam-EU FTA the new-generation FTAs.
The TPP is the comprehensive market access agreement, which ensures the free movement of goods, services, capital and technology at a higher level through fast elimination of import-export tariffs and non-tariff barriers to trade and investment; formation of equal and non-discriminatory business environment; facilitation of trade and investment, thereby bringing more benefits to businesses, laborers and consumers.
The TPP will speed up the formation of a new production network and supply chain among 12 member countries; facilitate intra trade development; improve economic effectiveness, accelerate growth, support job generation, increase incomes and improve people’ living conditions; contribute to handling challenges of the current economy, encourage innovation, creativity and development of digital economy, establishment of competition policies and operation rules of State-owned enterprises, and protection of the basic rights of laborers and environment. The agreement also includes regulations to guarantee that the member economies with different development levels and enterprises of all sizes could gain benefits; helps small and medium-sized enterprises to overcome challenges and make the best of opportunities for development. The TPP also includes commitments on technical assistance, capacity building, and flexibilities in terms of implementation roadmap according to the levels of development for signatories to satisfy commitments and take full advantage of the benefits of the agreement. Simultaneously, it includes regulations on implementation supervision mechanisms and sanctions.
The TPP respects the political regime of each country; recognizes the requirement of full compliance of national laws in accordance with international commitments, and excludes contents related to national defense and security. The agreement is also expected to create a new foundation for economic integration in the region as well as opportunities for other countries on the Asia-Pacific belt to join.
Despite the low development level of the economy and numerous difficulties, the decision to actively participate in the new-generation FTAs, especially the TPP, with the spirit to accept competition, surmount challenges, grasp opportunities for fast and sustainable development demonstrates the political stuff, sharp thought and time vision of our Party and State. This is also the evidence of the belief in the will, ability and power of the Vietnamese people and nation.
The TPP along with the Viet Nam-EU FTA will bring back a lot of opportunities but challenges and difficulties are also numerous.
These agreements will add more impulses for socio-economic development, particularly in investment attraction and export acceleration with the world’s biggest economies, in which the 28-member EU has a combined GDP of US$18 trillion and the TPP currently comprising of 12 members has a combined GDP of more than US$20 trillion. These economies have source technologies and remain the major importers and the biggest investors of Viet Nam over the past consecutive years. Taking into account of the resonant effects of the two agreements and the FTAs under negotiations or have been signed, opportunities are greater as our country has established free trade relations with 55 countries, including 15 members of the G20.
Export and investment are of decisive importance to economic growth, job creation, improvement of living standards, especially in the context that the average income per capita and domestic consumption are low. The proportion of import/export between Viet Nam and these markets also makes the country’s overall trade relations more balanced. The commitments of the agreements are the frameworks and standards which contribute to the improvement of the modern market economy institution and acceleration of restructuring and growth model transformation. Joining these agreements is also a new step forward to the consistent pursuance of the country’s foreign policy of independence, self-reliance, diversification and multilateralization of relations, and to the improvement of Viet Nam’s position in the international arena, especially in such a region where strategic competition becoming increasingly fiercer.
Beside opportunities, these agreements also roll out huge challenges and difficulties, including fiecier competition among the TPP members as well as within each of the markets in all three levels: product, business and national levels – especially the competition in terms of the quality of institutions and business environment. In the face of competition pressure, some enterprises, after being transformed or restructured may be dissolved or go bankrupt if they fail to better themselves, and part of laborers will loose job; agriculture sector and farmers will be vulnerable; the poor-rich gap will be bigger if we can not effectively realize the strategy on fast and sustainable development and or can not ensure that all people benefit from the growth fruits. Challenges in terms of implementation are also huge, ranging from perfection of the legal system to workforce training, capacity building for cadres, technical and legal experts. The labor and union issues also generate new challenges and requirements for the operation of the Viet Nam General Confederation of Labor and the whole political system of our country.
Being deeply aware that favorable opportunities can not transform themselves into economic power, interests and competitiveness without the efforts and goal-oriented activities exerted by stakeholders – the State, people, and enterprises. Difficulties and challenges will not be minor pressure but the magnitude of pressure depends on how each subject respond. If opportunities are well grapsed, challenges would be pushed back and new greater opportunities would come; conversely, difficulties and challenges will dominate and we will loose [things] that we can’t recover. One important thing is that opportunities generated from FTAs always go hand in hand with challenges and challenges always contain opportunities – this is dialectical development.
Against the backdrop of globalization and increasingly deep and wide international integration, establishment of the ASEAN Economic Community, participation in new FTAs, including the TPP and the Viet Nam-EU FTA, information technology and the Internet boom, rising proportion of cross-border transactions in global trade and service, advancement of multimodal transport and logistics services and flattening boundary between domestic and foreign markets, the classic nuances of the export-replacement or export-oriented industrialization models are fading. Many countries have shifted to industrialization models based on competitiveness, exploited and developed comparative advantages, conversed comparative advantages into competition advantages, joined global production network and value chain while striving to control high value added steps of such value chain.
To fully take advantage of opportunities and overcome challenges, improving the competitiveness of the whole economy becomes an urgent matter, in which, the role and actions of the stakeholders to perform this vital task need to be clarified.
Businesses are the subject that decides the micro competitiveness, reflecting the strength and the competitiveness of the economy. Businesses must be brave to accept competition and implement solutions proactively and creatively to unceaselessly sharpen the competitiveness of their goods and services, not just in domestic market but also in regional and global markets. However, businesses themselves can not decide all. They must perform in a defined institutional framework and business environment and this totally depends on the State.
Many researches and real conditions of different countries show that, national governance institutions are the most decisive factor to the macro-competitiveness and the development of economy. Fast and sustainable development or stagnation and lagging behind are mainly due to the quality of institutions. Good institutions, law-governed State, people’s right to democracy and compatiblity with modern market economy rules will stimulate the aggregate strengthen to the fullest level and resources for development. Thus, institutions play a decisive role in the effectiveness and competitiveness of enterprises.
To have good institutions, it is a must to precisely define the relations between the State, market, businesses and the society. The State must perform well its role as a development creator, especially in stabilizing macro-economy; develop the system of laws, policies, strategies and planning and apparatus organization to create an open, transparent business environment to ensure the right to business freedom and equal competition; use its resources, policies and tools to develop culture, pursue social equality and progress, ensure social security, improve social welfare and living standards; protect the environment; ensure the provision of essential services, develop socio-economic infrastructure system, train human workforce, enhance national security potential, and firmly maintain political security, social order and safety.
The market decides the mobilization, allocation and effective use of resources. Businesses are free to decide the business lines that are not prohibited by law and must raise high their social responsibility and corporate culture. The society contributes constructive ideas, comments and supervises the implementation of policies via citizens and organizations, professional associations, experts and independent researchers in order to mitigate shortcomings of the market and the State.
Based on right understanding of the aforesaid relations, we need to quickly improve institutions and the legal system to meet the requirements of a modern market economy, international integration and commitments to the FTAs, especially the new-generation ones with the spirit of comprehensive and synchronous innovation in both economic and political dimensions; exert all efforts in buiding and improving the law-governed and law-abiding State of the people, by the people and for the people. Citizens can do whatever the laws do not prohibit. Cadres and civil servants can only do and must do things prescribed by law.
To continue reforms to ensure the compatibility and synchronousity of laws, structural organization and contingent of cadres and civil servants. Overlapping organization will cause waste of resources and hinder development. [We] must dare to accept innovation, overcome slackness and conservativeness to perfect the system of leadership and administration, improve national governance capacity to meet the requirements of national construction and Fatherland protection in the new development stage.
The improvement of the business environment needs to be part of the requirement of institutional reform. Institutions create framework and limits for improvement of business environment. The business environment can not be considered good without suitable institutions. Advances in institutional reform must be translated into improvements of business environment. This does not only relate to the apparatus organization but also the quality of cadres and civil servants. There is a must to focus on building a contingent of capable cadres and civil servants who devote their minds and hearts to serving the people. It needs speciall attention to the training of legal staffs, business administrators meeting the requirements of international integration, competition and development.
Only by reforming national governance institutions properly, can we improve the quality, effectiveness of the process of restructuring and growth model transformation, accelerate the application of science and technology, raise productivity, and improve the competitiveness of products, businesses and the whole economy. And only by properly reforming institutions can we facilitate the accumulation and concentration of land and the formation of large-scale production regions and a clean, high-value added agriculture with substainable supply to quickly raise global market share. Otherwise, opportunities from the TPP, Viet Nam-EU FTA and other new-generation FTAs could not be grasped.
The TPP as well as the Viet Nam-EU FTA requires open and transparent operations of State-owned enterprises and their equal competition with enterprises of other economic sectors. It needs to beef up the process of restructuring, improving the effectiveness of State-owned enterprises along with encouraging the development of Vietnamese business circle, especially private ones, as the driving force for improving the competitiveness and self-reliance of the economy.
To ensure the success of international integration and effective implementation of the FTAs, especially the TPP and the Viet Nam-EU FTA, there must be resolutions of the Party and the National Assembly as well as the action plans of the Govenrment, sectors and the business community. Communication work needs to be carried out well to create awareness consensus and unity in action, strive to raise competitiveness for fast and sustainable development.
We are living in the era of very fast movement and development where the world is entering the 4th industrial wave, thus the industrialization process becomes shorter. With great determination and strong will to better themselves, creativity spirit and proper growth strategies, countries with lower development levels can catch up with and surpass countries with higher level of development and new small-sized enterprises could become big ones quickly.
Joining these agreements opens more opportunities for Viet Nam to improve economic effectiveness thanks to the expansion of the scope and create favorable conditions for the establishment of big enterprises in association with individualization of businesses. This is also an opportunity to nuture the spirit of innovation and creativity, encourage business startup movement among all people and improve the development level of the economy.
The whole Party, people, army and business community should raise high the national pride and join hands and minds to proactively exploit and bring into full play opportunities, strive to overcome arising difficulties an challenges in the integration process to strengthen the national aggregate power, firmly protect national independence, sovereignty, territorial integrity, strive to build Viet Nam into a strong country with wealthy people, democratic, just an civilized society, being able to walk abreast with powers as President Ho Chi Minh ever wished./.