WSJ: After TPP, Foreign Capital Will Flow Massively into Vietnam

set-up business in Vietnam

At a press conference held in Atlanta (USA), the Trans-Pacific partnership agreement (TPP) has ended negotiations and this has meant alot for Vietnam in terms of attracting investment.

According to the Wall Street Journal (WSJ), the textile, rubber glove enterprises will consider expanding operations in Vietnam and Malaysia to take advantage of export by TPP.

TPP can be considered as a turning point for the economies of Southeast Asia. It is forecasted that in 2025, the TPP can help exports of Vietnam increase by 29% and Malaysia increase by nearly 12%. Vietnam is considered as the biggest beneficiary in terms of actual income growth due to TPP. Accordingly, the actual income of Vietnam in 2025 could increase by 10.5%, following by Malaysia with 5.6%, while the US and Canada increase only 0.4%.

The actual income of countries in 2025 is forecasted to increase significantly due to the TPP.

TPP if completed would be the best trade liberalization agreement in 20 years. The foreign capital would flow massively into Southeast Asia when the agreement details were announced.

Although the TPP is currently comprised of 12 members, accounting for 40% of global GDP, but it seems the smaller economies will benefit more.

For example, Vietnam and Malaysia have not signed the free trade agreements (FTA) with the United States – the largest consumer market for raw materials and finished products. Currently, goods from Vietnam and Malaysia are taxable in the United States. However, with the TPP, goods from country members would enjoy tax reduction or tax exemption mechanisms, therefore creating competition with goods from China, Thailand and Indonesia.

Experts predict that tax on Vietnam’s garment products when entering the US market will fall to nearly 0% from the current level of 17%, although this process can take many years. In the year ending July 2015, the US has imported 10.8 billion USD textiles from Vietnam. Meanwhile, Malaysia exported more than 30 billion USD in goods and services to the US in 2014.

United Sweethearts, the Malaysian textile enterprise has planned to open the 2nd factory in Vietnam, the progress of the TPP will further promote their plan.

Detail of the TPP agreement is expected to be announced in the next few weeks or months.

David Hon, CEO of Duarte, a bicycle manufacturing in the US said he would wait to see whether the TPP countries will be entitled to tax incentives before considering narrowing production in China, Europe and redirect to Malaysia, Vietnam.

ANT Consulting assists clients with Market Entry, Legal Advice, Tax Advice and Outsourcing Services in Vietnam.

We are located in Hanoi, Da Nang and Ho Chi Minh City.

Talk to our consultants at +84 28 3520 2779 or email us ant@antconsult.vn