Analysts say Vietnam’s economy is set to benefit from the 12 nation trade agreement called the Trans Pacific Partnership (TPP), which is now being considered for approval by lawmakers in each member nation. With an appealing market for foreign investment and trade, and economic growth among the fastest in the Asia region. The country is poised to become a competitor to China.
Vietnam, as a middle income country, stands out from the TPP group that together account for 40 percent of global output, said Hanoi based World Bank economist, Sandeep Mahajan.
“The question is how much benefit they can derive from (the TPP) — it’s not whether they can derive benefit. We have estimates which would show that cumulatively by 2030 it would add about eight percent to Vietnam’s GDP [gross domestic product] — from the participation in TPP,” said Sandeep Mahajan.
Among the key industries to gain from TPP membership include Vietnam’s textiles and garments as well as global supply chain operators, such as in telecommunications, able to take advantage of Vietnam’s close proximity to regional economic giant China.
But Vietnamese commentators hold fears for other economic sectors such as agriculture, seen as vulnerable from competition from major commodity exporters such as Australia.
Analysts say the gains from the TPP will add further momentum to a generally positive economic outlook.
Independent economic consultancy, Capital Economics, has called Vietnam one of emerging Asia’s “few bright spots” and where economic growth has accelerated to over six per cent in recent years.
New foreign investment into Vietnam has also played a key role, especially by producers seeking an alternative to rising costs in neighboring China.
Daniel Martin, a senior Asia economist with Capital Economics in Singapore, said strong export growth and foreign funds are now key drivers of growth in the economy.
“In fact compared with anywhere else in the world, Vietnam’s exports have been doing exceptionally well, and if you break that down between local and foreign manufacturers almost all of the growth in the last few years have been driven by foreign manufacturers,” he said.
Martin said a combination of a less heavily regulated business environment in Vietnam and a more flexible labor laws have encouraged foreign investor support.
The Asian Development Bank (ADB) said that in 2014 foreign direct investment (FDI) commitments rose to $15.6 billion with some $4.6 billion committed to existing foreign funded projects.
The ADB is already forecasting Vietnam to report a better than six per cent growth rate in 2016, making it one of the leading economic performers in the Asia Pacific region.