RCEP offers opportunities for promoting trade and investment

Duc Duy

Vietnam’s major export categories are expected to benefit from the Regional Comprehensive Economic Partnership (RCEP) agreement.

RCeP was signed by 10 ASeAN member countries with partner countries including China, Japan, Korea, Australia and New Zealand on 15 November 2020 and officially takes effect on 1 January 2022. The RCeP will form the largest free trade area in the world, in terms of population size (2.2 billion consumers, accounting for about 30 percent of the world's population) and GDP of more than USD27 trillion, equivalent to about 30 percent of global GDP.

Notably, after the RCeP takes effect, the parties will immediately deliver their commitments, including tariff cuts. Vietnam and the partner countries will eliminate tariffs on at least 64 percent of tax lines as soon as the agreement comes into effect. By the end of the roadmap (after 20 years), Vietnam will eliminate nearly 90 percent of tax lines for the partner countries, while the partner countries will eliminate about 90-92 percent for Vietnam. ASeAN countries will eliminate almost all tax lines for Vietnam.

Fitch Solutions notes that for Vietnam, major export categories that are expected to benefit include IT, footwear, agriculture, automobiles, and telecommunications. The FTA would help Vietnam access large consumer markets double the size of those included in the CPTPP.

As Vietnam moves to become a hightech manufacturer, the RCeP can help local firms increase exports and attract high-quality goods for its consumers. In addition, with demand for Vietnam’s exports like agriculture and fisheries products, Vietnam is set to benefit.

In addition, the simplification of procedures such as customs and rules of origin will help reduce bureaucracy allowing more SMes to participate. SMes account for 98 percent of all enterprises in Vietnam, contributing to 40 percent of GDP, and thus the RCeP presents significant opportunities for Vietnamese SMes to move up the value chain.

For investors operating across ASeAN, China, and other regions – RCeP offers good news. Streamlined customs procedures, unified rule of origin, and improved market access will make investing in multiple locations. The common rule of origin will lower costs for companies with supply chains that span across Asia and may encourage multinationals to RCeP countries to establish supply chains across the bloc, thus growing the global value chain activity in the region.