TPP helps small, medium businesses: experts The Trans-Pacific Partnership deal (TPP) will offer more business opportunities for local small- and medium-sized enterprises (SMEs) though many challenges still remain, experts said. The TPP deal encourages SMEs to develop, economic expert Nguyen Minh Phong said. Diversification in the business sectors under the TPP will create large opportunities while seeking new markets at home and abroad for domestic enterprises, including SMEs, Phong said. These business sectors include information technology (IT), e-commerce and financial services that will be suitable for young people, especially those with sound ability in IT and e-commerce. Economic expert Huynh The Du said that it offers good opportunities for young people who have real ability in doing business and want to launch start-ups, Tuoi tre newspaper reported. Meanwhile, according to the Viet Nam Chamber of Commerce and Industry (VCCI), the local private economic sector represents 50 per cent of the national gross domestic product (GDP), but operational efficiency of the sector has not improved much, with 70 per cent of the enterprises running up losses. Of the around 500,000 existing private enterprises at home, 2 per cent are large scale enterprises, another 2 per cent are medium-sized, while the remaining 96 per cent are small-sized firms. Therefore, economist Bui Trinh said, in the eventuality of Viet Nam joining TPP, it needs to develop enterprises in the private economic sector to increase the internal power of the domestic economy. Nguyen Dinh Cung, director of the Central Institute for Economic Management, said that in theory, an economy cannot grow if the private economic sector does not develop. However, there are still many obstacles in the way of development of local private enterprises, Thoi bao Kinh doanh newspaper reported. To promote development of the private economic sector when Viet Nam joins the TPP, private enterprises, including SMEs, need for the State to remove obstacles, continue improving institutions, including an institution of market economy, Cung said. The state should also promote renovation of the economic growth model, restructuring of the local economy and improvement of the business environment. The state should soon issue a law on support for small- and medium-sized enterprises to solve their existing difficulties in investment and business activities, Cao Sy Kiem, chairman of the Viet Nam Small and Medium-sized Enterprise Association said. The Ministry of Planning and Investment has compiled the law and launched meetings to elicit opinions from business communities, associations, and ministries, apart from cities and provinces, he said. He hoped the law will offer support to SMEs in remaining and developing their business after the TPP come into effect, Dau tu newspaper reported. Real estate pins hopes on TPP Real estate investors in Vietnam are placing much hope on a breakthrough in the market following the announcement that the TPP was signed on October 5. That there will be a turning point in terms of liquidity in the real estate market and in property distribution in Hanoi were common sentiments among investors when asked about the impact of the TPP. Similar to the Law on Housing allowing foreigners to purchase houses in Vietnam, the signing of the TPP is welcome news for real estate investors. If adopted, a number of procedures previously seen as barriers to foreign investment in Vietnam, including real estate investment, will become more straightforward. Vietnam will have to cut or remove many procedures as they relate to the eleven other partners in order to create favorable conditions for their businesses and citizens in the country. Compared with developed countries in the region, home prices in Vietnam are cheaper when measures against income levels in the other member countries. As foreigners are now able to purchase houses in the country, higher housing demand, including purchases for investment and perhaps even speculation, is forecast for the future. According to Ms. Vo Thi Diu Hien, Deputy General Director of the Saigon Thuong Tin Real Estate JSC (Sacomreal), the successful end to the TPP negotiations is expected to continue the opening up of opportunities in the real estate business in general and for Sacomreal in particular. “To seize the opportunities the TPP brings, especially FDI inflows into Vietnam, Sacomreal will launch more than ten large-scale projects in many different segments,” Ms. Hien said. For his part, Mr. Ta Phuc Hai, Director of the Hoang Vuong Real Estate Floor, said that the number of people registering to purchase apartments in the last two days has increased markedly. Not only residential but also the industrial real estate sector is also expected to increase sharply after the TPP comes into effect. According to the latest report from Cushman and Wakefield, more and more industrial occupiers will come to Vietnam to take advantage of the TPP alongside the other free trade agreements that Vietnam has secured. Therefore, demand for industrial property will continue to rise. “In addition, the demand for more roads, railways, seaports, and airports as the logistics market continues to grow will be a feature of the next decade and after in Vietnam,” the report stated. As the demand for any commodity increases the price will also increase. According to some experts, however, this rule may not necessarily hold true in Vietnam’s real estate market. According to Nguyen Manh Ha, Chairman of the Board at the Phu Quy Land Co., the completion of the TPP negotiations will certainly bring practical benefits to Vietnam’s real estate market, especially for homebuyers. Along with the increase in supply, cheaper input materials should result in prices being more in line with the wallets of buyers. Minister of Construction Trinh Dinh Dung has said that people will benefit from lower house prices in the future because more and more businesses now apply new technologies and use new materials, so costs and, therefore, prices will fall significantly. “Land prices in Vietnam are not overly expensive, and neither are house prices,” Minister Dung said. “It is certainly an attractive market for foreign customers, which will stimulate its development.” Businesses urged to raise competitiveness ahead of TPP opportunities Domestic manufacturing firms and exporters are expected to significantly benefit from the freshly-signed Trans-Pacific Partnership (TPP) Agreement, yet they still need to map out plans to enhance their competitiveness and increase the presence of Vietnamese goods in the global market. Vice Chairman of the Vietnam Steel Association Nguyen Van Sua said the TPP is hoped to create numerous benefits for steel production enterprises, especially in export activities thanks to preferential tariffs. Nevertheless, businesses should invest in upgrading technologies rather than simply relying on support policies and preferential tariffs to increase productivity, reduce production costs and ensure quality, he advised. Promoting trade is essential to bring the steel sector to the new markets, he suggested. President of the Vietnam Foundry and Metallurgy Science & Technology Association Pham Chi Cuong said the nearly zero-percent tariffs under the TPP will create favourable conditions for steel businesses to export their products to the 800-million-strong TPP market. The conclusion of the TPP is expected to facilitate foreign investment in Vietnam and vice versa while enabling Vietnamese firms to gain access to major markets such as the US, Japan and Australia, he added. Involvement in the TPP will put pressure on expanding the market and increasing the competitive edge for Vietnamese business players, experts said, warning that difficulties are unavoidable without careful preparations. Tariff reductions could help increase the flow of goods imported from TPP countries with higher competitive prices. Started out as P-4 by Chile, New Zealand, Singapore and Mexico, the TPP was joined by the US in September 2008 and Vietnam by early 2009. The TPP brings together 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam. The completion of the historic, world’s largest free trade pact on October 5 in Atlanta, the US, has received a positive response from many countries around the world. After the signing, the document must receive approval from member countries’ governments and parliaments before taking effect. Once realised, the TPP will become a free trade region of 800-million people, accounting for 30 percent of global trade and about 40 percent of the world’s economy. Vietnam to benefit most among TPP members Vice President of the US Chamber of Commerce Tami Overby said Vietnam will benefit most among TPP member countries. Ms. Overby said the TPP will be a force for change in the world, particularly in its 12 member countries. She said: “TPP will do for Vietnam, as it literally will transform your country overthe next several decades. And what that means is potential investors and American companies as well will look at the TPP countries, where the most opportunities are, and I think many of them are going to choose Vietnam. And being a part of TPP will be like a stamp of approval or endorsement that within, operating in a TPP country means put more predictable rules, higher standards, and a greater certainty. Business loves to have predictability. That’s what TPP will bring. I know that many of the companies I talk to, when we talk about “Which country are you most interested in?” they always start with Vietnam. The economic modeling all shows that Vietnam’s economy will benefit the most. TPP will require some changes in Vietnam but there will be transition periods or phases to give Vietnam time and also capacity building to help Vietnam transform its economy. So I have to say I am excited about all 12 countries but I’m particularly excited about Vietnam because of what it is going to do for your country: Is it going to raise the standard of living, raise the standard of your rules and make it more predictable business environment? So I think it’s going to be especially good for the country of Vietnam.” VNS/VNA/VOV/VET |