Vietnam will be the main beneficiary of RCEP: DBS Bank

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Singaporean multinational banking and financial services company DBS Bank expects Vietnam to be a key beneficiary within the Association of Southeast Asian Nations (ASEAN) Regional Comprehensive Economic Partnership (RCEP) in beyond the biggest winners in North Asia – China, Japan and South Korea. Trade integration between Vietnam and RCEP members is already high and is expected to tighten as companies take advantage of RCEP’s benefits, it seems.

The participation of Vietnamese domestic companies in RCEP can provide opportunities to increase their exports and be more active in regional value chains, if they can access cheaper inputs and adapt to increased competition, said DBS on its website.

Gains are likely to be modest for many ASEAN member economies, given existing bilateral free trade agreements (FTAs) and already very low tariffs for intra-RCEP trade.

Singapore-based DBS Bank expects Vietnam to be a key beneficiary within the ASEAN Regional Comprehensive Economic Partnership (RCEP) beyond the biggest winners in North Asia – China, Japan and South Korea. Trade integration between Vietnam and RCEP members is already high and is expected to tighten as companies take advantage of RCEP’s benefits, it seems.

RCEP has now entered into force for 11 of the 15 member economies.

According to UNCTAD calculations, Vietnam’s average effectively applied tariffs on intra-RCEP trade are in the middle of the pack at 1.2%, compared to much higher levels for South Korea at 4.8% or the China at 2.8%.

Nevertheless, Vietnam is among the ASEAN economies likely to benefit somewhat from the tariff cut, given its high trade openness, DBS said. Vietnam’s gains would be lower than those of its North Asian peers, as Japan did not have bilateral agreements with China and South Korea before RCEP.

Six ASEAN economies have received growing FDI inflows over the past two years, rivaling that of China. Even though Singapore continues to receive the lion’s share of FDI inflows, inflows to Vietnam have tended to increase and have ranked among the top three recipients within ASEAN-6.

DBS believes that Vietnam continues to avail itself of multiple assets to attract foreign investors.

Vietnam has regularly imported a significant amount of goods from RCEP partners. In contrast, Vietnam’s share of exports to RCEP partners, although still high at almost 40%, has been declining over the years.

The United States, Vietnam’s largest trading partner at present, has taken over RCEP’s market share, rising to nearly 30 percent of the latter’s total exports.

With the RCEP deal, Vietnamese products made from Chinese inputs can potentially increase trade. For example, Vietnamese “textiles, garments and footwear” made from Chinese materials can enjoy favorable tariffs when shipped to Japan.

Fibre2Fashion (DS) News Desk

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