VN’s TPP advantage: Opening doors to the US market

The TPP map

The upcoming Trans-Pacific Partnership (TPP) in likely to provide the Vietnamese companies much more than a direct opportunity to export to the US. The benefits will accrue from the lower tax rates, unhampered access to capital as well as advanced technology, with which the companies can build their own material supply base.

Dang Duc Dung, former vice president of the Hanoi Young Business Association, said this at a meeting introducing business and investment opportunities in the US.

The TPP, which is still on the round table, is not a conventional trade agreement. “Its effectiveness spreads to an extremely wide area of the world, which accounts for nearly 40 per cent ($28 trillion) of the global gross domestic product and 30 per cent of the global trade,” said Dung.

More than broadening of market choices, the Vietnamese companies will benefit from the lower taxes offered by other member countries. This will help improve companies’ profit margin. The companies will also have direct access to customer feedback, which “is one important element that Vietnamese companies often ignore or underestimate,” Dung added.

He pointed out information technology (IT) as a typical array that Vietnamese firms have the competitiveness edge. Vietnam, with its large human resource pool in IT and technical sector, is also applying the Silicon Valley model to incubate young tech startups. Several of them have got funding from the US-based accelerator 500 Startups.

Also read: Startup Review 2014: Vietnam tech firms find success, expand overseas

However, there is a barrier of law understanding among the Vietnamese business community. Nguyen Huu An, director for Vietnam Office of the US-based law firm Sterling Harwood & Associates, warned that America is a strictly regulated market. “Therefore, understanding the US (market and laws) will certainly help companies avoid risks in business.”

An also emphasised that as long as Vietnamese businesses comply with the US law, doing business in the largest economy of the world is really easy.

However, the biggest barrier is the scale of operation. Being honest about the status of Vietnamese enterprises, the current vice chairman of the aforementioned Hanoi association, Tran Anh Vuong, shared his view: “Vietnam is the weakest economy in the TPP. The hindrance to growth in the process of integration is not about technical issues negotiated by governments, it is about the small scale of business.”

Garment industry – the biggest beneficiary

 

While IT is the emerging sector, garment and textile companies will benefit directly and the most from the TPP, according to An.

Vuong Cong Van, chairman of a small garment company specialising in producing uniforms for workers called Thien Bang, stated: “We have studied about the TPP and we are positive that our company will do good when export products to the US.”

With tax rate expected to come to zero from the average 17 per cent, and the US being the largest export market for the sector (the US market accounts for over 40 per cent of Vietnam’s total garment and textile export), growth prospects for these firms are huge.

From the investment angle, the advantage might help garment companies become target of multiple investors. Shares of garment and textile companies combined jumped 34 per cent last year, way ahead of the VN-Index which grew at 8.15 per cent.

VN_joining_TPP1


Related stories:

AEC Effect: Thailand cos foray into Vietnam

AEC Effect: ASEAN banks follow retail & realty investors, into Vietnam

 

 

 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.