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COMPANIES RUSHING TO “GREET” CPTPP

Posted Date: 11/12/2018
As of December 30, 2018, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership - CPTPP shall become effective. In Dong Nai, companies have been preparing themselves to seize this chance.

​As of December 30, 2018, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership - CPTPP shall become effective. In Dong Nai, companies have been preparing themselves to seize this chance. 

According to the CPTPP regulations, it only takes approval of six countries for the agreement to be officially ratified. To date, there have been seven countries who have approved of CPTPP being: Canada, Japan, Mexico, Singapore, New Zealand, Australia and Vietnam; The four countries that have yet approved the CPTPP are Malaysia, Brunei, Chile and Peru.
VA-101218-DoanhNghiepGapRutDonCPTPP.jpg
Production of electronic components for domestic market and for export at Sowell Vietnam Co., Ltd in Nhon Trach 3 Industrial Park (Nhon Trach District).
 
* Many economic activities benefit
Even with United States no longer involved, CPTPP and its 11 members is still a big market, many companies in Dong Nai are anticipating this. Because after a this group of economies still represents 13.5% of global GDP, equivalent to10 trillion USD per year. When the agreement comes into effect, within 7 years, almost all commodities will have tariffs reduced to 0%, goods will increase their competitiveness compared to those of non-member countries exported into this market. At the same time, the companies shall also have easy access to modern machinery and equipment to increase productivity, quality, and the ability to export more conveniently to other markets.
 
Mr. Phan Van Binh, Chairman of the Dong Nai Handicraft and Wood Association, said: "Many wood processing companies are eagerly expecting CPTPP to take effect, as many member countries are large importer of wood materials and exporter of wood products and exporting. Large wooden products of Dong Nai. With no import tax, companies will lower their production costs and products exported to other markets shall be improved in terms of competitiveness." Also, according to Mr. Binh, in addition to the advantages there are difficulties in that companies now must meet the requirements regarding worker’s rights, environment, factory regulations... However, the woodwork companies have already prepared in advance so when CPTPP becomes effective, they shall not be caught by surprise and can take advantage of this great opportunity immediately.
 
According to Mr. Yoo Sun Hyung, Executive Director of Hyosung Vietnam Co., Ltd. in Nhon Trach 5 Industrial Park (Nhon Trach District), Hyosung has been preparing for this for 2-3 years so the Company is really looking forwards to when the terms of The CPTPP take effect to expand export to this market, and to benefit from tariff reduction from the Agreement.
 
Companies that deal in of clothing, footwear, machinery, electronics, electronic components ... also acknowledge that CPTPP is a big market, so in the recent time, they have been seeking for raw materials from both domestic or from other countries that are also members of the Agreement.
 
* Strict material requirements
 
However, to meet the requirements of origin of goods is not such an easy task because the "weakness" of raw materials can be a barrier that holds companies back from benefiting from the market.
 
According to many predictions, the clothing and footwear industry will have more advantages to reach and expand export to large markets such as Canada, Australia, Chile ... But in fact, according to the provisions of CPTPP, the requirements for origin of goods are quite strict. For example, for textiles to benefit from 0% tariffs, they must satisfy the requirement that the yarn or fabric must be produced domestically or imported from countries participating in CPTPP. However, in reality, the majority of the raw materials for garment and textile industry, footwear, electronics, components of Vietnam are currently being imported from China, Taiwan, Korea with the percentage of from 60-80%.
 
However, when CPTPP comes into effect, Vietnam would be one of the countries that sign the most free trade agreement in the world. This helps attract foreign investment into Vietnam more, because many companies that work in supporting industries for garment and textile, footwear, machinery and equipment manufacturing... will come to Vietnam to supply materials for Vietnamese companies or foreign companies in Vietnam.
 
Mr. Bui The Kich, General Director of Dong Nai Garment Corporation said: "Unless the customer specifically demands otherwise, Our Company prefers getting materials from domestic sources. Recently, many foreign companies have entered Vietnam to invest in the yarn and textile industry to meet the needs of Our company, so finding domestic sources is not too difficult." For the past 2 years, many Chinese and Taiwanese companies have come to Dong Nai to rent factories to produce yarns, fabrics, leather, and machinery parts for the local market.
 
Mr. Peter Wu, Head of Taiwan Trade Union in Dong nai said "There are many Taiwanese companies in the field of supporting industries that are looking for locations to rent to build their factories in Dong Nai to supply materials for other companies in the Province and other nearby provinces. Once CPTPP launches, there will be many more companies that deal in supporting industries that would come to Dong Nai as well as Vietnam to invest and to partake the benefits stemming from the Agreement.
 
CPTPP shall become effective within just over 1 month. To benefit from this Agreement, many companies are urgently striving to meet the accompanying requirements which are quality, origin of goods, location of production, labor and environment. This is also an opportunity for Dong Nai as well as other provinces and cities to attract foreign investment in supporting industries to increase the localization rate of products.
 
Huong Giang