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Restructuring vital for Vietnamese firms ahead of historic TPP deal

Update: October, 07/2013 - 08:39

With the Trans-Pacific Partnership (TPP) likely to be agreed this month, local businesses are under pressure to change. Le Xuan Nghia, director general of the Business Development Institute, explained the situation to Hai quan newspaper.

In your opinion, what are the challenges that Vietnamese enterprises are facing at the TPP threshold?

One of the toughest issues being discussed at the on-going TPP negotiation is the preferential rules of origin.

Under these rules, if a member state uses raw materials imported from other TPP members, the member will enjoy the preferential rules of origin.

These rules are mainly applied in the import and export of raw materials in the textile and garment industry, as well as for leather in the footwear industry. Of course, sometimes they also cover technology and equipment imports.

However, one condition that the importer has to satisfy to the exporter is to have the foreign currency required by their counterpart.

This poses a problem for many Vietnamese enterprises. I should say at present only the packaging and plastic industries are importing raw materials from TPP members. So this is one of their advantages when Viet Nam officially become a TPP member state.

In other industries the raw materials are mainly imported from China. This is big issue for many Vietnamese enterprises.

Do you think the rules of origin is an advantage for Viet Nam to compete with China or other non-TPP members?

I couldn't agree more. TPP membership is a big opportunity for Vietnamese enterprises while China is not. Furthermore, Viet Nam also has some comparative advantages over China regarding certain groups of commodities. That's why I'm confident if Vietnamese enterprises will quickly adapt to the new situation presented to them by the TPP, they will be able to compete not only with Chinese enterprises, but also with non TPP enterprises.

What about the State-owned enterprises?

The TPP has imposed rather strict regulations on our State-owned enterprises (SOEs). One guiding principle is a level playing field between the SOEs and non-SOEs in the perspective of competition and trade.

There is a very simple reason, SOEs' capital comes from the people's taxes. Throughout the negotiation process, other TPP members kept demanding that capital investment for our SOEs must be disclosed, including their transactions and finances. These requirements are very tough for us.

What are your comments regarding these tough requirements from TPP towards our SOEs?

By now, I don't know what the results are. But the words "absolute transparency" have been mentioned many times during the negotiations.

It is my opinion that if the SOEs have to follow the true spirit of the words "absolute transparency," some SOEs will become normal enterprises.

This requirement has put pressure on some of our SOEs to restructure if they want to be players in the TPP.

Some of the legal requirements in the TPP are new to us. Do you think that we have to amend or revise some of our legal documents?

The first law I think that we have to revise is the Law on Enterprises – or should we have a separate law on SOEs.

The other point we should consider carefully is the requirements on labour and child labour for enterprises, or information services.

Under our law, any organisations providing information services must have their servers located inside Viet Nam, or else they must be protected by fire walls.

However, under the TPP, the servers could be located anywhere and all transactions are free. This is something we have to consider and make amendments to - so is the law on Intellectual Property Rights. — VNS

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