TPPs demise has some effect on US FDI
What advantages does Vietnam lose in terms of FDI attraction with the US exiting the TPP?
Vietnam will definitely feel some sort of economic blow in terms of lost FDI due to the US’s exit from the TPP, but the impact will be greater on future investment rather than existing investment.
US firms who were perhaps planning an expansion into Vietnam may now have second thoughts as they will no longer benefit from the preferential trade terms in the TPP, but the economic fundamentals are still such that in more cases than not executing any planned investment will remain a sound business decision.
That said, one area Vietnam in which will need to tread carefully is the automotive sector.
Already we’ve seen indications that Japanese carmakers may shift production out of the country to Thailand or Indonesia now that Vietnamese cars and automotive parts may not receive the preferential treatment once expected.
Without the TPP, do you think FDI from the US into Vietnam - both direct and indirect – will fall?
We do not forecast any significant fall in FDI and are expecting continued flows of investment from the US.
Our US clients are still excited about Vietnam and we haven’t heard of any planned FDI projects being cancelled due to the Trump administration’s withdrawal from the TPP.
Nevertheless, it is possible that Vietnam may not enjoy the same level of FDI from US companies and individuals as it would have had the TPP come into being.
What should Vietnam and Vietnamese enterprises do now the TPP may not go ahead?
We feel that, even without the TPP, Vietnam is on a strong trajectory.
With the upcoming EU-Vietnam FTA, Vietnamese businesses should look west towards the EU and focus on how they can penetrate European markets further, with a particular focus on textiles, consumer goods, electronics, and even agriculture.
Beyond that, they should double down on their trade with countries with which Vietnam already has an FTA in place, such as Australia, Japan and South Korea.
