Actual impact of the demise of TPP and what about RCEP

Much has been written and discussed about the impact of the demise of the Trans Pacific Partnership on foreign direct in Vietnam. With the first quarter statistics on FDI now available we can confidently say that there has been no significant impact on FDI.

According to the Ministry of Planning and Investment newly registered FDI totaled almost US$ 7 billion and an increase of 70% over the corresponding quarter in 2016.  Of this total, registered investments increasing their capital accounted for US$ 3.9 billion up a staggering 200% plus on the same quarter in 2016.

The biggest investor, by country, was S Korea accounting for over 50%, followed by Singapore and China.

Now the attention is also focusing on the Regional Comprehensive Economic Partnership, (RCEP), which is under negotiation and is a likely replacement in the short term to TPP. The RCEP includes the 10 ASEAN countries and 6 ASEAN Free Trade Agreement partners: Australia, China, India, Japan, S. Korea an d New Zealand. This bloc together accounts for 3.4 billion people or half the world’s population and GDP of US$ 21 trillion or 30% of the world’s GDP.

The RCEP, whilst expected to have fewer benefits for Vietnam than the TPP it will have greater regional benefits and therefore greater benefits for Vietnam.[1] RCEP does not have the same strict requirements for institutional reform but will necessitate Vietnam improving it’s economic institutions including, Corporate Governance, and overall transparency.

So this reminds me of a Chinese saying which in English translates to Something good always comes out of something bad. Let’s hope the first quarter performance will be representative of the next 9 months.