RCEP Vietnam Benefit | All You Need To Know

In an economically turbulent world, developing countries must strive to find alternatives for economic sustainability. With a trade war between the USA and China imminent, it has become imperative for other Asian countries to find sustainable means of economic growth and stability.

The Regional Comprehensive Economic Partnership agreement took effect at the start of 2022, potentially benefiting member nations, including Vietnam, and the global economy.

What is RCEP Vietnam?

The Regional Comprehensive Economic Partnership (RCEP) is a landmark trade agreement signed by 15 Asia-Pacific countries, including Vietnam, took effect from January 1st, 2022.

RCEP Vietnam represents a significant opportunity for Vietnam’s businesses to leverage its strategic geographic location and emerging market potential.

Vietnam’s Benefits Under RCEP

Here are some of the expected economic benefits for Vietnam under the RCEP trade agreement:

Reduction of Tariffs & Duties

One of the key advantages of RCEP Vietnam for businesses in Vietnam is the reduction of tariffs and duties imposed on trade among member countries. RCEP aims to progressively eliminate tariffs on various goods and services, giving our businesses more affordable access to regional markets.

This reduction in trade barriers will enhance competitiveness and cost-efficiency, enabling companies in Vietnam to expand their export opportunities.

Rules of Origin (ROO)

RCEP also establishes standardized rules of origin (ROO), determining the country of origin for traded goods. This simplifies and harmonizes trade procedures, making it easier for businesses in Vietnam to qualify for preferential treatment within the RCEP framework.

With clearer guidelines, businesses can navigate complex supply chains more effectively and capitalize on the benefits of regional integration.

Potential Exporting Market

RCEP creates a vast and diverse market for Vietnamese businesses, encompassing countries such as China, Korea, Japan, and ASEAN nations.

This agreement provides Vietnam with enhanced access to these markets, enabling businesses to tap into the growing demand for their goods and services. By leveraging RCEP, businesses can explore new export opportunities, expand their customer base, and we can thus diversify our revenue streams.

Advanced Technical Cooperation

RCEP Vietnam promotes advanced technical cooperation among member countries, fostering knowledge sharing, capacity building, and technology transfer. This collaboration presents a valuable opportunity for businesses in Vietnam to enhance their competitiveness through the acquisition of new skills, technology, and best practices.

By leveraging technical cooperation initiatives within RCEP, businesses can strengthen their capabilities, improve productivity, and help us adapt to evolving market demands.

Challenges

While RCEP brings numerous benefits, businesses in Vietnam may face certain challenges as they adapt to the new trade landscape.

Competitive Market

RCEP Vietnam creates a highly competitive market environment, with businesses from member countries vying for market share.

Businesses will need to improve their competitiveness, enhance product quality, and innovate to differentiate themselves in this intensified competition. This challenge presents an opportunity for businesses to raise their standards, increase efficiency, and embrace continuous improvement to succeed in the RCEP market.

Losing Distinct Advantages

Vietnam has enjoyed certain advantages in specific industries, such as low labor costs and favorable trade agreements with individual countries.

However, under RCEP, these advantages may diminish as other member countries also gain access to similar benefits. Vietnamese businesses must adapt their strategies and identify new competitive advantages, such as specialization in high-value niche markets or developing unique products and services.

Risk of Dependence

While RCEP offers new market opportunities, overdependence on a few key regional markets is potentially risky. Businesses should maintain a diversified customer base and explore opportunities beyond RCEP member countries. This proactive approach will help mitigate risks associated with geopolitical shifts, economic fluctuations, or changes in trade policies.

Impact of RCEP on Industries in Vietnam

Here are some of the major impacts of RCEP on select industries in Vietnam.

Supply Chain Development

RCEP’s emphasis on supply chain connectivity and integration is expected to impact industries in Vietnam significantly.

The agreement aims to streamline trade procedures, enhance logistics and transportation infrastructure, and promote digital connectivity among member countries. These developments will enable Vietnamese businesses to participate more effectively in global value chains, attract foreign direct investment, and improve overall supply chain efficiency.

Industries such as manufacturing, electronics, and textiles will likely experience positive effects from the improved supply chain infrastructure and coordination.

Effective Trade Agreements

RCEP provides Vietnamese industries access to a consolidated market of over 2.2 billion consumers, accounting for nearly 30% of the world’s population and 29% of the global GDP. This vast market size presents significant business opportunities across various sectors, including manufacturing, agriculture, services, and tourism.

Vietnamese exporters can benefit from reduced trade barriers, simplified customs procedures, and preferential treatment in member countries, allowing them to expand their market reach and increase exports.

Enhanced Trade with China, Korea, and Japan

RCEP opens up new avenues for trade with major economies such as China, Korea, and Japan. These countries are significant trading partners for Vietnam, and the agreement will further strengthen economic ties.

Various industries, especially electronics, automotive, and textiles, can leverage this opportunity to deepen our integration with supply chains in these countries.

Integration within ASEAN

Vietnam will benefit from RCEP’s reinforced economic integration within the region. The agreement strengthens the ASEAN Economic Community (AEC) framework and promotes trade among ASEAN countries.

Vietnamese industries can leverage this integration to deepen collaboration, attract investment, and tap into consumer markets. Manufacturing, construction, financial services, and tourism will likely experience increased cross-border trade and investment activities.

Boost for Small and Medium Enterprises (SMEs)

RCEP aims to support the growth of our SMEs by providing them with better market access, simplified trade procedures, and increased opportunities for collaboration.

Local SMEs, which form the backbone of the economy, can benefit from reduced tariffs, expanded export markets, and improved access to regional supply chains. The agreement’s focus on capacity building and technical cooperation will enable SMEs to upgrade capabilities, adopt advanced technologies, and meet international standards, enhancing competitiveness in the global market.

Access to Advanced Technologies

RCEP promotes technology transfer, innovation, and knowledge sharing among member countries. Vietnamese industries can leverage this aspect of the agreement to access advanced technologies and know-how from countries such as Japan and South Korea. This technology infusion can significantly benefit local industries, such as electronics, telecommunications, manufacturing, and renewable energy, enabling them to enhance productivity, improve product quality, and develop innovative solutions.

How Can We Help

Premia TNC offers company secretarial services that can help our businesses in Vietnam navigate the changing business landscape influenced by RCEP.

Our services include compliance with RCEP Vietnam-related regulations, incorporation, and structuring support, corporate governance and administration assistance, due diligence and compliance reviews, intellectual property protection guidance, and corporate restructuring and mergers & acquisitions support.

By engaging these services, businesses can ensure compliance, optimize operations, protect intellectual property, and capitalize on the opportunities presented by RCEP.