Illustrative photo (Photo: VNA)

London (VNA) – Vietnam is set to become the biggest beneficiaries of the Trans-Pacific Partnership (TPP) trade deal out of the four Southeast Asian participants, the other three being Brunei, Malaysia and Singapore, according to the UK Financial Times.

David Robinson, Principal, ASEAN at FT Confidential Research, said that the deal will help Vietnam promote garment exports in the coming time.

The 12-country pact, covering about 40 percent of the world’s economy, will grant Vietnamese manufacturers tariff-free access to several potential markets. The newspaper said that the Vietnamese Government should speed up the economic restructuring while giving a push to the privatisation of state-owned enterprises.

After being approved, the trade deal will help Vietnamese businesses penetrate their products into large markets such as the US, Japan and Australia. This will boost demand for Vietnamese exports and create a wealth of new jobs at home.

The sectors that stand to benefit the most are apparel, footwear and textiles, which together accounted for 26 percent of Vietnamese exports in 2014. These industries have grown rapidly in the past few years, he said.

According to the World Trade Organisation (WTO), US import tariffs on Vietnamese-made footwear can be as high as 48 percent while certain items of clothing can be levied tax of 20 percent.

TPP will cut the tariffs to zero or close to zero, depending on the goods. This promises to accelerate an already steady increase in Vietnamese exports of footwear to the US, which rose 23 percent in 2015.

However, Robinson said that the reduction of tariffs will provide further incentives for Chinese footwear and apparel producers to relocate or expand across the border to Vietnam. In the past decade, rising labour costs in China have encouraged lower-value-added industries to move production to the Mekong Delta region.

The FT Confidential Research, an investment research service of the newspaper, also said that TPP will help Vietnam’s share of apparel and footwear imports by the US double to 30 percent by 2020.

Furthermore, TPP will prove a real boon to Vietnam’s automotive industry, potentially transforming into ASEAN’s second automotive manufacturing hub after Thailand.-VNA