Vietnam is likely to face both opportunities and challenges when joining the Regional Comprehensive Economic Partnership (RCEP) with the scale tipped towards gains rather than losses, economists have said.

Negotiations on the RCEP commenced in 2012. The deal aims to reach a comprehensive economic partnership between the Association of Southeast Asian Nations (ASEAN) and six regional free trade agreement (FTA) partners, namely China, Japan, the Republic of Korea (RoK), Australia, New Zealand and India.

The RCEP region has a population of 3.4 billion, a combined GDP of 21 trillion USD, and trade accounting for 29 percent of the global figure.

Six rounds of RCEP talks were organised and negotiations are expected to conclude later this year.

As the agreement gathers a number of Vietnam’s major economic partners like China, Japan, Australia and ASEAN, it promises strong growth in trade between the country and these key export markets.

The pact will also bring about an inflow of foreign direct investment (FDI) which in turn will result in positive impacts such as transfers of technology and business and management skills that Vietnam needs.

The implementation of commitments stated in the RCEP will also help Vietnam create a competitive and transparent investment climate and participate in regional value and production chains.

Nguyen Anh Duong, Deputy Director of the Macro-economic Policies Department under the Central Institute for Economic Management (CIEM), said the deal will help Vietnam access investment from and markets of ASEAN and partners.

He elaborated that once it takes effect, Vietnam will have a chance to import goods at lower prices, especially material for manufacturing such as steel from China and plastics from the RoK and Japan, along with advanced machinery.

The pact will also help cut down expenses and create a friendlier business environment thanks to harmonised regulations, he added.

CIEM researcher Dinh Thu Hang considered some sectors such as aquatic production, agriculture and construction to be the biggest beneficiaries of the RCEP while the liberalisation of services in the region will beef up trade in services and FDI in Vietnam.

Vietnam could export its distribution and hospitality services to RCEP members, especially Japan, ASEAN nations and Australia. Efforts to facilitate trade and development cooperation could also further reduce the expenses of service connectivity and goods trade, she said.

In a recent report, ANZ bank said Vietnam and Thailand will profit the most from the RCEP as the former’s GDP growth rate could reach approximately 8 percent and the latter’s figure could hit 13 percent in five years after the deal’s signing. FDI within RCEP members is expected to account for 85 percent of the global figure, critical to the Vietnamese economy.

Meanwhile, some challenges Vietnam could face once the deal takes effect include the vulnerability to supply and demand fluctuations as the majority of its trade is focused on only few large partners and several key products, according to Nguyen Anh Duong.

Although Vietnam’s trade structure is similar to that of other RCEP members, the quality and amount of added value in its goods are still low, posing a great competition challenge to Vietnamese products. For example, the country will have to compete with China in exporting apparel, footwear and rice to Japan and the RoK.

Vietnam will also encounter strong rivals from RCEP countries in terms of banking services which have matured in Singapore, Japan, the RoK and Australia, economists said.-VNA