November 23, 2018

CP-TPP and Implications on State Owned Enterprise Reform in Vietnam

November 23, 2018

CP-TPP will be effective starting from 2019; as a member, what changes will Vietnam experience after the agreement takes effect? Particularly what are the impacts of the agreement on SOEs which are the backbone of Vietnamese economy?

In the seminar “Chapter 17 of Comprehensive-Prospective Agreement for Trans-Pacific Partnership (CP-TPP) and its implications on SOEs Reform in Vietnam” at Fulbright School of Public Policy and Management on 16thNovember 2018, Associate Prof. Pham Duy Nghia, Director of MPP Program addressed these questions in his seminar presentation.

Unlike negotiation rounds, TPP Agreement is attached with trade, political and legal significance in U.S.-China relations. As such, U.S. particularly focused on fostering and establishing chapters on intellectual rights, dispute resolution mechanism between foreign investors and the government, etc.

Nonetheless, in early 2017, U.S. decided to withdraw from TPP agreement and the remaining 11 members with three leading economies (i.e. Japan, Canada, and Australia)continued negotiating and successfully signed the revised Comprehensive-Prospective TPP Agreement (CP-TPP) in March 2018 and the revised agreement will enter into force from 2019.

In the revised CP-TPP agreement, Chapter 17 incorporates clauses on policy for SOEs and government subsidies at the expense of foreign firms. Vietnam and Malaysia, whose SOEs are pivotal in these economies, have negotiated strenuously to gain favorable positions in these clauses.

Chapter 17 has exerted pressure on member countries to make commitment for a level playing field for SOEs, private firms and foreign firms. Meanwhile, SOEs are obliged to publicly post their organization approaches and business results. These external pressures are consistent with desirable domestic reform efforts.

Given U.S. departure from the agreement and diminishing entry to U.S. market, will Vietnam go on to embrace Chapter 17 in CP-TPP, seeking external force to urge domestic reforms? Assoc.

Prof. Nghia believed that the magnitude of the change will be restricted and with extensive exempt cases in the Appendix, CP-TPP is expected to significantly adjust only large-sized SOEs which are owned and governed centrally.

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