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Can TPP be revived under APEC 2017 in Vietnam?

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Authors: Do Quynh Anh & Bui Hong Hanh*

The Trans – Pacific Partnership Agreement (TPP) is the largest and most ambitious trade agreement in history, which was considered dead when US President Donald Trump abruptly announced his withdrawal in February, 2017. But shortly thereafter, TPP quietly took by the 11 remaining parties to restructure efforts under the name TPP11.

After the United States withdrew from the TPP, there are three views concerning the future of this agreement. Firstly, the most pessimistic view is that TPP without the United States will no longer be a TPP, so other countries should give up the agreement. Secondly, after the United States decisively withdraw, TPP should invite other Asian countries such as China, South Korea and Indonesia to participate and start negotiations again. Thirdly, the TPP 11 that is being headed by Japan will not change the content and the rest will continue to promote the TPP sooner. The third view is agreed by remaining countries, but this conclusion of TPP 11 still face many obstacles.

It is said that with the determination of the remaining members, TPP11 still has the prospect of revival. On the sidelines of the 13th Ministerial Conference of the Asia-Pacific Economic Cooperation forum held in New Zealand in May, the remaining 11 nations, in an attempt to restart the agreement, agreed to find ways to continue implementing the TPP without US . If revitalized, the TPP will link 11 countries, including the world’s 4/20 leading economies, to a combined GDP of $ 9,800 billion, followed by 19 new free trade agreements. This is also the reason that some economists recently said that it is possible that the United States will have to rethink its attitude toward TPP.

In order to have a positive result from the other members, Japan and major economies in the TPP such as Australia, Canada and New Zealand have been working hard for nearly a year in the hope of accelerating the process. These members expressed their determination to work closely together to reach a compromise soon in line with the common interests of all countries.

Replacement of the United States leading position, Japan has pledged to play a leading role in setting a clear direction for the TPP11, as Tokyo believes that the agreement will not only bring economic benefits but also a geopolitical strategies. The victory in the House of Representatives elections in Japan on October 22 has strengthened the political role of Prime Minister Abe, who favors TPP, and shows the bright future of TPP11. From Australia side, Australia Trade Minister Steven Ciobo told reporters that the gains made by the TPP are worthy to continue the agreement. He expressed satisfaction with the views of Japanese Prime Minister Shinzo Abe and what they discussed showed that there are more positive factors than expected. New Zealand Prime Minister Bill English continued to promote TPP11. He emphasizes that the country has stepped to the stage joining hands with Japan to recover the TPP process.

Meanwhile, Canada, the second largest economy in the TPP11, said it would try to remove the terms of each concession to the United States in its initial agreement. The US withdrawal from the TPP is bringing more benefits to Canada as well as allowing it a better position to rewrite the treaty. The Westover Center recently announced a study entitled “The Art of Trade Negotiation: Quantifying the Benefits of the TPP Without the United States.” According to this report, Canada’s exports to the TPP11 countries by the year 2035 will increase by 4.7%, while Mexico will increase by 3.12%, higher than the base without the TPP. When TPP included the US, the increase was only 0.36% and 0.05%. In addition, Mexico and Canada also benefited from exports to foreign TPPs in the context of TPP11 adoption. The study also found that Canada’s largest harvest under the TPP was from agriculture, agricultural food because it was not competing with the United States in the TPP. The benefits of TPP11 will allow Canada and Mexico to broaden their lead in re-negotiating NAFTA. Peru and Chile are also beneficiaries of the US withdrawal from the TPP as these countries will have a larger market share in the non-US TPP. Similarly, Singapore will also have the advantage of not competing with the United States in the Asian market.

At present, in the hope of reviving the TPP Agreement, the original text of the TPP needs to be adapted to the new situation, not just a simple exemption from the US, but also a number of difficult issues. This new face gradually revealed. Some members have proposed modifying or freezing some of the terms of the agreement, such as issues related to state procurement or the protection of intellectual property rights. Viet Nam has proposed the possibility of regulating some provisions on worker rights and intellectual property regulations in the pharmaceutical field of the original treaty. Meanwhile, Canada and Mexico have issued the terms they want to suspend, including a number of provisions of the TPP that may be incorporated into the revised version of the North American Free Trade Agreement (NAFTA) between the United States and these two countries.

After many meetings, the common perception among member countries has progressed. A number of sessions have been conducted to find a way to modify the original TPP text to suit the new context. There have also been significant advances in discussions on the modification or suspension of certain terms, such as the intent to freeze a patent filing extension, if the application is subject to postponement. Unreasonable, investment rules, copyright protection …Although the United States has retreated, the TPP is better than any agreement currently on the agenda of countries, such opportunities are not much. So, basically countries are discussing the same agreement with the original version.

Officials from several countries said a possible agreement could be reached at APEC 2017 – the Asia-Pacific Economic Cooperation forum, which will take place in Danang, Vietnam in November. TPP members are present at this conference. The move comes after the end of the fourth round of talks between high-level officials in Tokyo in September, which has sparked renewed hopes for a large-scale cooperation in the TPP process. Observers note the importance that the parties have achieved.   Peruvian Trade Minister Edgar Vasquez announced to media after the meetings “All member states are willing to evaluate alternatives so that TPP can survive.”

At the meeting of APEC Finance Ministers in Hanoi on October 20, 2007, in addition to the contents related to APEC’s organization works in Da Nang next month, the information showed that with little change, Japanese officials and participating countries are optimistic that TPP will have a good result in Da Nang.

Commenting on the next APEC meeting next month, the Australian Ambassador said Australia’s main objective in the forum was to join the 10 member countries approve the TPP. After this round, the final decision on the new TPP, which many hope to become reality at the end of the year and if agreed, can be implemented from next year.

The TPP agreement will have some adjustments, but that contents is not much, not very important. Because of that, the general desire of TPP members still to hope America back. In order for the United States returned, TPP 11 can not cut off what it has installed in the Agreement so much, especially in such areas as labor, environment, intellectual property, public procurement, fighting terrorism, transparency and anti-corruption, conflict resolution, competition policy, and service sectors lead by United States. The revival of the TPP11, the Asia-Pacific region has determined Its own path, not completely passive look at the US leadership as before.

*Bui Hong Hanh, associate professor, Vietnam National University, Hanoi

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Southeast Asia

Infrastructure Drive, Strong Domestic Demand to Sustain Philippine Growth

MD Staff

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The Philippines’ economic growth is expected to sustain its quick pace in 2018 and 2019 as the government’s infrastructure program is rolled out, says a new Asian Development Bank (ADB) report.

In its new Asian Development Outlook (ADO) 2018, ADB projects Philippine gross domestic product (GDP) growth at 6.8% this year and 6.9% in 2019, up from 6.7% in 2017. Rising domestic demand, remittances, and employment, in addition to infrastructure spending, will drive growth. ADO is ADB’s flagship annual economic publication.

“Along with domestic demand, the government’s infrastructure investments will fuel the country’s growth in the next few years, supported by a sound economic policy setting,” said Kelly Bird, ADB Country Director for the Philippines. “We expect this growth to further lift wage employment numbers, add to household incomes, and benefit more poor families across the archipelago.”

The Philippines remained one of the strongest growing economies in Southeast Asia in 2017. Domestic investment recorded 9% growth last year, moderating from a brisk 23.7% in 2016, although growth in fixed investment in industrial machinery, transport equipment, and public construction remained robust. Household consumption grew by 5.8% in 2017, from 7% in 2016, on the back of higher remittances and employment, with the unemployment rate falling by 1.3 percentage points to 5.3% in January 2018 as 2.4 million jobs were added. Public spending rose by 7.3% last year from 8.4% in 2016.

Consumer price inflation reached 3.2% last year from 1.8% in 2016 due to strong economic growth, higher international fuel prices, and Philippine peso depreciation, but well within the 2% to 4% target by the Bangko Sentral ng Pilipinas—the country’s central bank. The country’s external debt further declined to 23.3% of GDP in 2017, from 24.5% of GDP in 2016.

Moving forward, ADB projects services will continue to drive GDP growth, along with manufacturing and construction industries. The approval of the Tax Reform for Acceleration and Inclusion law in December 2017 will augment tax revenues and provide additional fiscal space for more progressive public spending. The policy reforms are expected to yield additional 90 billion to 144 billion Philippine pesos ($1.73 billion to $2.76 billion) in tax revenue collection in 2018 and 2019, respectively.

With economic growth gaining momentum, inflation is projected to reach 4% in 2018 as global oil and food prices rise, and higher excise taxes on some commodities take effect. In 2019, meanwhile, inflation is expected to marginally decline to 3.9%.

The report notes there are external risks to the Philippines’ growth outlook from heightened volatility in international financial markets and uncertainty about global trade openness, although the country’s strong external payments position would cushion these effects.

A major policy challenge to the country’s growth outlook, according to the report, is managing the rollout of the government’s “Build, Build, Build” infrastructure program, which is expected to raise public infrastructure spending to 7.3% of GDP by 2022 from 4.5% in 2016. The report provides suggestions on ways to enhance government capacity, including strengthening coordination between government agencies and improving technical capacity of staff within these agencies, and fostering stronger partnerships between government agencies, the private sector, and development partners.

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Southeast Asia

Securing the future prosperity of the Greater Mekong Subregion

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The Greater Mekong Subregion (GMS) countries have made stunning progress over the past quarter century. Once plagued by poverty, they are now economic success stories.

The GMS Economic Cooperation Program has contributed significantly to this transformation. Since it was established in 1992 as a means to enhance economic relations and promote regional cooperation, its six member countries—Cambodia, the People’s Republic of China, Lao People’s Democratic Republic, Myanmar, Thailand, and Viet Nam—have built a platform for economic cooperation that has mobilized almost $21 billion for high-priority infrastructure projects. Foreign direct investment into the subregion has surged ten-fold and trade between its countries has climbed from $5 billion to over $414 billion.

But the subregion faces challenges to its prosperity. Further reducing poverty, climate change adaptation and mitigation, energy efficiency, food security, and sustainable urbanization remain priorities of the GMS Program. Countries also face new challenges, including growing inequalities, rising levels of cross-border migration, and the potential impact on jobs of the fourth industrial revolution.

Moreover, GMS countries have agreed to significant commitments under the Sustainable Development Goals and the Paris Agreement on climate change.

There are also emerging opportunities for the region, including incorporating new technologies in various sectors such as education, agriculture, health, and finance. GMS countries are situated at the crossroads of South and Southeast Asia, and hence they can benefit from the increased momentum for growth in South Asia.

As GMS leaders gather this week in Ha Noi to chart the future of the program, it’s a good time to consider how a new generation of initiatives can ensure the GMS Program remains relevant and responsive to the subregion’s needs.

The Ha Noi Action Plan and the GMS Regional Investment Framework 2022, both proposed for adoption at the Summit, provide a platform for countries to strengthen their cooperation through continuous innovation. These two documents will have a sharpened focus on the GMS Program’s strategic goals of enhancing connectivity, competitiveness, and community in the subregion.

Connectivity, the first objective, has been dramatically improved. More than 10,000 kilometers of new or upgraded roads and 3,000 kilometers of transmission and distribution lines have been added under the program. These transport networks have been transformed into an interconnected network of transnational economic corridors, building on 25 years of work to extend the benefits of growth to remote areas. The Ha Noi Action Plan calls for the continued expansion of these economic corridors to boost connectivity both between and within countries.

The subregion’s competitiveness is improving through ongoing efforts to facilitate transport and trade flows, enhance agriculture exports, and promote the GMS as a single tourism destination after receiving a record 60 million visitors in 2016. Looking ahead, it will be important to continue cutting red tape and to remove remaining barriers to transport and trade.

Finally, communities are being strengthened through cross-border initiatives to control the spread of communicable diseases, expand educational opportunities, protect the subregion’s rich biodiversity, and mitigate the impacts of climate change.

GMS countries have identified a new pipeline of 227 projects worth about $66 billion under the GMS Regional Investment Framework 2018–2022. These projects will expand economic prosperity by developing cross-border transport and energy infrastructure.

ADB, which has been the program’s secretariat since its inception, expects to provide $7 billion over the next 5 years for a range of projects supporting transport, tourism, energy, climate change mitigation and adaptation, agribusiness value chains, and urban development. This builds on more than $8 billion in financing provided by ADB so far under the program.

To deliver these projects and make headway on other priorities such as infectious disease control and environmental preservation, strong partnerships are vital. The GMS Program depends on the collaboration of many stakeholders, including local administrations and communities, development partners, academia, and the media.

The GMS will benefit from strengthened partnerships with other regional and global cooperation platforms, leading to new opportunities for future development.

Partnerships with the private sector will also be increasingly important, and it is gratifying to see them deepening through the GMS Business Council, the Mekong Business Initiative, the e-Commerce Platform, GMS tourism and agriculture forums, and the recent Finance Sector and Trade Finance Conference.

I am optimistic that the subregion will meet its challenges and capitalize on emerging opportunities. By working together, GMS countries can deliver rapid, sustainable, and inclusive growth for another 25 years and beyond. ADB will continue to be an important and trusted partner in that endeavor.

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Southeast Asia

Vietnam continues to reduce poverty

MD Staff

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Poverty in Vietnam continues to fall, particularly amongst ethnic minorities, who saw their rate of poverty decline significantly by 13 percentage points, the largest decline in the past decade, says a new World Bank report.

According to Climbing the Ladder: Poverty Reduction and Shared Prosperity in Vietnam, released today by the World Bank, improving income from highland agriculture can help Vietnam further reduce poverty, which has fallen by almost 4 percentage points since 2014, to 9.8 percent in 2016. Ethnic minorities – many of them living in highland areas – account for 72 percent of Vietnam’s poor, and encouraging them to grow more profitable industrial crops may improve their earnings.

“Vietnam has achieved tremendous results in reducing poverty and improving the quality of life for millions. The decline in poverty amongst ethnic minorities is encouraging, and more focused efforts on improving their incomes can further broaden their opportunities and reduce persistent inequalities,” said Ousmane Dione, World Bank Country Director for Vietnam. “The aspirations of those with less opportunities cannot be ignored.”

Outlining recent trends and patterns of poverty in Vietnam, the report proposes solutions for that untapped agriculture potential in highland areas where the poor are concentrated. Land use and cropping decisions, for example, contribute more to agriculture income differences between households. Low-income families in highland areas use their land to grow basic crops such as rice or maize instead of raising more profitable crops such as coffee, black pepper, or rubber.

Improving access to credit may help highland farmers make the necessary investments for higher-earning agricultural production. Strengthening earning capacity can help narrow inequalities between groups.  The average per capita consumption of ethnic minorities, for example, remains less than 45 percent of the Kinh and Hoa. Moreover, the poor faces a widening gap in terms of access to upper secondary education and improved water and sanitation.

At the same time, the report recognizes that 70 percent of Vietnam’s population is now classified as economically secure, including the 13 percent who are now part of the global middle-class. These income classes are growing rapidly, rising by over 20 percentage points between 2010 and 2017. An average of 1.5 million Vietnamese joined the global middle class each year since 2014, confirming that households continue to climb the economic ladder after escaping poverty. The rise of the consumer class changes society’s aspirations and the focus of the poverty and shared prosperity agenda shifts from combatting extreme poverty to effecting broad improvements in the quality of life and supporting the further expansion of the middle class. Rapid job creation and an ongoing transition to wage employment are driving gains in poverty reduction and shared prosperity.

The report suggests several areas of strategic priorities to further reduce poverty and promote shared prosperity, including:

  • Boosting labor productivity and investing in infrastructure to sustain job creation and wage growth without losing competitiveness.
  • Implementing education reforms designed to equalize opportunities and develop workforce skills.
  • Spurring agriculture structural transformation through changing farmland use patterns, strengthening land user rights, and improving skills of the poor farmers.

While reducing inequality remains a challenge, the report notes that the number of individuals vulnerable to falling back into poverty declined to only 2 percent between 2014 and 2016. In contrast, the period saw the middle class expanding by more than 3 million people.

One of the prioritized areas under the new World Bank Group Country Partnership Framework with Vietnam for the period from FY18 – FY22 is inclusive growth, with a specific objective for the “economic integration of the poor and vulnerable groups” under which the Bank will provide support for targeted interventions to expand economic opportunities for people in lagging areas.

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