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CPTPP Serving Vietnam as Opportunities and Challenges

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CPTPP is originated from the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP) (it is also so call P4) signed in 2005 by Singapore, Chile, New Zealand and Brunei. Since September 2008, the United States, Australia, Peru, Vietnam, Malaysia, Canada, Mexico and Japan have jointly negotiated at the aim of setting up the Trans-Pacific Partnership Agreement (TPP). The TPP negotiation process ended in 2015 under the agreement of the 12 member states; however, Trump administration announced its withdrawal from the agreement in January 2017. After a number of adjustments, including postponing the implementation of the 20 TPP provisions with the expectation that the United States would return to the Agreement, the 11 remaining TPP members unanimously continued to promote this process by establishing Comprehensive and Progressive Agreement for Trans-Pacific Partnership -CPTPP). After completely reviewing the content and approved by the member parliaments, estimated by March 2018, CPTPP will officially become a large economic zone in Asia-Pacific with a population of over 460 million, contributing 14% of world GDP and 1/6 of global trade.

The agreement is expected to establish a new common framework for regional free trade arrangement for Asia-Pacific countries, to support trade, to attract foreign investment, and to promote institution reformation in those countries. CPTPP has the basic advantages as the members of the negotiation are the countries that have been strongly committed to the trade liberalization. Given the disclosed commitments, CPTPP is considered as a model treaty for the 21st century because of its overwhelming scale and influence in comparison with other trade agreements regionally and globally.

Given the competitiveness, the economic size and the inadequacies of the current institutional system, it is surprised that Vietnam has strongly participated in CPTPP. Compared with other members, it has the least competitive economy and the loosest legal system. Despite its 20-year-old experience in the process of international economic integration, Vietnam lacks the practices in a highly competitive and demanding integration environment since it is only familiar with first-generation FTAs, where the open commitments and reform pressures are readily accepted in a transitional and distinctive economy.

Meanwhile, CPTPP’s regulations set out in the negotiations are evaluated as far beyond the ability of the current economy of Vietnam. What is the motive of Vietnam to join CPTPP?

Given the economic size of the members and the terms of trade liberalization, joining CPTPP is obviously advantage to empower Vietnamese economy in the Southeast Asia in terms of economic growth, trade as well as FDI attraction. In the economic perspective, Vietnam is a country to achieve the most benefit from the CPTPP.

Firstly, the opportunities to increase the export of goods that are the advantages of Vietnam (i.e. textiles, footwear, electronic products and equipments) are relatively high by combining the tariff reduction and the experiences in these markets.

Secondly, the attraction of foreign investment into Vietnam is greatly promising. The access to large markets such as Japan and Canada together with the clearer commitments to improve the investment environment and protect intellectual property rights will become a significant attraction for international investors. Moreover, Vietnam, under the framework of CPTPP, is able to attract large inflows from the member countries through the membership of regional economic organizations such as AFTA and ACFTA.

Thirdly, the chances of faster economic growth are strongly wide. The expansion of the major export industries such as textiles, footwear, fishery, etc., will help stimulate the income growth from domestic production, thereby support the increase of the overall demand.

Fourthly, Vietnam will have an opportunity to form a more comprehensive economic structure. CPTPP will urge the domestic investors as well as the regional ones to invest in the supporting industries to create local material resources given the extremely high standards on the place of origin.

Fifthly, it is a chance to complete the institutions that govern the market economy. CPTPP sets out a clear legal framework for not accepting concessions to any business. Because of its high and foreseen requirements on policy transparency, compared to many other agreements, CPTPP could become one of the important premises for Vietnam to carry out institutional and market reforms thoroughly and comprehensively.

However, among the countries participating in CPTPP, Vietnam achieves the lowest level of development and faces big challenges.

Firstly, the production industry structure is not consistent with the provisions of CPTPP. The economy is not well-prepared and the supporting industry is weak. With regard to the requirements of origin, the sectors which are the advantages of Vietnam’s export sector are not able to exploit the concessions from the CPTPP because their inputs do not contain domestic factors.

The second challenge is from the stagnation of the enterprise system. The adaptability to the market economy of Vietnamese enterprises is weak. The lack of an effective investment strategy for the supporting production industry and “traditional outsourcing” works have made the overall benefit of the economy declined.

Thirdly, the limitation of state enterprises’ role in the national economy becomes a content of CPTPP. The external pressure is positive only if it meets the community benefits. If the selection of CPTPP is purely commercial-economic aspect, it will not cause the objection against the reformation within the SOE system.

The fourth challenge is from the increasing competition of goods from the members of CPTPP. At present, Vietnamese enterprises are well-protected by the high tariffs. The trend and demand for zero tariff reduction will be applied to CPTPP members in the coming time. In the analysis of the export structure of CPTPP countries, it can be seen that the manufacturing industries of Vietnam facing difficulty are automobile industry and agriculture, especially the husbandry which remains mall and fragmented, and unable to compete against the large, experienced and traditional competitors.

The fifth challenge from the requirements of intellectual property protection in CPTPP is much more critical. The continuing possibility of “appearing to court” by infringing intellectual property law is present in countries previously without adequate preparation of intellectual property law. Furthermore, the requirements for increasing the level of protection of intellectual property rights over inventions, copyrights, and trade marks can lead to the escalation of drug prices and create a health burden to the emerging economy like Vietnam. More than that, the measures to protect intellectual property related to biology also affect agriculture which accounts for more than 60% of the population of Vietnam. The prices of agricultural products such as veterinary drugs, fertilizer, etc. will thereby grow significantly, which increases costs and reduces the efficiency of agricultural production in general.

In regard of the need for economic reform and the promotion of economic growth, the process of further integration into the world economy is not allowed to slow down. The question is what Vietnam needs to do to facilitate the upcoming integration roadmap.

Firstly, administrative reform and severely corruption offence are the most important things. It is shown that the WTO supports free market economy so that it could operate and develop only in a healthy competitive environment. Since the joining in the WTO, Vietnamese economy has not really created a healthy competitive environment. Meanwhile, corruption has created more conditions for interest groups to ramp up and distort even the good national policies. If the administrative procedures remain cumbersome and troublesome, corruption will still restrain the required transparency in corporate management. In accordance, CPTPP is not an opportunity, but a challenge to the whole system.

Secondly, the reformation of the legal environment and policies to ensure a single “standard” prescribed by CPTPP is a difficult for Vietnam. But in the long run, this reform of the institutional environment towards the international “rules” is a necessary condition for growth in the context of globalization. In this perspective, although adjusting the policy system involving the regulation of CPTPP is a difficult and costly process, Vietnam’s commitments can be seen as an external “push” to provide additional momentum for domestic efforts towards a transparent institutional environment and economic growth.

Thirdly, it is needed to organize the perfect communication to all classes of people, especially the business and the production circles in the countryside. The participation in CPTPP without fast updating to the farmers might cause the loss of market, the high pressure of competition, and even the legal disadvantage in disputes and sues.

Fourthly, the reform of SOE and the development of SMEs is the key solution. Given the population and economic growth, the number of enterprises in Vietnam is relatively low. This is a major constraint in economic development, employment, creation of competitive markets and the mobilization of resources from society.

In the context of limited resources and high demands of work, the development of these types of enterprise is appropriate not only to the internal capacity but also the preferences of CPTPP. Hence, it is essential to reform SOEs in a substantial way and enable them to have a transparent business environment.

Assoc.Prof.Dr.BuiThanh Nam, University of Social Sciences and Humanities, Vietnam National University, Hanoi

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Southeast Asia

South-East Asia youth survey: Skills prized over salary

MD Staff

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Young people in South-East Asia face a relentless challenge to upgrade their skills as technology disrupts job markets, according to research released today by the World Economic Forum and Sea.

In a survey of 56,000 ASEAN citizens aged between 15 and 35, some 9% of respondents say their current skills are already outdated, while 52% believe they must “update their skills constantly.” Only 18% believe their current skills will stay relevant for most of their lives.

These concerns about skills are reflected in attitudes to jobs. ASEAN youths say the number one reason they change jobs is to learn new skills – the desire to earn a higher income comes second. 5.7% report having lost a job either because their skills were no longer relevant, or because technology had displaced them. Other reasons include the desire to create a more positive social impact and to have a more innovative working environment.

The survey also shows 81% of ASEAN youths believe internships are either equally important or more important than school education. In addition, over half are keen to spend time working overseas in the next three years, probably to gain new skills, with a significant portion wanting to work in another ASEAN country.

“It is impossible to predict how technology will change the future of work.” said Justin Wood, Head of Asia Pacific and Member of the Executive Committee at the World Economic Forum. “The only certainty is that job markets face accelerating disruption, where the lifespan of many skills is shortening. It is encouraging that ASEAN youths are aware of these challenges and show a deep commitment to lifelong, ongoing learning.”

Soft versus STEM skills

Overall, ASEAN youth attach greater importance to soft skills, and less importance to STEM skills – science, technology, engineering and maths. They see “creativity and innovation” as the most important skill – in which they also rank themselves highly – followed by the ability to speak multiple languages. They are confident about their soft skills, such as emotional intelligence, and list the two least important skills as “maths and science” and “data analytics”. They are particularly positive about their ability to use technology such as social media platforms, e-commerce sites, and e-payment systems.

Santitarn Sathirathai, Group Chief Economist of Sea, noted: “While it is essential that the region continues to invest in developing STEM skills among young people, we can also see that soft skills will have a vital role to play – even in the tech sector. In the world where knowledge becomes obsolete more quickly, soft skills such as adaptability, leadership and creativity will be crucial in ensuring young people have the resilience to constantly evolve their skill-sets in step with a changing market.”

The importance of re-skilling

Responding to the need to train workers in the face of technological change, the ongoing ASEAN Digital Skills Vision 2020 programme, launched by the Forum in Bangkok in November 2018 is assembling a coalition of organizations to train 20 million workers at ASEAN SMEs by 2020, and to provide internship and scholarship opportunities.

“The World Economic Forum’s ASEAN Digital Skills programme is delivering significant impact. In its first eight months, the initiative has already secured commitments to train over 8.9 million workers at SMEs, and to provide over 30,000 internships,” said Mr Wood.

Some 16 organizations have so far joined the programme: BigPay; Certiport, a Pearson VUE Business; Cisco; FPT Corporation; General Assembly; Golden Gate Ventures; Google; Grab; Lazada; Microsoft; Netflix; Plan International; Sea; thyssenkrupp; Tokopedia; and VNG Corporation.

“Government policy and business practices need to catch up to what is happening on the ground. Advances in technology will continue to impact labour markets into the future, and this requires ongoing education and skills training,” said Saadia Zahidi, Managing Director and Head of the Centre for the New Economy and Society at the Forum. “Anything less than a systematic shift in our approach to education and skills risks leaving people behind.”

Future jobs

When asked what type of organization they work for today, and where they would like to work in the future, ASEAN youths show a strong preference for entrepreneurial settings. Today, 31% are either entrepreneurs or work for a start-up. In the future, 33% want to work in an entrepreneurial setting. 19% of young people also aspire to work for foreign multinationals in the future (the current figure is 9%).

Traditional SMEs (as opposed to start-ups) are seen less favourably. While SMEs form the backbone of ASEAN labour markets, the survey reveals that small companies face recruitment challenges. 18% of youths work for SMEs today, but only 8% want to work for an SME in the future. One reason for the low interest is because young people say they receive less training at small companies compared to larger ones.

When asked what industry sectors are most attractive, the results reveal a clear preference for the technology sector, with 7% working in the industry today and 16% aspiring to work there in the future. In comparison, more traditional parts of the economy may face recruitment challenges. For example, 15% of youths work in manufacturing today, but only 12% want to work there in the future. Likewise, 8% work as teachers, yet only 5% want to work in education in the future.

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Being Wealthy Helps Singapore’s Naval Ambition

Bahauddin Foizee

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There’s an image that has been imprinted in the minds of the millions about Singapore, that it is a tiny yet wealthy city-state and an important Asian financial hub. But many are unaware of the fact that Singaporean armed forces are stronger than many regional forces, as it has one of the best navies, airforces and armies in the region.

Singapore’s navy, officially known as the Republic of Singapore Navy (RSN), in particular has been shaped over the years into a maritime force which is highly sophisticated and well-trained. An article on The National Interest ranked the RSN among the top five Asian navies, even when Indian Navy did not find a place in the list.

According to the aforesaid article, the RSN is a better navy than the Indian Navy in terms of quality, operation and policy-making, though the RSN lacks the experience, manpower and size of the Indian Navy. Arthur Waldron, an International Relations academic at the University of Pennsylvania, believes that if Chinese Navy, necessarily dividing the fleet, sends a taskforce to subdue the RSN at the Philip Channel, the narrowest part of the Strait of Malacca, the RSN would beat the Chinese taskforce.

Ambitious Procurement Plans

Singapore intends to build a navy that could protect its territories and economic interest from the potential hostility by any immediate larger neighbours, and more importantly a navy that could become lethal if combined with other regional and extra-regional navies (like Australia and Indonesia) against a greater navy (e.g. against Chinese navy). That is why, the RSN is currently on a spree to acquire more capabilities and next-generation platforms.

As part of its submarine force renewal program, the RSN is acquiring four Type 218SG submarines from Germany to improve the operational and combat capabilities of its submarine fleet. These new submarines will be having far more capabilities and durability — and are built to stay submerged about 50% longer — than those of the existing ones.

It’s worth mentioning here that submarines, unlike surface warships that have both peactime and wartime functions, is built to shoot and destroy targets as well as to conduct surveillance, even surveilling foreign coasts to gather vital intelligence. The very fact that a small city-state like Singapore has submarines in operation and is now renewing its fleet with even more capable submarines — shows how ambitious Singaporean navy has become about increasing its naval power.

Because of the larger capacity, these submarines have plenty of scopes for future upgrades, meaning that these submarines could be equipped with weapon systems such as long-range missiles to carry-out an offensive strike.

There’s more to the Singapore’s naval ambitions. Take for example the Joint Multi-Mission Ships (JMMSs), one of the RSN’s major new procurements. With full-length flight deck, these vessels would be almost 540 feet long with an estimated displacement of around 14,500 tons, and are expected to carry five medium and two heavy helicopters on a flight deck. What’s more, these vessels could potentially support limited operations of fixed-wing aircraft, including the F-35B warplanes which Singapore airforce is expected to purchase from the U.S. sometime in near future. Therefore, these vessels could potentially serve as aircraft carriers.

The RSN is also very well aware of the fact that wars these days are fought from a distant with the help of unmanned drones and unmanned vessels that carry cameras and weapons in order to see farther and respond quicker. Hence, the RSN plans to procure new vessels that will be having multiple unmanned air and surface vehicles to extend their reach and flexibility against threats. Take the eight new Littoral Mission Vessels (LMVs) for example. These LMVs will have a helicopter landing pad that will be able to carry an unmanned aerial vehicle. The aforesaid JMMSs and the new Multi-Role Combat Vessels (MRCVs) too will have unmanned air and surface vehicles.

Being Wealthy Helps

An Asian financial hub, the city-state of Singapore has a lot of wealth. The tiny landmass of the state and the already developed infrastructures allow the Singaporean government to allocate comparatively lesser wealth on infrastructures and other conventional sectors and to invest more on innovation and technology as well as defense and security. This is how the tiny state affords to make the quality defense procurements.

Singapore has been the Southeast-Asia’s largest military spender for several years now. Singapore was the top regional military spender in 2018 with an expenditure of US$10.8 billion and the Southeast Asian neighbour with the closest figures was Indonesia with an expenditure of US$7.4 billion. For 2019, Singapore has allocated US$11.4 billion for defense on its budget — something which amounts to about 19 percent of total government expenditures and around 3.3 percent of national GDP.

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Sino-Indonesian Relations: From Friendship to Alliance

Mohamad Zreik

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The relationship between China and Indonesia is becoming increasingly important in international politics. Many analysts are focusing on this relationship as a privileged relationship and it is likely to become a strategic alliance, especially with the Belt and Road Initiative, and the Indonesian role as a key member of the maritime route of the initiative. While others consider that Indonesia allows China to dominate it politically and economically because of exchanges at all levels, which is developing rapidly.

Indonesia is raising the level of relations with China because this policy is in favor of the local economy and stability in Indonesia, while China is dealing with Indonesia with respect and without interference in the internal Indonesian national affairs. In a meeting with his Indonesian counterpart, Ratno Marsudi, on the sidelines of the G-20 foreign ministers’ meeting in Germany, Chinese Foreign Minister Wang Yi said China would work to strengthen bilateral relations with Indonesia and that Indonesia was an important country on the historic maritime silk route. The Indonesian foreign minister said her country is ready to strengthen cooperation with China, more openness to more projects and investment in all fields and Indonesia will work to improve China’s relationship with the ASEAN Group.

The Chinese presence in Indonesia has a long history. Trade relations were the basis of China’s openness to most of the countries of the world and from those countries Indonesia. With the accession of Mr. Abdurrahman Wahid to the presidency of the Republic, the margin of freedoms has greatly expanded to the Chinese community in Indonesia, so they can celebrate the Chinese holidays and they were allowed to work in the local Indonesian markets.The title “Father of Chinese Indonesians” was given to him, because he granted them full rights in Indonesian territory. In 2003, President Megawati Sukarno decided to consider the Chinese New Year as a national holiday in Indonesia. In 2004, the first Chinese minister in the Indonesian government, Mari Pangestu, was appointed.

It is the common interest of China and Indonesia to promote such relations, regardless of differences such as demarcation of the maritime border between the two countries and trade imbalances for China. China is interested in Indonesia for several reasons: having a strong ally in the region, Indonesia’s strategic geographic location beinga natural deterrent and a major contributor to the Silk Road launched by China, natural resources in Indonesia, which are an important factor in China’s industrial and technological progress, and the largest Indonesian market on which China depends on the disposal of its products.

The Chinese president’s announcement of the Belt and Road initiative from Indonesia is a great indication of the depth of the strategic relationship between the two countries and the importance of Indonesia as a key partner of China politically and economically. Chinese Foreign Minister Wang Yi said the relationship between China and Indonesia is a strategy because the two countries have important characteristics and the prospects for development are wide. In addition to politics, diplomacy and security, cooperation between China and Indonesia is expanding at sea, land and air levels. For example, it is expected that the two sides will agree on cooperation in space aviation, the construction of an industrial complex on the ground and the completion of further maritime cooperation.

China is working to consolidate military ties with Indonesia, especially after a dispute between the two countries in the South China Sea region. The good relations between China and Indonesia are of concern to the United States and the West because the Indonesian region is a strategic sea corridor and a geographical area rich in natural resources. Currently, China and Indonesia are working on law enforcement, combating terrorism, controlling drug trafficking, cyber security, defense and joint cooperation in maintaining regional security. The global maritime hub initiated by Indonesia and China’s Maritime Road is being harmonized.

All the political and economic indicators indicate that the relationship between China and Indonesia is developing rapidly and could turn into an alliance, so that Indonesia will be an important partner of China in an internationally sensitive geographical area, all international forces aspire to be there.

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