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The REMON Project

July 13, 2015/in Opportunities /by gktagroupVN

On July 2 and 3, the Final Conference of the Vietnamese-German Research Project Real Time Monitoring of Urban Transport—Solutions for Traffic Management and Urban Development in Hanoi (REMON) was held in Hanoi. During the conference, project representatives outlined their plans for going forward and listened to the concerns of the attendees, which ranged from data privacy to the methodology of the proposed actions.

Traffic in Vietnam can conjure up images of motorbikes, bicycles, buses, and luxury vehicles all vying to occupy the limited space on the road, especially in major cities. Already during rush hour, parts of Hanoi and Ho Chi Minh City are near impassable. Few experiences could be worse than being caught at a red light in Ho Chi Minh City during the rainy season, and surrounded by the drone and exhaust of a few hundred motorbikes in front and behind. (Your author has experienced this firsthand.)

And up in Hanoi, the afternoon rush hour can turn into a “Battle Royal” where buses are operated as if they were cars, cars as if they were motorbikes, and motorbikes as if there were regulations for operating a motorbike. The Vietnamese dream is to own a car—to show off success to others, to protect from the elements, and to travel comfortably.

Last year, the first Rolls-Royce Motor Cars showroom in Vietnam opened up in Hanoi. However, as we explained during coverage of the Yamaha Town Hanoi showroom, the car will never fully replace the motorbike in Vietnam, and Hanoi itself is a Motorcycle Dependent City (MDC). Still, Vietnam experiences 10% new vehicles on the road each year and congestion will only increase as more people become successful as a result of the economy. In fact, there are even events called “car washes” where an entire company will go out to celebrate the purchase of a car by one of its employees–arguably, one of the nicer effects of an increasing number of vehicles on the road, but not without short and long-term effects on the city, its people, and the environment.

So in the last three years, a team of Vietnamese and German researches has looked at this increasing traffic issue in Hanoi. The REMON Project is funded by the German Federal Ministry of Education and Research and the Ministry of Science and Technology, Vietnam and has been ongoing since May 2012 (and will run until October 2015).

According to a handout at the event, the REMON project has several key objectives:

“reduction of air pollutants and emissions;”
“reduction of energy consumption in the urban transport sector in Hanoi, Vietnam;”
“establish a real-time traffic information system in Hanoi, which helps to increase the efficiency of Hanoi’s transport system;”
reduce environmental impacts of traffic, in particular traffic jams, traffic-induced emissions and energy consumption.”

The REMON project wants to track and detect traffic conditions in real time via two methods; Floating Car Data (FCD) and Floating Phone Data (FPD) which is essentially GPS data from onboard units in vehicles but also the smartphones of the vehicle drivers as well.

The REMON project hopes to use the raw data for several applications ranging from “informing road users of the current traffic situation on each street to controlling and managing traffic as well as long-term transport and urban planning efforts and measure to solve traffic problems.”

Thus, the focus is on short-term traffic information as well as long-term transport management approaches and urban planning solutions. In other words, “the REMON project is a well-adapted, demand-oriented, collaborative research and development project between German and Vietnamese partners. It aims at establishing a traffic information system and using it for achieving an integrated urban and transport development of Hanoi.”

Ridesharing and Electric Vehicles in the Future

Uber arrived in Vietnam in June, 2014 in Ho Chi Minh City and in October in Hanoi. GrabTaxi also arrived last year in Vietnam. These services help optimize the flow of people across cities but they also have the potential to reduce future vehicles on the road considering the tough parking situation in Hanoi. For sure, once the metro comes online, it will provide a viable alternative for navigating around Hanoi (and Ho Chi Minh City).

On the other hand, electric vehicles such as bicycles, are usually associated with young people or students. At the high-end range, if Tesla Motors were to enter Vietnam it could change the perception of electric vehicles in this market. However, entering an Asian market where consumers want to have instant gratification and want to save “face” and requires developing infrastructure can be quite challenging as seen with Tesla Motors’ progress into China.

There are definitely opportunities to partner with residential and commercial developers in Vietnam to offer Powerwall (see a full Powerwall 2 review) and other devices in the portfolio that could benefit residents, customers, and others who are interested in living a high-tech, stylish, and green life. For example, establishing VIP charge/parking spots at malls, and premium parking in residential developments are some options for building a suitable brand image for Tesla Motors. Successful Vietnamese want others to acknowledge their success and want to be seen in exclusive situations so it may take some time for a mindset or attitude shift, especially from the nouveau riche, who will only increase in numbers in the future.

One thing is certain: the focus and results of the REMON project will affect all Hanoians as the impact of traffic is demonstrated in more relatable terms such as quantifiable lost productivity due to waiting in traffic (or even access to the real-time data via a mobile application as the project hopes to achieve). Along those lines, solutions for traffic challenges could emerge from a variety of areas–not only the private sector or from researchers, but also from the public via crowdsourcing campaigns. Indeed, there were many vocal and concerned commentators at the event in the audience who did not have a shortage of opinions on what should be done moving forward. In the meantime, the continued promotion of basic standards of courtesy on the roads with an emphasis on safety, utilizing signals, and respecting traffic laws can go a long way toward improving the commuting, driving, and riding experiences in cities such as Hanoi; after all, innovation and technology can help to fill in the gaps.

If you would like to know more information or would like to view the material presented then you can find it here.

The World’s Biggest Ever Trade Deal

April 5, 2015/1 Comment/in Challenges /by gktagroupVN

In a previous post, we explored Vietnam’s economic context in the region and the world but here is a quick rundown of local current and proposed multi-party agreements that Vietnam is part of:

East Asian Summit (EAS)—annual forum on energy and trade held since 2005 between 18 countries.

Regional Comprehensive Economic Partnership (RCEP)—proposed free trade agreement between ASEAN members and Free Trade Agreement partners; formally launched in 2012 at the ASEAN summit. (China’s version of the proposed TPP.)

Asia-Pacific Economic Cooperation (APEC)—21 member Pacific Rim forum that was established in 1989. Membership is determined by economy, not country.

Association of Southeast Asian Nations (ASEAN)—formed in 1967, its membership today includes ten countries and focuses on political and economic issues.

And then there is the Trans-Pacific Partnership (TPP); this week we are going to do a roundup of some of the competing narratives when it comes to the TPP. The TPP has been in the works since 2002 (under a different name) with the US and Vietnam joining the round of talks in 2008. The twelve countries involved in the TPP comprise approximately 40% of global GDP; those countries are Brunei, Japan, Malaysia, Singapore, New Zealand, Australia, Mexico, Canada, Chile, Peru, and, of course, Vietnam and the US.

The TPP is both an economic and a strategic agreement; one thing to keep in mind is the annual GDP of Vietnam: approximately $170 billion. To put that in perspective, the annual revenue of General Electric is approximately $150 billion. In other words, the revenue of one US company is almost on parity with the annual GDP of Vietnam so there are other reasons than purely economic interest in Vietnam.

At a time when China is creating competing regional and global financial organizations, according to The New Yorker, such as “the New Development Bank, the Silk Road infrastructure fund, and the Asia Infrastructure Investment Bank, which, together, intend to amass two hundred and forty billion dollars in capital” (in association with some US allies) the US needs the TPP (or something like it) to pass in the near future to provide a counterbalance (as proponents of the TPP have argued).

In Favor of the TPP

What are the governments behind the TPP saying? Let’s start with some of the countries that are involved in the TPP negotiations (more than 20 rounds so far).

According to the Office of the US Trade Representative:

“As the cornerstone of the Obama Administration’s economic policy in the Asia Pacific, the Trans-Pacific Partnership reflects the United States’ economic priorities and values. The TPP not only seeks to provide new and meaningful market access for American goods and services exports, but also set high-standard rules for trade, and address vital 21st-century issues within the global economy.”

According to the Australian Department of Foreign Affairs and Trade:

“Conclusion of the TPP would open new trade and investment opportunities for Australia in the Asia-Pacific region, further integrate our economy in this fast growing region, and promote and facilitate regional supply chains. By setting commonly agreed rules and promoting transparency of new laws and regulations, the agreement will provide certainty for businesses and reduce costs and red tape for Australian exporters, service suppliers and investors.”

According to the New Zealand Ministry of Foreign Affairs & Trade:

“As well as tangible benefits for our exporters and consumers, TPP would safeguard New Zealand’s longer term trading interests. TPP is potentially a platform for wider, regional economic integration.”

According to the Foreign Affairs, Trade and Development Canada:

“Along with our successfully-concluded free trade agreement with Korea, our ongoing bilateral talks with Japan, and other ongoing initiatives, the TPP is a means to achieve our ambitious pro-trade, pro-export plan to create jobs and opportunities for hardworking Canadians.”

Against the TPP

What about the TPP’s skeptics?

There has been a great deal of secrecy surrounding the terms of the deal and some controversy. For example, China isn’t included in the deal and most of the information that the public knows about the TPP has been due to leaks.

According to Public Citizen:

“We only know about the TPP’s threats thanks to leaks – the public is not allowed to see the draft TPP text. Even members of Congress, after being denied the text for years, are now only provided limited access. Meanwhile, more than 500 official corporate “trade advisors” have special access. The TPP has been under negotiation for six years, and the Obama administration wants to sign the deal this year.”

MSF (Doctors without Borders) is against the TPP:

“Proposed by U.S. negotiators, the IP rules enhance patent and data protections for pharmaceutical companies, dismantle public health safeguards enshrined in international law, and obstruct price-lowering generic competition for medicines.”

Nobel economist and professor at Columbia University, Joseph Stiglitz, made the case against the same drug provisions in the TPP:

“The efforts to raise drug prices in the T.P.P. take us in the wrong direction. The whole world may come to pay a price in the form of worse health and unnecessary deaths.”

The EFF (Electronic Frontier Foundation) is against the TPP:

“TPP raises significant concerns about citizens’ freedom of expression, due process, innovation, the future of the Internet’s global infrastructure, and the right of sovereign nations to develop policies and laws that best meet their domestic priorities. In sum, the TPP puts at risk some of the most fundamental rights that enable access to knowledge for the world’s citizens.”

Former US secretary of Labor, Robert Reich is against “fast-tracking” the TPP (under the Trade Promotion Authority) and identifies some issues that the TPP overlooks:

“We need trade agreements that address unfair trade practices such as currency manipulation, foreign subsidies to exports, corporate power grabs and systematic and egregious violation of internationally recognized labor rights.”

Fast-tracking is important because it allows Congress to approve (or disapprove) the TPP as a whole, instead of introducing amendments which would surely kill the TPP in its entirety. (Senate Majority Leader Mitch McConnell from Kentucky is among those who want to pass the Trade Promotion Authority.)

Senator Elizabeth Warren of Massachusetts is against the TPP, in particular “Investor-State Dispute Settlement,” or ISDS:

“[I]f a Vietnamese company with U.S. operations wanted to challenge an increase in the U.S. minimum wage, it could use ISDS. But if an American labor union believed Vietnam was allowing Vietnamese companies to pay slave wages in violation of trade commitments, the union would have to make its case in the Vietnamese courts.”

The CATO Institute mostly agrees with her.

Senator Bernie Sanders of Vermont is also against the TPP:

“The TPP would make it easier for countries like Vietnam to export contaminated fish and seafood into the U.S. The FDA has already prevented hundreds of seafood imports from TPP countries because of salmonella, e-coli, methyl-mercury and drug residues. But the FDA only inspects 1-2 percent of food imports and will be overwhelmed by the vast expansion of these imports if the TPP is agreed to.”

(Here is a speech Senator Sanders gave to the Senate earlier this year.)

Both sides are very clear in their respective positions; there does not seem to be much middle ground. On one hand, governments and corporations are overwhelmingly in favor of passing the TPP. However, NGOs along with current and former politicians, policy advisers, and pro-consumer advocacy groups have all voiced their concerns about elements of the TPP.

Defining Failure and Success

So there are clear and credible opponents to the TPP. However, if the TPP fails, it could mean disastrous results for American foreign policy in the region.

As The Economist points out:

“Failure to complete it would be a terrible blow to American interests, for a number of reasons. Trade liberalisation itself is of course one. With prospects of a global agreement at the World Trade Organisation vanishing, America’s hopes lie in the TPP and the more distant Transatlantic Trade and Investment Partnership with Europe. In his state-of-the-union speech to Congress in January, Barack Obama dwelt on “the world’s fastest-growing region”, ie, Asia and the Pacific.”

As The Editors of the Bloomberg View pointed out:

“The main harm, if the talks fall apart, is the damage this would cause to the larger process of global economic integration.”

(However, a Bloomberg View columnist also covered secrecy issues involving the TPP process.)

The Brookings Institution laid out one scenario as a result of a failed TPP:

“The rebalance to Asia will stall. TPP is the second leg (after a reorientation of military resources) of the policy of rebalancing to Asia. As such, its fate will determine whether this strategy advances or just limps along. If TPP fails, doubts about the staying power of the United States will once again rear their ugly head. The signature U.S. policy to remain vitally connected to the world’s most dynamic economic region will come to naught. Let’s not forget that prior to the advent of TPP, the United States appeared poised to be marginalized from the process of regionalism in Asia.”

And if the TPP passes then what would that mean for the average American?

According to Moyers & Company, the TPP will drastically impact income distribution in the US:

“[T]he incomes of those at the very bottom of the ladder would be protected by the minimum wage, and those at the very top would benefit significantly from the deal’s intellectual property and investment protections. But the vast majority of Americans would see their incomes drop.”

Rep. Loretta Sanchez of California goes further to elaborate how destructive the TPP would be for the US and its workers:

“Unfortunately, the TPP would neither ‘protect American workers’ nor bring jobs ‘back from China.’ Assessing what we know of the massive TPP only affirms what we’ve learned the hard way through past broken promises on trade pacts – it’s a bad deal for American workers.”

And what about the ISDS?

Jeffrey Zients, Director of the National Economic Council, wrote on the White House Blog:

“There have only been 13 cases brought to judgment against the United States in the three decades since we’ve been party to these [kinds of] agreements. By contrast, during the same period of time in our domestic system, individual and companies have brought hundreds of thousands of challenges against Federal, state, and local governments in U.S. courts under U.S. law.

We have never lost an ISDS case because of the strong safeguards in the U.S. approach.”

But that doesn’t mean that the US will always win an ISDS in the future either.

Time is Running Out

So who is right and who is wrong? Can both sides be right? What should be done?

American workers can’t compete on labor wages alone and workers (in general) can’t compete against automation. Is it better to get rid of vulnerable (to outsourcing) American jobs now that will eventually be lost to job automation?

Who would benefit the most from the TPP? What sort of timeframe are we looking at? Five years down the road? 10 years? 20? Through that lens, who is really winning and who is losing? It’s only with hindsight that we can see the effects of NAFTA.

Are there other issues that have been overlooked and that the TPP would open the floodgates for?

In the short term, the TPP would make Vietnam a clear winner (as a result of its growing manufacturing base) but the benefits for the majority of Americans seems limited and largely focused on American corporations. Mexico would benefit as well, especially if Vietnam were to slash its high import taxes on vehicles. However, as we pointed out in this post, cheap labor is not a sustainable competitive advantage for Vietnam in the long term.

However, the effects of the TPP will surely be felt beyond Vietnam, the US, and the 10 other countries involved. In a sense, international trade, intellectual property rights, and fundamental issues of national sovereignty in the 21st century will all be redefined. The lack of transparency in the process, the unanswered questions, and the overall unclear picture does little to bolster confidence in those who are promoting the TPP in a positive light.

If the TPP fails to go through, it would deal a serious blow to American efforts in Asia. The TPP is in a fragile state at the moment; it can be derailed if Congress does not grant Trade Promotion Authority. Trade Promotion Authority (TPA) means that Congress can approve or disapprove the TPP but cannot amend or filibuster. The TPA must be obtained from Congress first in order to “fast-track” the TPP, i.e., to give a “yes” or “no” vote as President Obama has requested. The US expects TPA to pass within the next month but it’s not a done deal.

The LA Times recently summed up the state of negotiations:

“At this point, the administration appears to have pinned its hopes on a fast-track bill being negotiated by Sen. Ron Wyden of Oregon, the Democrats’ top member of the Finance Committee. Fast-track authority is also supported by the committee chairman, Sen. Orrin G. Hatch (R-Utah), and Ryan in the House.

But the administration’s strategy looks in peril as talks between Wyden and the others have dragged on.”

Simply put, without TPA, there is no TPP, (and less “rebalancing” to Asia) but perhaps that’s a good thing in the long term.

Former IMF chief economist Simon Johnson, and Representative Sander Levin of Michigan posed a profound question about the TPP in Politico Magazine:

“Are the agreement’s rules sufficiently forward-looking and strong enough to bring about meaningful lasting improvements to people’s lives, by enhancing the positive aspects and addressing the negative impacts of globalization?”

As more information about the TPP’s 26 chapters continues to leak to the public, the answer to that question seems to be a resounding “no.”

Devon London by Devon Nguyen

December 8, 2014/in Opportunities /by gktagroupVN

Fashion in Vietnam has come a long way from loose shirts in the 1980s and denim jeans in the 1990s. In recent years, there has been a wave of Vietnamese from overseas who have returned to Vietnam and set up fashion houses all in an effort to shape the fashion industry in Vietnam and beyond. Kelly Bui, Helene Hoai, and Devon London are just a few brands started by pioneering entrepreneurs who have faced the odds and challenges of starting up in a nascent domestic industry.

Recently, we sat down with Devon Nguyen, CEO of Devon London to find out more about the fashion scene in Hanoi and greater Vietnam. Ms. Devon grew up in Warsaw, Poland and worked in London (where she developed herself as artist and designer) before moving to Vietnam and launching her Devon London line in 2011. She is currently based in Hanoi and opened up a second store location in Saigon about a month ago on Dong Khoi street.

For Ms. Devon, her brand’s style is different from domestic and international brands and it is geared toward people who know what they want from fashion. Ms. Devon describes the brand as stylish, sophisticated, modern, and minimalist because for her customers, they can get a Devon London outfit that they can wear beautifully. The Devon London line is designed at her studio in Hanoi and the clothes are produced in a factory in Hanoi employing some laser cutting techniques (hers was one of the first brands to utilize this technology in Vietnam for clothing).

To Ms. Devon, her brand is more than just a business. Ms. Devon is family oriented but she is also a self-described workaholic—the key for her is balance. She has a Vietnamese husband who lived London; an architect and a fellow artist. Both of their families are from northern Vietnam and she also has a brother and sister: twins who are 10 years old.

Fashion From the Start to Starting in Vietnam

Ms. Devon always knew that she wanted to be a fashion designer from an early age. In part, she had early influences from her parents as they had fashion backgrounds. However, it wasn’t until she was 15 years old that her parents treated her interest in fashion as something serious. Despite her interest in fashion at a young age, she wasn’t enrolled in creative courses as she grew up. In fact, she was self-taught and through research she learned how to draw and to sketch.

Ms. Devon has been living abroad her entire life so when she came to Hanoi, it took her a year to get adjusted to life here even though she grew up on Vietnamese values abroad since she was three years old. Even today she is still learning new things about Vietnam compared to her past. During tough times, she thought about going back to Europe but she ultimately decided to stay and persevere.

In some cities it can be easier to create than in others due to inspiring surroundings, a robust art community, and collaborative talent. When Ms. Devon arrived in Vietnam, she needed to get used to a lot of different and new things. Designing is art form so her role as a designer is to create art. At first, she was surprised that she couldn’t get inspiration—it was so hard compared to her time in London. For Ms. Devon, the hardest part of operating in Hanoi is challenging herself—not with the environment but with design technique, i.e., keeping the creativity flowing in Vietnam. Not being able to find inspiration means that the risk increases of “becoming more commercial,” which can result in an unclear picture of where to stand and brand. Thus, the real danger is being a copy of other people and losing what you were fighting for in the first place.

Suffice to say, Ms. Devon does a little bit of everything. Not only does she design the line, but she is actively involved in the PR, marketing, sourcing, and almost every other aspect of the business in Hanoi. Ms. Devon is passionate about what she does because for her, fashion is not a job—it’s part of her but it doesn’t mean that it’s always easy. Daily operational challenges include finding quality people and drawing out the most of her creativity.

The people Devon London hires have the potential to be someone in the future. Ms. Devon sees herself in them, as a version when she was just starting out; they need experience from someone they admire in a good environment and Ms. Devon provides that. In her recently opened larger location in Saigon, it was important to select the right store manager to represent the brand. As she put it, “opening a shop is easy but expanding is difficult.”

With the opening of her second store, Ms. Devon has to be more precise in training employees and she begins to scale the brand. When employing people, it requires finding experienced employees and using what you have. In the end, “we choose what’s best for us, what gives us peace of mind under a lot of stress.”

Changing Trends

Like many things in Vietnam, the fashion industry has developed a lot in recent years. In fact, the fashion scene here has been changing every year; for example, last year the fashion industry was not as developed as it is today. Two years ago there was a huge gap in the industry and three years ago no one cared about fashion shows. People were simply not interested in fashion the way they are today and as with anything new, people need some time to get used to new fashions.

Since a large part of the time for “first movers” is spent educating consumers, Vietnamese designers struggle daily. People tend to comment without knowing the real substance so they make up a story; it’s a hard path to expand to be someone and to get a brand to be where you want it to be. And if you are original then get ready to be copied because so many designers go for the “easy job.” However, customers know what is what—they are very smart. For other stores who copy Ms. Devon’s style, it’s something that she can joke about because it’s not something serious when her customers tell her, “I saw your design in another store’s window but it looked horrible.”

Still, being in the fashion community in Vietnam can be tough since there is jealousy and it’s a competitive business all the time. However, healthy competition is always good; there are new designers so it pushes Ms. Devon to be good all the time as she needs to try to be better every collection. The London Devon brand primarily competes on quality and pricing. For global super brands the design looks great, but the average income in Vietnam does not make it affordable. Devon London is a unique design which can expand consumer tastes and habits. But Ms. Devon warns, “if you want to be original then you have to be ready to be copied.”

Advice for Entrepreneurs

For other expats who come to Vietnam and settle down here, Ms. Devon recommends that they know the local language because Vietnamese people don’t speak much English. If you want to establish things then you will need to work with a lot of people which means that you will need to coordinate with local workers. Learn about the culture, how people operate and spend time to get to know where to buy things, who to speak to, and gain a bit of connections. Remember, it’s not what you know but who know.

For sure, the beginning of any journey is the hardest part. Ms. Devon advises that, “when you think of giving up then think of why you started. Nothing comes easy.” For her, when things don’t go as planned, she finds peace with her family and divides between work and home life. For example, she hasn’t worked on a Sunday in the past two years.

Also, it depends where you start in Vietnam. In Hanoi, the customer market is different compared to Saigon; there is more culture in Hanoi whereas Saigon is more commercial and more open. There, they appreciate a more unique style but in Hanoi the people appreciate something more stable and prefer to blend in in Hanoi, where people can be more judgmental.

Devon London, Present and Future

For future plans, Ms. Devon would like the collection and brand showcased in a major fashion city like London or New York but it’s a long term objective. For now, she ships orders outside of Vietnam for customers who buy online.

Ms. Devon describes her life as busy all the time but for her, busy means that she’s doing good so she doesn’t complain about it; she strives to find the right balance. Each collection she designs is different. In London she found inspiration by going to the park and relaxing or by going to an art gallery exhibition but it’s not so easy in Hanoi. Ms. Devon reads a lot of books and has learned how to be creative in Hanoi, how to train her creativity, and how to find inspiration in Hanoi. In her downtime, she travels to Thailand and Hong Kong.

In terms of future prospects overall, the Vietnamese fashion industry will grow very fast. A lot of designers like Ms. Devon are coming back to Vietnam. Furthermore, a lot of creative people are seeing that the fashion space in Vietnam hasn’t been used to the fullest, but what they do about it is the defining portion. For those that see the gaps in the fashion community, they can’t sit and complain—in other words, don’t say “we don’t have anything” instead of finding it or creating it.

Ms. Devon sees Vietnam as a source for prototyping for up-and-coming fashion designers outside of Asia due to costs of manufacturing. Furthermore, she is confident in the Devon London brand; it’s on the way and doing well. For Ms. Devon, everything is possible—nothing is impossible as long as you put your heart into it. At the end of a journey, you can say “we used the best we could and did with what we had.”

It seems like that fashion journey is just getting started for Vietnam; this month the first Vietnam International Fashion Week was held in Ho Chi Minh City (HCMC) with about half of the showcases being local designers. For some of the designers, they might be living their dream, and for others the show might be a stepping stone to something greater. Only time will tell but if you have trouble figuring out what to do, as Ms. Devon says, ask yourself, “what really makes me happy?”

Economic Context in the Greater Region and the World

October 26, 2014/2 Comments/in Opportunities /by gktagroupVN

Vietnam is party to several regional and global organizations. Ever since doi moi (“Renovation”) in 1986, institutions encouraging regional economic and financial cooperation between South Asian countries have played a major role in Vietnamese development. Below, we will examine some of various organizations and partnerships that Vietnam is a part of.

East Asia Summit (EAS)

Since 2005, the East Asia Summit encourages cooperation in several fields from energy to education. Concerning the economy and finance, the last summit in Brunei reaffirmed the common will to increase cooperation in economy and finance with more “liberal initiatives.” Myanmar will organize the 9^th edition of the East Asia Summit in November, 2014.

Regional Comprehensive Economic Partnership (RCEP)

The Regional Comprehensive Economic Partnership aims to gather 10 ASEAN members and six non-ASEAN members to improve economic cooperation in the region. Today, RCEP totals 46% of the global population and generated 24% of the global GDP in 2012.

RCEP plans to standardize Free-Trade Agreement (FTA) rules to simplify its implementation by companies. Also, the establishment of common incentives serves to “democratize” the use of tax incentives for both large and small enterprises. According to Kohei Shiino, deputy director of JETRO (Japan External Trade Organization) Singapore, RCEP will “bring about big advantages for Vietnam’s garment and textile industry.” For example, the ASEAN-Japan tax incentives on exporting Vietnam-made goods in Japan only concern products with ASEAN or Japan origins. However, 33% of Vietnamese apparel materials cannot benefit from tax incentives due to their Chinese origins. The implementation of common incentives should help to avoid similar situations in the future.

Looking forward, the fifth round of negotiations in December in New Delhi, this economic partnership seems to have a bright future ahead of it. The Asian Development Bank argues that RCEP will increase revenues by 664 billion dollars in 2025 – which would equal 0.6% of the global GDP due to goods, services, assets and labor exchanges between these countries.

However, Vietnam will have to face the challenge of joining RCEP, while being an active member of the Trans-Pacific Partnership (TPP). The potential conflict between the TPP – led by the United States and RCEP, driven by China–(both wanting to shape economic partnerships with Southeast Asia countries) could put Hanoi in a difficult position. Indeed, both political and security implications in the context of an economic partnership can be conflicting between China’s and United States’ interests. Concerning the future role of Vietnam, ASEAN observers consider a potential split of Asian countries in two sides: Singapore, Malaysia and Vietnam would tend to turn to TPP whereas other ASEAN countries would strengthen trading relations with China through RCEP.

On a smaller scale, Vietnam has to consider China’s predominance in the trade balance between the two countries. Although crude oil and coal are exported to China, Vietnamese industries abundantly import Chinese goods as raw material, machinery and equipment, steel, chemicals, and oil and fabrics. (This situation is probably due to the differing economies in North and South Vietnam.)

Asia-Pacific Economic Cooperation (APEC)

Created in 1989, the Asia-Pacific Economic Cooperation includes 21 countries in the Pacific region and congregates 40% of the global GDP. Since the establishment of APEC, average trade barriers have dropped from 16.9% to 5.5% in 2004.

Looking at numbers, Vietnam takes advantage of being a member of such a organization: from 1998 to 2006, capital flows of APEC members towards Vietnam reached $49.5 billion with 6,527 projects in operation. Moreover, 10 APEC members are part of the top 15 investors in Vietnam. As a consequence, Vietnam will be able to rely on future solid financial and economic partnerships to accelerate its integration into the world economy.

Association of Southeast Asian Nations (ASEAN)

Since July 1995, Vietnam has taken part in the Association of Southeast Asian Nation with nine other states. The effective growth of trade between ASEAN and Vietnam reflects the success of the partnership. According to Louis Taylor, CEO of the Standard Chartered Bank in Vietnam, Laos and Cambodia, “ASEAN is the third-largest export market for Vietnam, accounting for more than 10 per cent of the country’s total exports … [and] the second-largest supplier to the country, accounting for 20 per cent of the nation’s total imports.” In 2010, Vietnam hosted summits concerning ASEAN solidarity and connectivity and expressed “its desire to fulfill the goal of building the ASEAN Community by 2015.” Although increasing regional economic cooperation will generate changes in Vietnam’s economy, one-to-one treaties and agreements with neighboring countries also impact the market.

In March 2014, on the occasion of a visit of the Vice President of Myanmar Nyan Tun in Vietnam, the two countries concluded a bilateral agreement on a common objective in trade. Vietnam remains the ninth-largest foreign investor with $370 million invested in Myanmar, let alone the 18 Vietnamese companies registered in Myanmar. Moreover, in 2012, the trade volume amounted to $66 million. Both sides want to reach $500 million in trade by 2015, thanks to cooperation in agro-forestry, fisheries, banking, telecommunications, transport, oil and gas and tourism.

Bilateral Trade Agreements
Vietnam is also working on increasing economic partnership with individual nations such as South Korea. On October 2^nd, President Park Geun-hye met Nguyen Phu Trong, the general secretary of the Communist Party of Vietnam during his state visit in Korea. Both sides agreed on signing a free trade agreement before the end of the year and improve cooperation in building transportation infrastructure in Vietnam.

Additionally, in 2012, India and Vietnam announced their common objective to reach $7 billion bilateral trade in 2015 and $15 billion by 2020. The Indian government expressed its wish to facilitate the access of Indian banks to the Vietnamese market, in order to develop trade and investment between both countries. The implementation of India-ASEAN free trade agreement by Vietnam and India helped both countries to reach $4 billion in bilateral trade in 2012.

Moreover, Vietnam appears to be the land of opportunities for Japanese small and medium enterprises (SME): a survey from business associations in the East Asian country show that 50% of Japanese SMEs planning investment abroad consider coming to Vietnam. Therefore, it should come as no surprise that the Japan External Trade Organization in Ho Chi Minh City welcomed 2,400 Japanese investors considering investment opportunities in Vietnam between April 2011 and January 2012.

The Takeaway and Key Milestones

We can observe several trends in regards to trade in Vietnam: the first general trend is the expansion of the range of products concerned by free trade agreements. The second phenomenon is the common will of improving existing trade conditions between countries. Finally, Vietnam actively tries to develop its trading partnerships with neighboring countries and is moving to increase cooperation on many subjects as well as to deepen economic relationships with a wide range of current and potential partners.

For foreign investors, the Vietnamese market should also become more attractive to Thai retailers with the upcoming ASEAN Economic Community in 2015. Meanwhile, the Vietnamese retail market is expected to grow 12% in 2014. The major news is that the TPP could be finalized later this year—if so then expect relations between the US and Vietnam to become even closer. [Update: as of February, 2015, the TPP has still not been finalized but the US has announced that it intends to be Vietnam’s number one trading partner after the TPP becomes finalized.]

Thanks to Louis Boulay, who contributed to this week’s post.

Sources:

Credit: Louis Boulay

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Chauhan, Sadhavi. “Vietnam’s Role in ASEAN.” East Asia Forum. East Asia Forum, 23 Oct. 2013. Web. 20 Oct. 2014.

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Mehdudia, Sujay. “India-Vietnam Set a Trade Target of $7 Billion for 2015.” The Hindu. The Hindu, 1 Nov. 2012. Web. 20 Oct. 2014.

“Mid-Term Stocktake of Progress Towards the Bogor Goals and the Busan Roadmap to the Bogor Goals.” Asian-Pacific Economic Cooperation. Asian-Pacific Economic Cooperation, n.d. Web. 20 Oct. 2014.

NZST. “Regional Comprehensive Economic Partnership (RCEP).” Trade and Economic Relations. Trade and Economic Relations, 15 Sept. 2014. Web. 20 Oct. 2014.

Sojung, Yoon. “Korea, Vietnam Discuss Ways to Deepen Economic Cooperation.” Korea IT Times. Korea IT Times, 8 Oct. 2014. Web. 20 Oct. 2014.

Tran Thu, Tran. “Vietnam to Benefit Greatly from RCEP, Say Experts.” Vietnam to Benefit Greatly from RCEP, Say Experts. The Saigon Times, 18 June 2013. Web. 20 Oct. 2014.

Truong-Minh, Vu, and Nhat-Anh Nguyen. “The Potential of the TPP for Vietnam.” The Diplomat. The Diplomat, 4 Sept. 2014. Web. 19 Oct. 2014.

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VNA. “Le Vietnam Au 5e Tour De Négociations Du RCEP à Singapour — Vietnam+ (VietnamPlus).” Le Vietnam Au 5e Tour De Négociations Du RCEP à Singapour. Vietnam+ (VietnamPlus), 30 June 2014. Web. 20 Oct. 2014.

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Yoon, Suthichai. “TPP vs. RCEP: A New Washington-Beijing Tug-of-war?” The Nation. The Nation, 6 Dec. 2012. Web. 20 Oct. 2014.

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