CPTPP - motivation and pressure for institutional reform

Textile and garment industry is one of the sectors that will get most benefit from the CPTPP. Picture: ST.

However, the issue is that Vietnam needs more substantive institutional reform, towards transparency and putting the interests of people and businesses at the center in order to achieve these benefits,

Promoting transparency

In fact, institutional reform is an important part of the whole CPTPP. With commitments made by member countries such as tariff reductions on goods, market access to services, intellectual property, technical barriers related to trade, and new issues such as labour, environment, procurement of government and State enterprises. It is clear that Vietnam will have advantages, especially with CPTPP, which will put pressure on speeding up institutional reform in Vietnam. However, institutional reform for gaining benefits is not a simple matter, it requires a lot of effort in implementation.

According to Mr Sebastian Eckardt, World Bank Economics Specialist in Vietnam, CPTPP is expected to accelerate reforms in areas such as competition management, services (financial services, telecommunications, and temporary entry of service providers) customs, e-commerce, environment, government procurement, intellectual property, investment, labor standards, legal, penetration of goods market, rules of origin, non-tariff measures, trade remedies, etc.

"The new agreement will bring direct benefits to Vietnam through trade liberalization and strengthening market access. The most important thing is it will accelerate and speed up the domestic reform process in many different areas. Implementing the commitments under the CPTPP will further promote transparency and the establishment of modern institutions in Vietnam," said Sebastian Eckardt.

Minister of Trade and Industry Tran Tuan Anh emphasized that, like other countries, Vietnam has committed not only to market liberalization, tariff dismantling, further liberalization, and trade facilitation, but also to continue to publicize and clarify the state management of market development. Accordingly, when an environment is being improved by institutional reforms as well as specific areas of state management, especially the business investment environment, the conditions to attract more investment from external resources will improve rapidly.

However, Minister Tran Tuan Anh emphasized that any integration framework contains positive and negative effects. The benefits to the Vietnamese economy depend on the conditions and the implementing integration commitments, reforms towards sustainable growth, and positive aggregators that produce added value of the economy. That is the decisive factor.

Talking about the pressure of institutional reform as Vietnam wants to take advantage of CPTPP opportunities, Mr Le Dang Doanh, economic expert said that he welcomed Vietnam's decision to sign the CPTPP Agreement with a lot of commitments about reforms. He expects these commitments will promote Vietnam to accomplish what Prime Minister Nguyen Xuan Phuc said for building a state of integrity. Accordingly, the CPTPP prohibits bribery, corruption and, at the same time, regulates the rights of workers and the responsibilities of the State, the publicity and transparency of government procurement, the rights of Enterprises are sued if the state apparatus has been violated ... The above institutional reform commitments are the pressure and also the motivation for Vietnam, and Vietnam needs to consider implementing the commitments and train companies to take appropriate action.

Reforming must focus on the interests of business

Concerning this issue, Doctor, Luong Van Khoi, deputy director of the National Center for Socio-Economic Information and Forecasting, said that due to the improvement of the economy's productivity and the opening of the service sector in parallel with the reduction of tariffs according to the CPTPP's commitment, there is a great impact on Vietnam's economy and society, and it is necessary to have appropriate solutions to improve the productivity of the economy in general and of the service sector in particular when it opens its door to international integration, especially since joining CPTPP.

Giving the evidence of sub-sector financial services that have spillover effects for stimulating the general growth for the major economy, Doctor Luong Van Khoi said that the total factor productivity (TFP) of this industry has decreased in the period 2012-2017. Specifically, in the period 2012-2015, TFP industry increased 14.7%, the period 2015-2017 only increased at 14%. This decline is due to the change in scale efficiency, due to external factors such as business environment, institutions, level of international integration ... while there are positive changes in technology of the industry. Therefore, it is necessary to have appropriate and timely solutions for the above issues to promote this sector to grow and develop.

Commenting on the institutional reform that Vietnam is facing since joining the CPTPP, Master Nguyen Anh Duong, Head of Macroeconomic Policy, Central Institute for Economic Management (CIEM), said that it is possible to assess each benefit of each agreement, but the overall progress of Vietnam's reform over the past 30 years has shown that the benefits that Vietnam has made are mainly domestic reform. The integration is the catalyst to promote the process of reform closer to the interests of the people, putting people and businesses at the center of the policy-making process.

"Unlike the period 2016, at the moment the reform has to go before the integration process, the reform is the motivation for enterprises. So the most important thing is that the government still has to focus on the business community, placing the business in the center position. Accordingly, the Government should continue to take practical measures to reduce unreasonable business conditions. At the same time, there should be other policies to respond promptly to adverse shocks, to deal with challenges from the fourth industrial revolution for how to connect more workers with the business community, these are technical issues that are long term," said Nguyen Anh Duong.

Dr Luong Van Khoi, in his remarks, commented: "Despite the benefits that CPTPP brings to Vietnam, it is worthwhile to take advantage of the opportunities offered by CPTPP, and the realization of these benefits depends on whether Vietnam does well in economic restructuring, institutional reform, growth models, that are consistent with the pace of opening in CPTPP or not."

Thus, institutional reform, in other words, is to change management, change governance, use mechanisms, ownership in all sectors such as agriculture, industry, SOEs management, etc. Creating a breakthrough momentum in line with the new situation as committed to CPTPP is essential for Vietnam to take advantage of opportunities offered by CPTPP.