The World Bank projection for the RCEP is indeed very impressive and the Member States will see GDP increase by 1.5 per cent. Furthermore, by some estimates, the RCEP could add almost US$ 200 billion to the global economy by 2030.
ASEAN Member States, Australia, China, Japan, South Korea, and New Zealand have heralded the Regional Comprehensive Economic Partnership (RCEP) on 01 January 2022. This 15 Member consortium is the largest economic grouping and constitutes nearly 30 per cent of the global population which relates to a market of 2.3 billion people with an output value of about US$26.2 trillion with over a quarter in world exports. The World Bank projectionfor the RCEP is indeed very impressive and the Member States will see GDP increase by 1.5 per cent. Furthermore, by some estimates, the RCEP could add almost US$ 200 billion to the global economy by 2030.
Infographics Credit: Vietnam Investment Review
As far as Vietnam is concerned, the leaders in Hanoi must be happy to see the RCEP take concrete shape given that it was signed in November 2020 during the ASEAN Summit under Vietnam’s chairship. Vietnam, according to Fitch Solutions, is expected to benefit enormously from the RCEP particularly the IT, footwear, agriculture, automobiles, and telecommunications sectors being the major export categories. The RCEP will also provide Vietnam access to huge consumer markets which could be double the size of those included in the CPTPP. Vietnam can potentially move to become a high-tech manufacturer, and the RCEP can facilitate “local firms increase exports and attract high-quality goods for its consumers. Likewise, agriculture and fisheries product exports will benefit”.
Vietnam, according to Fitch Solutions, is expected to benefit enormously from the RCEP particularly the IT, footwear, agriculture, automobiles, and telecommunications sectors being the major export categories
Vietnam’s economic outlook for 2022 is positive with numerous growth opportunities. The National Assembly has identified (2021-2025 period) focus areas in sectors such as “digital economy, hi-tech industries, developing the urban economy, strengthening regional connectivity, strengthening the role of key economic zones, and restructuring to achieve a green and sustainable economy among others”. These sectors can be expected to grow given that the country has strong economic indicators notwithstanding the downturn in economic growth due to COVID-19. This is premisedon “investor-friendly policies, relative economic and political stability, cost efficiency, and consumer demand prospects, supply chains restructuring in Asia” which will attract both old and new investors.
However, Vietnam should also be prepared for the ongoing and impending geo-economic and geopolitical triggers emerging from contestation between the US and China. During the East Asia Summit in October 2021, President Biden announced that the US was considering a major trade and economic initiative in the form of an “Indo-Pacific economic framework”. Soon thereafter Commerce Secretary Gina Raimondo visited Japan, Malaysia, Singapore, and South Korea to “begin discussions on potential negotiations that could start in early 2022”. Besides some Members of Congress, the new framework is also inspired by Australia and Japan, who had called for a “more active U.S. trade policy, including U.S. leadership in regional trade initiatives”. Above all, the initiative should be seen as a move by the Biden Administration to put to rest any doubts in the minds of regional leaders that the US “lacks an economic and trade strategy sufficient to counter China’s increasing economic influence” in the aftermath of President Trump decision to withdraw from the proposed 12-nation Trans-Pacific Partnership (TPP) in 2017.
The new US economic framework, it is hoped, will also lessen fears in the minds of regional countries arising from the geopolitical-geostrategic issues between the US and China. The US’ “free and open Indo-Pacific” strategy which pivots on ‘rule of law’ is essentially diplomatic and military and is symbolized by the Quadrilateral Security Dialogue among the US, Japan, India, and Australia (the Quad) and the Australia-United Kingdom-United States (AUKUS) security partnership.
The Quad has made significant progress and the first-ever in-person Leaders’ Summit was held in September 2021. It was agreed to advance practical cooperation on 21st-century challenges such as “ ending the COVID-19 pandemic, including by increasing production and access to safe and effective vaccines; promoting high-standards infrastructure; combatting the climate crisis; partnering on emerging technologies, space, and cyber security; and cultivating next-generation talent”. The leaders also called for building quality infrastructure in the Indo-Pacific region which was targeted against China’s Belt and Road Initiative (BRI). As far as the AUKUS is concerned, the rationale is quite clear and is driven by the growing Chinese assertiveness amid fears of extreme coercion against regional countries particularly Taiwan and the claimants of the South China Sea.
The RCEP and the “Indo-Pacific economic framework” are significant developments but can potentially pose a dilemma for Vietnam
The RCEP and the “Indo-Pacific economic framework” are significant developments but can potentially pose a dilemma for Vietnam. There are numerous economic benefits to be accrued from the RCEP, but at the same time there are both economic and strategic rewards from the “Indo-Pacific economic framework”. The US Indo-Pacific strategy has not found much favour in Hanoi; instead, Vietnam has chosen to support and pursue the ASEAN Outlook for Indo Pacific (AOIP) which envisages ASEAN Centrality and the East Asia Summit (EAS), as the underlying principle for promoting cooperation in the Indo-Pacific region.
Feature Image Credit: worldakkam.com
