Employees work at a shoe production chain owned by the Hunex Company in Da Nang City's An Don Industrial Park. Local firms have not yet properly prepared their business strategies to align with the Trans-Pacific Partnership, which will be instrumental in the extremely competitive globalisation process. — VNA/VNS Photo Tran Le Lam

HCM CITY (Biz Hub)— Vietnamese firms have to be proactive and keep themselves updated on the ongoing Trans-Pacific Partnership (TPP) negotiations, a senior official said yesterday.

The attitude will help them to effectively tackle challenges and opportunities that will arise from the multilateral agreement, Luong Van Ly, former deputy director of the HCM City Department of Planning and Investment, stressed.

He said at a seminar that according to his assessment, local firms have not yet prepared well their business strategies and plans for the TPP, which is part of the extremely competitive globalisation process.

This means that when the TPP takes effect, many Vietnamese businesses will pay a high price for the lack of preparedness, including having to stop operations, he predicted.

He said the Government as well as relevant agencies like the Viet Nam Chamber of Commerce and Investment (VCCI) should ensure that local businesses are able to access crucial, sector specific and phase specific information in time, so as to give them the best chances to survive and compete in the new situation.

Diep Thanh Kiet, deputy chairman of the Viet Nam Leather and Footwear Association (Lefaso), agreed with Ly on the importance of keeping a close eye on negotiation rounds to spot both benefits and obstacles.

One of the challenges is that foreign investors will be able to take advantage of Viet Nam joining the TPP to open production factories and export to other TPP members, Kiet said.

He noted that Viet Nam's textiles and garment sector will have to follow the "yarn forward" principle, which would mean that every stage of garment production, including weaving, dyeing, finishing and sewing would have to be done in the country.

Kiet said this principle would create major problems for the Vietnamese garment sector, which relies heavily on fabric imports.

He said 58 per cent of Viet Nam's textiles and garment export turnover in 2012, worth US$17.2 billion, came from TPP member countries.

Corresponding figures for the leather and footwear sector was 41 per cent of $8.7 billion, he added.

Multiple pressures

Several economists said at the seminar that the TPP could create a more transparent trading environment and legal framework in all member countries including Viet Nam.

However, they warned that the ensuing commitments to open up the domestic market would generate huge competitive pressures on Vietnamese businesses.

The required adjustments to the legal system, the development of human resources as well as the institutional capacity to implement TPP commitments are significant challenges that the country will face, the economists said.

Economist Pham Chi Lan said, "Viet Nam would have to do some heavy lifting to meet the TPP's demands on quality, trading standards and institutional reforms."

She said Viet Nam needs to create more value-added products and services to be able to compete with many countries; and to do this, it should identify its advantages and focus on developing them.

For instance, Viet Nam should combine agricultural production with two other economic sectors – the industrial and service sectors – to create more added value, she said.

She also warned that the country would face a shortage of skilled workers, including in the tourism sector, when the TPP is signed because they would be able to move and work in other countries.

The 19th round of TPP negotiations is scheduled to take place next week in Brunei.

In the 18th round, Japan became the 12th country to join the negotiations. The other nations are Australia, the United States, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Viet Nam.

Yesterday's seminar was jointly organised by the Sai Gon Economic Times in collaboration with the VCCI's WTO Centre. — VNS