The Regional Comprehensive Economic Partnership (RCEP) was signed on November 15, 2020. It is one of the world’s largest free trade agreements, covering the ten ASEAN countries and five dialogue partners, including China, Japan, South Korea, Australia, and New Zealand. RCEP aims to promote regional economic integration through tariff reductions, trade facilitation, and investment protection measures. For businesses looking to expand into Vietnam, RCEP presents vast opportunities but also poses numerous challenges. In this article, we will comprehensively analyze these aspects from policy and market access perspectives and provide corresponding suggestions.

Opportunities and Challenges of Expanding into Vietnam under RCEP

The Regional Comprehensive Economic Partnership (RCEP) was signed on November 15, 2020, covering ten ASEAN countries and partners such as China, Japan, South Korea, Australia, and New Zealand, making it one of the largest free trade agreements globally. RCEP aims to promote regional economic integration through tariff reductions, trade facilitation, and investment protection. This offers significant opportunities for member countries like Vietnam. One of the key highlights of RCEP is tariff reduction. Most member countries will gradually eliminate over 90% of tariffs on goods within 15 to 20 years. For instance, Vietnam’s industrial and agricultural exports to countries like Japan and South Korea will benefit from preferential tariffs, further driving the integration of cross-border supply chains. Moreover, RCEP simplifies cross-border trade processes by standardizing rules of origin, reducing administrative and time costs for businesses.

As a manufacturing alternative to China, Vietnam, with its low labor costs and improving infrastructure, is becoming an essential hub for manufacturing and electronics industries. RCEP not only strengthens Vietnam’s position in the global supply chain but also opens market access to high-consumption countries like Japan and South Korea. Through regional integration policies, Vietnam’s supply chain efficiency improves, and logistics costs decrease. However, as market access improves, Vietnam’s businesses also face more intense regional competition, particularly in industries such as textiles and electronics. Additionally, non-tariff barriers, such as technical standards, environmental regulations, and the complexity of rules of origin, pose compliance challenges. Businesses must ensure that their production processes meet regional accumulation rules to enjoy tariff reductions while maintaining competitiveness.

Considerations for Policy and Market Access

1. Vietnam’s Investment and Tax Policies

To attract foreign investment, Vietnam has implemented several investment incentive policies. For example, businesses investing in high-tech sectors or underdeveloped areas can benefit from corporate income tax reductions and land lease fee discounts. According to Vietnam’s Investment Law, companies established in economic zones can enjoy a 15-year corporate income tax incentive period. However, foreign businesses must also pay attention to Vietnam’s foreign exchange controls and capital flow restrictions, particularly regarding profit repatriation rules.

2. Tariff Quotas and Industry Restrictions

While RCEP eliminates most tariffs on goods, certain industries are still subject to tariff quota management and industry restrictions by the Vietnamese government. Specifically, for sensitive products, Vietnam applies quota management. For instance, in the agricultural, energy, and mineral sectors, the government may set annual import and export quotas. Companies entering these industries should familiarize themselves with quota policies in advance to avoid the risk of sudden tariff increases due to exceeding quotas.

Moreover, in strategic industries such as telecommunications, media, and energy, Vietnam imposes strict foreign ownership limits. For example, the foreign ownership limit in the telecommunications sector is capped at 49%. These industry restrictions may impact businesses’ investment decisions and operating models. Companies entering these fields should carefully review regulations and consider partnerships through joint ventures or other collaboration forms.

3. Intellectual Property Protection and Technology Cooperation

Under the RCEP framework, intellectual property (IP) protection has been significantly enhanced, with member states required to strengthen patent, trademark, and copyright protection. This is a positive development for technology-intensive businesses, as Vietnam’s IP laws increasingly align with international standards, providing a safer legal environment for technology transfer and cooperation.

However, businesses should still approach technology transfer and IP cooperation cautiously in Vietnam. Although RCEP facilitates technology cooperation, local IP protection remains less robust than in developed countries, and there is a risk of patent or trademark infringement. It is advisable for companies to register local trademarks or patents in Vietnam and clearly define IP ownership in technology transfer agreements to avoid disputes.

Industry-Specific Impacts of RCEP

1. Manufacturing

RCEP has had a significant positive impact on Vietnam’s manufacturing sector, especially in industries such as textiles, electronics, and automotive parts. With tariff reductions, the export costs of these industries have decreased substantially, allowing businesses to integrate regional supply chains more effectively. According to the Vietnam Textile and Apparel Association (VITAS), Vietnam’s textile exports reached approximately USD 39 billion in 2021, a year-on-year increase of over 11%. The tariff reductions under RCEP have greatly enhanced Vietnam’s competitiveness in the regional textile industry, particularly in markets like Japan and South Korea.

Additionally, Vietnam’s electronics manufacturing industry continues to rise globally, thanks to more accessible high-tech components from China, Japan, and South Korea. Multinational companies like Samsung and LG have already made Vietnam their Southeast Asian production base, providing strong growth momentum for Vietnam’s manufacturing sector.

2. Agriculture and Food Processing

As an agricultural country, Vietnam has benefited greatly under the RCEP framework, particularly in rice, coffee, and seafood exports. Vietnam’s Ministry of Agriculture reported a record high in 2021, with agricultural exports reaching USD 48.5 billion. The lowered market entry thresholds in countries like Japan and South Korea have led to significant increases in Vietnam’s seafood and tropical fruit exports, becoming crucial sources of foreign exchange revenue.

However, the agriculture and food processing industries also face challenges. RCEP’s implementation means that Vietnam’s agriculture will face competition from other regional countries, such as Thailand and the Philippines. Vietnamese agricultural enterprises need to improve production efficiency, enhance product quality, and build brand value to maintain their competitive edge.

3. E-Commerce and Digital Trade

The e-commerce chapter in the RCEP agreement provides new opportunities for cross-border e-commerce and digital trade. Vietnam’s e-commerce market has developed rapidly in recent years, and its market size is expected to exceed USD 52 billion by 2025. RCEP sets uniform rules for cross-border data flows and privacy protection, providing businesses with a more regulated operating environment.

Furthermore, the reduced barriers to cross-border services among RCEP member countries will create new opportunities for Vietnamese e-commerce businesses to expand into markets like Japan and South Korea.