TPP to give foreign investors power to sue Vietnamese government

By VnExpress   September 15, 2016 | 01:16 pm GMT+7

The Trans Pacific Partnership could cost Vietnamese taxpayers untold millions in arbitration fees and rulings.

The Trans-Pacific Partnership would allow foreign entities to sue the Vietnamese government for taking actions that harm their investments, Tran Ba Cuong, a senior official from the Ministry of Industry and Trade, said at a workshop on the country's retail sector yesterday.

Led by the United States, the trade pact strives to eliminate tariffs between 12 countries in the Pacific rim. The pact would also allow foreign companies and investors in signatory countries to challenge Vietnamese regulations, rules and government actions before an international trade tribunal.

A single lost arbitration could force Vietnamese taxpayers to cough up millions of dollar in damages, Cuong pointed out.

The senior trade official offered the hypothetical problem amid the flood of foreign retailers scrambling to gain market share by acquiring or partnering with local businesses.

Mergers and acquisitions involving local companies hit $3.2 billion in the first seven months of this year and are expected to hit $6 billion for the whole year, beating the 2015 record. Cuong said that, should a provincial government reject an investment plan under the TPP, the authors of that plan could bypass local courts and take the matter straight to international arbitration.

“It would cost us a lot of money to sit through an arbitration that could last a couple of years,” said Cuong.

These suits could likely result in fines that would dwarf the initial investment by a factor of three or four, Cuong continued.

Prized for its potential, Vietnam’s retail market is growing rapidly. Government statistics show that retail chains meet only 25 percent of the country’s demand; the rest of which is catered for by traditional markets.

Vietnam’s total retail revenue, which grew 10.6 percent in 2015 to $110 billion on-year, is expected to hit about $179 billion by 2020.

As a signatory to a variety of free trade agreements, including the pending TPP, Vietnam is poised to attract a growing number of foreign investors.

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