The trade and investment ties between ASEAN member states and South Korea have been brought into a new height since the ASEAN - South Korea Free Trade Area Agreement (AKFTA) was signed in the Philippines in 2006. The agreement opened up bilateral cooperation prospects and was considered a gate for Vietnam’s goods to enter the South Korean potential market.
Vietnam and South Korea established diplomatic relations in 1992 and upgraded their ties to “strategic partnership.” The two sides agreed to further strengthen and expand the bilateral relations for mutual benefit and for the sake of regional and global peace, stability and development. For years, South Korea has always been among the largest trade partners of Vietnam after China, the United States and Japan, and is a large export market of Vietnam. The signing of AKFTA marked a milestone in the process of building and developing the two-way cooperation, and created a stable and dynamic economic environment for future sustainable development.
In recent years, the ASEAN - South Korea Free Trade Area has become an open regional trade market that creates tremendous opportunities for businesses and investors in the ASEAN region in general and Vietnam in particular. Tariff cuts and nontariff barrier removal under the agreement will engender pressures and facilitate participating countries, including Vietnam, to adopt measures to reduce production costs and increase efficiency and competitiveness of the economy. This is the door for Vietnam’s exports to penetrate the South Korean market.
Especially, joining the AKFTA, tariffs on many import lines decreased while import and certificates of origin (C/O) procedures are streamlined, helping businesses save costs and time. Only in the first six months of 2010, up to 70 percent of Vietnam’s total exports worth US$1.2 billion to South Korea enjoyed preferential tariffs on C/O. Annualised trade growth between Vietnam and South Korea averaged over 23 percent from 2001 to 2010. Vietnam - South Korea trade ties thrived. In 2009, despite the global financial crisis, Vietnam's exports to South Korea exceeded US$ 2 billion, representing a year on year growth of 15.7 percent. In 2010, the two-way trade turnover soared 42 percent year on year to US$12.85 billion, of which Vietnam earned US$3.1 billion, up 49.8 percent. In the first nine months of 2011, the bilateral trade turnover reached US$12.7 billion, up 44.5 percent over the same period in 2010. Vietnam’s key exports to South Korea included crude oil, apparel, textile, seafood, coal, timber and wooden products while it imports materials for industrial and export production (70 percent of the value) from South Korea. Steel was biggest import of Vietnam with 12.3 percent, followed by fabric (11.7 percent), machinery (11.2 percent), computers and electronic products (8.6 percent).
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More commodities will be exported to Korea
Apparel
According to the General Department of Customs, Vietnam earned US$904 million from apparels and textiles exported to South Korea in 2011, up 145 percent from 2010 - the highest annual growth rate ever. With this impressive outcome, the Vietnamese garment and textile industry is determined to bring the value to US$1 billion, making South Korea the fourth largest importer of Vietnamese apparels and textiles after the United States, the European Union and Japan.
Coffee
With 14.15 percent of the market share, Vietnam is currently the third largest coffee exporter to South Korea after Brazil and Colombia. In 2008, the country was the largest coffee exporter to the East Asian nation with 40 percent of market share. Vietnam is the only Asian country on the list of 10 largest coffee exporters in South Korea.
Vegetables and fruits
The opportunity for Vietnamese fruit and vegetable export to South Korea is open. In 2011, the export doubled from the year earlier, with major products being banana, pineapple, coconut, dragon fruit, green skin grapefruit, sweet mango, durian, canned fruits and dried fruits. However, the value remained small.
Seafood
According to the Vietnam Seafood Exporters and Processors (VASEP), Vietnam’s seafood export to South Korea is growing up considerably. The East Asian nation is currently the largest importer of Vietnam’s crustaceans.
Khanh Linh
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South Korea’s AKFTA commitments to open the market have brought in impressive results. Accordingly, from January 1, 2010, South Korea and ASEAN-5 (Brunei, Indonesia, Malaysia, the Philippines and Singapore) removed taxes on nearly 90 percent of goods on the Normal Track. Other ASEAN members, including Vietnam, Cambodia, Laos and Myanmar, will start the same move on January 1, 2013. Vietnam will have at least 50 percent of tariff lines in Normal Track brought to 0-5 percent before January 1, 2013. In 2016, it will have to bring 90 percent of tariff lines to 0-5 percent and reach its full liberalisation in 2017.
Most of Vietnam’s exports to South Korea enjoy AKFTA preferences, particularly materials (nearly 100 percent), processed minerals (95 percent), leather products (70 percent), and apparels and textiles (88 percent). Meanwhile, South Korea’s exports to Vietnam have not taken advantage of AKFTA preferences to a large extent.
Besides, Vietnamese companies have access to better materials, machines and technologies to enhance output, productivity and competitiveness. Not only that, the agreement will also have long term implications on industry structuring in Vietnam. The country has huge potentials to export consumer products, foodstuffs, apparels and footwear to this East Asian market.
The State-level visit by Vietnamese President Truong Tan Sang to South Korea in November 2011 opened up more opportunities for businesses of the two countries to cooperate in trade and investment promotion. The two countries agreed to cooperate more closely on regional and international forums; foster cooperation in international issues like sustainable development, climate change mitigation, mass destruction weapon proliferation prevention, international anti-terrorism, peace, stability, and marine liberation in international waters. The Vietnam - Korea Friendship Year 2012 will include meaningful events to celebrate the bilateral diplomatic establishment.
Thu Ha
Vietnamese
