Recently in Busan, South Korea, Vietnam’s Minister of Industry and Trade Vu Huy Hoang and Korea’s Minister of Trade, Industry and Energy Yoon Sang-jick signed a Memorandum of Agreement to conclude negotiations on the Vietnam – South Korea Free Trade Agreement (VKFTA). The Memorandum of Agreement was signed in the presence of the Prime Minister of Vietnam Nguyen Tan Dung and President of the Republic of Korea Park Geun-hye, on the occasion of the commemorative summit marking 25 years of ASEAN-RoK relations.
Korea will liberalise 95 percent of tariff lines
Officially launched in Hanoi on August 6, 2012, after 8 official negotiations and 8 interim meetings and chief negotiators level meetings, the two sides have settled the content of the Agreement with comprehensive, high level commitment and ensured the balance of interests. The Agreement includes the main content groups of merchandise trade (tariff reduction commitments), Trade Services (including the Annex on Telecommunications, Finance), Investment and Intellectual Property, measures of food safety and animal and plant quarantine (SPS), rules of origin, customs facilitation, trade remedies division, technical barriers to trade (TBT), trade electronics, competition, institutions and legal frameworks and economic cooperation.
RoK gives Vietnam preferential tariffs, creating new export opportunities for important agricultural commodities and seafood such as shrimp, fish, tropical fruit, and industrial goods such as textiles, garments and mechanical products. Besides, Korea also pledged additional market opportunities for the services and investment of Vietnam, and agreed to strengthen economic cooperation, devoted comprehensive technical support in many areas. For the first time, RoK has opened its market for sensitive products such as garlic, ginger, honey and shrimp, creating significant competitive opportunities for Vietnam compared to other competitors in the region.
Vietnam also gives preferential tariffs to Korea in industrial groups such as materials for textile, garment, plastic materials, electronic components, trucks and cars from 2500 cc and above, automobile spare parts, electrical appliances, iron and steel products and electrical cables.
Korea liberalised 96.48 percent of imports from Vietnam, and Vietnam liberalised 92.75 percent of the total value of imports from Korea in 2012. In terms of tariffs, South Korea liberalised 95.43 percent of tariff lines, while Vietnam committed to 89.75 percent of tariff lines.
Other commitments on services, investment, intellectual property, competition, trade defence, dispute resolution, economic cooperation, sanitary and phytosanitary measures, and technical measures for trade have been agreed to ensure balance of interests, in accordance with domestic law and without prejudice to other negotiations of Vietnam today.
It is expected that the two sides will complete the negotiation of the remaining technical issues and complete the necessary domestic procedures for early conclusion of the Agreement in early 2015.
Leverage for export
Besides the important export interests, VKFTA is expected to facilitate import efficiency, especially in the group of materials for key manufacturing industries such as textiles, footwear, electronics, reducing dependence on imports from other sources. Thereby it supports the reform and economic restructuring, increasing the proportion of exports of high added value goods. The commitments on services, investment and transparent policy environment in accordance with the provisions of international agreements are expected to contribute to attract investment from Korea, especially in the field of high technology, manufacturing, and promote links between the two economies, enhance people's exchanges, and deepen Vietnam - South Korea cooperation and strategic partnership.
South Korea is the third largest trade partner of Vietnam and Vietnam is the ninth largest export market of Korea. According to the General Department of Vietnam Customs, in October 2014, the total turnover of import and export goods between Vietnam - South Korea reached US$23.74 billion; accounting for 9.7 percent of the total turnover of the country's export after 10 months. In particular, in the first 10 months of 2014, value of exports from Vietnam to the South Korean market reached US$5.99 billion; accounting for 4.8 percent of total exports of the country after 10 months. The main export items of Vietnam to this market include textiles, seafood, computers, electronic products and accessories, phones and accessories, machinery and spare parts; and transportation.
In reverse, the import turnover of Vietnam from South Korea reached US$17.75 billion; accounting for 3 times the export turnover to this market and 14.6 percent of the total turnover of imports of Vietnam in 10 months of 2014.
South Korea is a large export market of Vietnam in the last 10 months, reflected through imports of some main commodities worth "billions of dollars" such as computers, electronic products and components; machinery, equipment, tools and spare parts.
On investment, by the end of October 2014, South Korea was the largest investor in Vietnam with 4,063 valid projects and total registered capital of US$36.7 billion.
South Korea has invested in 18 out of 21 economic sectors of Vietnam, focusing mainly in the fields of industrial processing, manufacturing, real estate, construction, arts and entertainment, transportation and warehousing.
Huong Ly
Vietnamese
