"Businesses need to peruse the Vietnam - Korea Free Trade Agreement (VKFTA) to make good use of opportunities offered and avoid challenges which may come from big opportunities,” said Mr Pham Khac Tuyen, Director of Northeast Asia Division, Asia - Pacific Market Department under the Ministry of Industry and Trade, at the conference titled “VKFTA: Commitment contents - Impacts on Vietnamese businesses” held by the Vietnam Chamber of Commerce and Industry - Ho Chi Minh City Branch (VCCI - HCM).
According to the WTO Centre, an affiliate of VCCI, VKFTA was initialled by the Government of Vietnam and the Government of South Korea in Seoul on March 29, 2015 and was officially signed on May 5, 2015 in Hanoi. VKFTA comprises of 17 chapters, 208 articles, 15 appendixes and an agreement on regulation enforcement. According to VKFTA, South Korea will liberalise 97.2 percent of import value, accounting for 95.4 percent of tariff lines, particularly on key exports of Vietnam like shrimp, crab, fish, tropical fruits, apparel and furniture. For its part, Vietnam cuts duties on 92.7 percent of import value, accounting for 89.2 percent of tariff lines, mainly key industrial commodities like garment - textile raw materials, plastic materials, electronic components, automotive parts and electrical appliances.
Speaking of opportunities generated by VKFTA, Mr Tuyen said South Korea will provide more market access opportunities for Vietnam’s goods than the ASEAN-South Korea FTA. Hence, Vietnam’s exports will be exempted from tariffs when they are imported into South Korea. In addition, Vietnam will also have the opportunity to import cheaper commodities, especially inputs for key export production sectors like garment - textile, footwear and electronics. This will help the country reduce imports from other markets.
VKFTA service and investment commitments make the Vietnamese investment environment more transparent and open, thus attracting more direct investment from South Korea.
However, VKFTA also poses numerous challenges, especially new pressures on domestic products, services and investments. According to economic experts, exports of Vietnam and South Korea are relatively complementary and few are directly competitive; therefore, competitive pressures on domestic commodities caused by VKFTA are not a major concern. But, competition in domestic services and investment may be huge since, in the ASEAN - South Korea FTA, Vietnam does not open more investment and services for South Korea than WTO commitments. But, in VKFTA, Vietnam is committed to substantially opening up these sectors for South Korea.
Mr Tuyen said, "VKFTA-induced competition pressures are perhaps reasonable for domestic firms to make more intensive investments and enhance competitiveness before facing stronger competition from more powerful rivals from the US and the EU after upcoming FTAs are signed and put into force.”
To effectively utilise great opportunities generated by VKFTA, Vietnamese exporters should actively study integration commitments to work out best business plans to grasp opportunities and deal with competition, said Ms Dao Thu Huong, Director of International Economic Integration Division, the International Cooperation Department under the Ministry of Finance (MoF). They also need to actively invest in equipment and technological renovation and improve employees’ skills and competencies to enhance export quality and sharpen competitive edges. Besides, they should closely monitor information and make development strategies and long-term relations with South Korean firms to boost exports in the future.
Ms Nguyen Thu Giang
International Economic Integration Committee, International Cooperation Department, MOF
With VKFTA, South Korea offers Vietnam tax cuts and export opportunities for key agricultural and seafood products (shrimp, crab, fish, tropical fruits and industrial goods like apparel, furniture and mechanical products) because the former is committed to open its market wide for these items.
Together with export-boosting prospects, Vietnam can also import input materials for production for domestic consumption and for export third countries at lower costs after tariffs are slashed.
Mr Pham Khac Tuyen
Director of Northeast Asia Division, Asia - Pacific Market Department, MOIT
When VKFTA was formally signed, Vietnam became the first FTA partner of South Korea to open the market for very sensitive products like garlic, ginger, honey and sweet potato (tariffs on these items are excessively high, ranging between 241-420 percent, because of high sensitiveness to South Korea. Thus, VKFTA will create significant competitive advantages for Vietnam’s agricultural products in comparison with other competitors in the region when exported to South Korea.
Mr Tran Ngoc Liem
Deputy Director of VCCI - HCM
Challenges arising from VKFTA, despite huge competing pressures on Vietnamese businesses, are also opportunities for businesses to look into themselves, adopt new technologies, and have a new business mindset for success in integration and development.
Ms Dao Thu Huong
Director of International Economic Integration Committee, International Cooperation Department, MOF
Apart from major impacts on import and export operations, Vietnam will have the chance to draw more investment capital from South Korea. In fact, South Korea has strong capital, technology and advanced management and has become the most developed country among members of the Organisation for Economic Co-operation and Development (OECD). In addition, South Korea is the biggest investor in Vietnam thus far. Based on this foundation, market-opening commitments, investment protection and encouragement as well as liberal and sustainable business environment consistent with international practices will boost the trust of South Korean investors in Vietnam.
My Chau
Vietnamese
