Economic Interest by Vietnam - Korea FTA

 

The VKFTA is one of three important channels that have been concluded or are under negotiation, namely: VKFTA, Regional Comprehensive Economic Partnership (RCEP) and Trans Pacific Partnership (TPP). The negotiation between ROK and ASEAN is under way to upgrade the cooperation and hopefully to be concluded by the end of 2015. Meanwhile RCEP negotiation between 16 countries, Vietnam and ROK included, will also be concluded by the end of this year. ROK and Vietnam share common value in two FTAs for regional prosperity.

 

After 2 years of negotiation with 8 official rounds and 8 rounds of heads of delegations, VKFTA has been concluded with 17 chapters, 208 articles, 15 annexes and 1 implementation agreement. The FTA comprises commodities, services (annexes on telecommunication, financing, personnel movement), investment, intellectual property, food safety, SPS, C/O, customs, trade safeguards, TBE, e-commerce, competition, economic cooperation, institution and juridical issues.

 

VKFTA is the first agreement Vietnam concluded in 2014 and signed in 2015. It will contribute in many ways to Vietnam: economy, trade and investment alongside with commitments in WTO and other FTAs. VKFTA will help improve business environment, distribution and use of human resources, facilitate economic restructuring with higher added value and sustainable development.

 

Vietnamese exports will have more opportunities in Korea market with 97.2 percent of export value compared to 2012, 95.4 percent of tax rates, especially agricultural and aqua products (shrimp, crab, fish, tropical fruit), garments, wood-based and mechanic products. In addition, Vietnam is the first to export to Korea sensitive products of high tax rates (241-420 percent) such as garlic, ginger, honey and sweet potato. As a result, Vietnamese exports can compete with other competitors in the region namely China, Indonesia, Malaysia and Thailand.

 

For its part, Vietnam reduces tariffs for 92.7 percent of import value (89.2 percent of tax rates), mainly on industrial items such as garment materials, plastic, electronic parts, trucks and cars (3,000cc upwards), auto parts, household electrical appliances, steel products and cable. Most of these imports are for domestic production, replacing imports from other countries.

 

A better business environment will encourage investments from Korea with hi-technology, advanced management and opportunities to access third markets. The agreement also includes capacity building in policy-making and competitiveness for Vietnamese exports such as agricultural and aqua products, electronics, oil refinery and supporting industries.

 

In addition, VKFTA will produce positive social interests, creating more jobs in Vietnam, increasing income for workers and reducing poverty in rural areas.

 

VKFTA promotes pro-active integration, especially economic integration and restructuring, industrialisation and modernisation. It also helps develop Vietnam-ROK strategic partnership contributing to peace and stability in the region.

 

According to Minister of Industry and Trade Vu Huy Hoang, VKFTA helps first of all agriculture, farmers, rural areas, processing industry and labour-intensive sectors (garment, footwear). Besides, the two countries also try to promote bilateral trade. Korea pledges, first, to assist in developing the Vietnamese supporting industry; second, to increase the import of Vietnamese aqua products, vegetable and fruit with increasing quantity and preferential tax rates; and third, to accelerate energy projects, especially electricity and oil and gas.

 

Furthermore, VKFTA serves not only bilateral interests. As ASEAN Economic Community (AEC) will be established by the end of 2015, products and services of Korean investors in Vietnam can access other ASEAN members. They will also benefit preferential treatment in other ASEAN partners.

 

However, beside positive impacts, VKFTA also poses new challenges to Vietnam such as competition pressure due to tariff reduction. Nonetheless, benefits from imports and export as well as promotion of Vietnamese businesses will help develop local production.

 

According to experts, State authorities should continue reorganization and upgrade staff to meet new demands for State management in the new economic environment and under international practice.

 

For their part, local authorities, the business community and people should understand more fully the integration process and implementation of VKFTA so as to make the best use of the advantages and reduce the negative impacts of the agreement.