Bilateral treaty boosts Vietnam-RoK relations

06:14 | 20/09/2020 Cooperation

(VEN) - Trade and investment relations between Vietnam and the Republic of Korea (RoK) have experienced remarkable progress since the Vietnam-Korea Free Trade Agreement (VKFTA) took effect on May 5, 2015.

bilateral treaty boosts vietnam rok relations
Bilateral trade increased from more than US$36.5 billion in 2015 to about US$66.7 billion in 2019

VKFTA benefits trade, investment

Vietnam and the RoK are members of three free trade agreements (FTAs) -the ASEAN-Korea Free Trade Agreement (AKFTA), VKFTA, and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). VKFTA is the first bilateral FTA Vietnam has signed.

Compared with commitments in AKFTA, Vietnam’s commitments in VKFTA are related to 265 more product categories equivalent to an import value of US$917 million from the RoK, including textile and garment materials, plastic materials, electronic components, auto parts, electrical appliances, some steel and iron products, electrical cables, 10-20 tonne trucks, and cars of 3000cc or more.

Bilateral trade increased from more than US$36.5 billion in 2015 to about US$66.7 billion in 2019 (including Vietnam’s export value worth US$19.75 billion and the RoK’s export value worth US$47.29 billion), and reached US$35.6 billion in the first seven months of 2020. The RoK has become one of Vietnam’s largest trade partners. The increased bilateral trade is attributed to the implementation of FTAs of which both countries are signatories.

VKFTA plays an important role in attracting Korean investment to Vietnam. The RoK topped foreign investors in Vietnam from 2015-2019. The number of Korean enterprises investing in Vietnam increased from 4,970 in 2015 to 8,785 on May 20, 2020, an increase of more than 77 percent within five years. Korean registered investment capital increased from almost US$45.2 billion in 2015 to US$68.16 billion on May 20, 2020, up 51 percent within the five-year period.

In the first seven months of 2020, despite the Covid-19 pandemic, the RoK still ranked second among foreign investors in Vietnam with a total investment capital of US$2.8 billion, accounting for 15 percent of all foreign direct investment (FDI) capital that Vietnam attracted in the same period.

Samsung Group has become the biggest Korean investor in Vietnam, contributing over 20 percent to Vietnam’s annual electronics, phone, and electronic component export value in recent years.

VKFTA implementation

According to economists, the two countries’ export structures are relatively complementary and thus do not compete with each other. Vietnam has become an important partner of the Rok and is expected to become a major part of Korean supply chains in the fields of automobile, electronics, leather, footwear, textile and garment.

Samsung is expected to build and operate its largest Asian research center in Vietnam in 2023, which will help it better meet origin requirements and add value to exports to the RoK.

Nguyen Tan Thanh, Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said the Vietnamese Ministry of Industry and Trade and the RoK’s Ministry of Trade, Industry and Energy founded a joint committee to implement VKFTA at the ministerial level. As a result, Vietnam and the RoK have been making good use of the VKFTA’s provisions, contributing to bilateral trade and investment.

The two ministries have agreed to promote Korean investment in Vietnam, assist Korean businesses in Vietnam in maintaining and enhancing exports to the RoK, and create conditions for Vietnamese enterprises to export textiles, garments, footwear, wooden products, farm produce, seafood and processed foods to the RoK. They have also agreed to enhance technology transfer and technical assistance from the RoK to improve the competitiveness of Vietnam’s automobile, textile, chemical, mechanical engineering and components industries, thereby increasing exports to the RoK and other countries.

Korean Ambassador to Vietnam Park Noh Wan: The RoK prioritizes relations with the Association of Southeast Asian Nations (ASEAN), including Vietnam. Vietnam and the RoK are promoting their bilateral relationship in the context of new challenges faced by the region and the rest of the world, especially the pandemic and strategic competition among major countries. The two countries need to strengthen bilateral cooperation further, focusing on promoting business and confronting the pandemic.

Ngoc Thao