Korea-Vietnam FTA Creating breakthrough for agricultural products

13:42 | 10/06/2015 Cooperation

(VEN) - High demand for high-quality agro-forestry and seafood imports together with commitments to increase quota and reduce tariffs in the Republic of Korea (RoK) are offering opportunities for Vietnam to promote exports and attract investment in agriculture.

Korea-Vietnam FTA Creating breakthrough for agricultural products

Increasing exports
According to the Korea-Vietnam Free Trade Agreement (KVFTA) commitments, Vietnamese agricultural and forest products and seafood will enjoy tariff reduction and quota increase in the RoK. For example, the RoK will exempt Vietnamese shrimp from taxes with quota of 10,000 tonnes per year and this figure will gradually increase to 15,000 tonnes per year in the next five years. Agricultural commodities such as honey, garlic, chili, ginger and sweet potato will also enjoy many incentives.
Head of Northeast Asia Division Pham Khac Tuyen from the Ministry of Industry and Trade’s Asia-Pacific Market Department said that garlic, chili and ginger are important ingredients in making kimchi, a traditional Korean side-dish. After three to four days of negotiations, the RoK approved tariff reduction for Vietnamese garlic in a 10-year route. A tariff reduction would create breakthrough for garlic exports to the RoK.
Vietnamese wood products are currently subject to import taxes of three to five percent, even six percent in the RoK. However, these products will also enjoy the zero-percent tariff after the KVFTA takes effect.
He also said that machinery and equipment will enjoy tariff reduction, leading to the development of rental services and making positive impacts on wood processing businesses.
Vietnam Timber and Forest Products Association (Vifores) General Secretary Nguyen Ton Quyen said that a tariff reduction on machinery and equipment will help wood processing businesses save costs and create favorable conditions for technological innovation.
Promoting links to overcome difficulties
Although the KVFTA was signed, Vietnamese agro-forestry and seafood exports may face difficulties in entering the RoK market.
Pham Khac Tuyen said that the RoK has complex regulations on quarantine for agricultural products and foodstuffs such as requirements on farming, testing and certification, remedial measures in place and wordy risk assessment procedures. A typical example is that Vietnamese dragon fruit exports to the RoK took five years of assessment.
Some provisions in the RoK’s Law on Food concerning standards of cooked rice products such as rice paper, girdle cake and noodles remain unclear. In addition, the distribution system in this market remains complex and consumers mainly use local products.
Korea Chamber of Commerce and Industry in Vietnam General Secretary Hong Sun said that the competitiveness of Vietnamese goods in the RoK market remains low compared to Thai products. Therefore, Vietnamese businesses should adopt cooperation strategies with RoK companies to improve product quality, build brand and easily overcome technical barriers.
To take chances from the KVFTA, RoK and Japanese companies are promoting investment in the Vietnamese agricultural sector. The Korea Rural Community Corporation (KRC) and its subsidiaries will pour capital and provide equipment to mechanize all 20,000ha of rice in Dong Thap Province. According to economists, foreign direct investment (FDI) inflows in the Vietnamese agricultural sector will help promote the restructuring towards high-tech farming, contributing to meeting standards in terms of quality and exports.
Distribution system needs a change
Vietnam is the world’s leading agricultural product exporter, but is not able to control product quality and market prices.
Hong Sun said that Vietnam needs a new-style wholesale market like a major and modern trading center accompanied by technology and telecommunications. This center will include an auction system that would allow Vietnam to decide market prices.
Businesses will easily conduct classification of products for export. In particular, agricultural products will have to retrieve the source and origin. The RoK has conducted a survey to establish a new-style wholesale market in Hanoi and is awaiting comments from Vietnam.
The Vietnamese distribution system also needs a change as costs are 10-percent higher than other countries, causing negative impacts on the competitiveness of Vietnamese goods./.

By Nguyen Huong & Nguyen Phuong

Theo ven.vn