11:24 | 20/12/2016 Cooperation
(VEN) - The Republic of Korea-Vietnam Free Trade Agreement (KVFTA) officially took effect last December. According to the Asia-Pacific Market Department of the Ministry of Industry and Trade (MoIT), trade and investment between the two countries have been stable over the past one year, promising bright prospects for bilateral economic cooperation in the coming time.
|The signing ceremony for an MoU to promote cooperation between the National Financial Supervisory Commission (Vietnam)
and the Financial Services Commission (South Korea) - Photo: BaThuy
South Korea currently is Vietnam’s third largest trading partner, behind China and the US, and tops the list of 115 countries and territories investing in Vietnam, according to the Asia-Pacific Market Department.
Last year, bilateral trade reached US$36.5 billion, up 26.5 percent from 2014 and accounting for 11.2 percent of total value of trade between Vietnam and the world. This included US$8.9 billion worth of Vietnamese exports to South Korea, up 25 percent compared with 2014, and US$27.6 billion worth of imports from this market, up 27 percent. South Korea is a major consumer of Vietnamese products such as textiles and garments, telephones and components, seafood, timber, wood products, and footwear.
In the first nine months of 2016, nearly 10 months after the signing of the KVFTA, trade between the two countries reached US$31.4 billion, a rise of 14.7 percent compared with the same period last year. This included US$8.4 billion worth of Vietnamese exports to South Korea, up 31.4 percent, and US$23 billion worth of imports from this market, up 9.6 percent.
According to the Ministry of Planning and Investment, Vietnam has so far attracted 21,666 foreign direct investment (FDI) projects with total registered capital of more than US$293 billion. South Korea takes the lead with 5,453 projects totally capitalized at US$48.8 billion, including large-scale projects of global groups such as Samsung, LG, Posco, and Hyundai.
South Korea continued topping the list of FDI into Vietnam in the first 10 months of this year with US$5.62 billion, accounting for 31.9 percent of total FDI into the country.
Trade between Vietnam and South Korea remained on the rise in the first 10 months of this year despite a decline in their trade with the rest of the world. Although appreciating these results, the MoiT said it lacked sufficient basis to attribute the growth in bilateral trade to the KVFTA.
US$70 billion, feasible target
According to the MoIT, Vietnam and South Korea upgraded bilateral relations to a strategic cooperation partnership on the occasion of President Lee Myung-Park’s visit to Vietnam in October 2009.
The two countries have been developing this partnership based on mutual trust. To create suitable mechanisms and an adequate legal framework for boosting bilateral relations, Vietnam and South Korea have signed cooperation agreements in a variety of fields such as economic and technical cooperation, aviation, avoidance of double taxation, mutual legal assistance on criminal matters, and investment encouragement and protection. Apart from the KVFTA, the two sides have been involved in many other bilateral and multilateral agreements to promote trade and investment cooperation.
Ministries and sectors of the two countries have developed effective cooperation mechanisms. For example, the MoIT has established a joint committee for nuclear power, energy, industry and trade cooperation between Vietnam and the RoK, and a joint committee for the implementation of the KVFTA. The Ministry of Planning and Investment has established the Vietnam-RoK Intergovernmental Committee for Economic, Scientific and Technological Cooperation, and the Vietnam-RoK Financial Cooperation Committee.
Last year, South Korea was Vietnam’s third largest trading partner, while Vietnam moved up to the 10th position in the list of exporters to this market. Vietnam also stands among the leading beneficiaries of development assistance from South Korea.
Given the firm foundation of cooperation between Vietnam and the RoK, the MoIT affirmed the feasibility of the US$70 billion bilateral trade set for 2020.
The MoIT indicated five things that domestic businesses should do to benefit the most from the KVFTA.
Firstly, they should improve their knowledge about international integration and the KVFTA in particular, especially the market opening roadmap specified in the agreement. This will help businesses draw out suitable investment and production plans to enhance their competitiveness, which allows them to catch opportunities while restricting adverse impacts from the KVFTA.
Secondly, businesses need to build appropriate production, business, import, and export strategies in order to benefit from the KVFTA’s open regulations related to the origin of goods, plant and animal quarantine, and food safety.
Thirdly, businesses should pay special attention to human resource development, and improve technical and foreign language skills for marketing, import, export, and external relations staffs.
Fourthly, businesses need to seek the MoIT’s support for their efforts to join global supply chains of Korean groups having investment projects in Vietnam, such as Samsung, LG, and Lotte. Finally, they should explore market opportunities and possibilities for joining linkages in order to benefit from trade preferences offered by ASEAN and the EU to Vietnam and South Korea.
To benefit the most from the KVFTA, Vietnamese businesses need to improve the quality of products and services in
accordance with requirements from the South Korean market, as advised by the MoIT.