(VEN) - After 28 months with eight official negotiation rounds, the Korea-Vietnam Free Trade Agreement (KVFTA) has officially been signed. This is the first bilateral FTA between Vietnam and its economic partners in 2015. Vietnamese Minister of Industry and Trade Vu Huy Hoang and RoK Minister of Commerce, Industry and Energy Yoon Sang-jick signed the VKFTA on May 5 in Hanoi, in the presence of Vietnamese Prime Minister Nguyen Tan Dung and high-ranking representatives of the two countries.
Commerce, Industry and Energy Yoon Sang-jick at the signing ceremony - Photo: Can Dung
KVFTA’s content Industry and Trade Minister Vu Huy Hoang said that the KVFTA was a comprehensive agreement with high-level commitments aiming to ensure balanced benefits for both sides. The KVFTA is expected to offer a lot of employment opportunities for Vietnamese workers in key exporting sectors such as textiles and garments, leather and footwear. However, the agreement does not involve rice – as this rather sensitive trade item would upset the rice trade within the Republic of Korea (RoK). Under the agreement, the RoK has pledged to help Vietnam improve its policy making and implementation capacity, and enhance its competitiveness in fields where the RoK has export advantages such as agriculture, fisheries, forestry, electronics industry, refining and petrochemicals, and support industries. The RoK’s Minister of Commerce, Industry and Energy, Yoon Sang-jick, believes that the KVFTA will create a whole host of opportunities for small and medium-sized RoK businesses to penetrate the Vietnamese market, especially in fields such as textiles and garments, automobile spare parts, cosmetics, and electronics. Sectors to benefit from KVFTA The KVFTA is expected to take effect two months after it was signed, and will hopefully yield positive results for businesses from both. Strong market opening commitments by the RoK will present new opportunities for Vietnamese exporters. Specifically, the RoK pledged to liberalize 97.2 percent of the import value (calculated based on data from 2012), or 95.4 percent of tax lines applied to products which are key Vietnamese exports such as shrimp, crab, fish, tropical fruit, and industrial products such as textiles and garments, wood products, and mechanical products. Vietnam is the first FTA partner to benefit from the RoK’s market opening commitments related to sensitive products such as garlic, ginger, honey, and sweet potato (the RoK imposes very high tax rates ranging from 241-420 percent to these products). Therefore, Vietnam can compete with regional rivals such as China, Indonesia, Malaysia, and Thailand. Vietnam pledged to cut 89.2 percent of tax lines which apply to mostly industrial products, such as materials for textile and garment production, plastic materials, electronic components, trucks and cars with a cylinder capacity of 3,000cc or higher, automobile spare parts, electrical home appliances, iron and steel products, and electrical cables.
Currently, Vietnam is the ninth largest trading partner of the RoK, while the RoK is the fourth largest export market for Vietnam, behind the US, Japan, and China. The RoK is the largest foreign investor in Vietnam with more than 4,200 ongoing projects worth over US$38 billion in total. The VKFTA is expected to raise bilateral trade to US$70 billion by 2020, triple the current figure.