Vietnam, RoK take advantage of VKFTA opportunities

Vietnam Economic News’ reporter interviews Korean Ambassador to Vietnam Lee Hyuk (right)

Next year will mark the 25th anniversary of diplomatic ties between Vietnam and South Korea. What are your views on the achievements from bilateral economic, political and cultural relations over the past years?

Since South Korea and Vietnam officially formed bilateral ties in 1992, the two countries’ relations have experienced rapid development in a short period of time. With South Korea becoming Vietnam’s biggest investor, third largest trading partner, and Vietnam becoming South Korea’s fourth largest trading partner in no more than a quarter of a century, the two countries have nourished such an important cooperative partnership that it is now impossible to discuss one country’s economic development without involving the other’s. In particular, it is very encouraging that the two countries have been experiencing mutual growth such as a 10 percent increase in bilateral trade even amidst the global economic slowdown.

Moreover, while the number of Vietnamese and South Korean residents in each other’s country exceeding 130,000 people demonstrates expanding personal exchanges, instances such as the establishment of K-culture or Vietnamese food in the two countries’ pop culture, or the adoption of the Korean language as a second language to be taught at Vietnamese high schools, definitely show the active exchanges in culture, too. Recently, the scope of cooperation has been getting wider and deeper with cooperation acts matching the “strategic cooperation partnership” goal, such as the joint correspondence to issues regarding the safety and peace of the Korean Peninsula. In my opinion, the affinity and trust between the two nations that share racial, historical, and cultural similarities are what formed the foundation for such rapid growth of bilateral relations.

How do you assess the KVFTA’s impact on bilateral trade?

My assessment is that the KVFTA that took effect last year, as a typical win-win FTA, has had positive influence on Korean enterprises’ investment in Vietnam and the extension of trade between the two countries with tariff reductions. In the middle of the export slump that South Korea had gone through till September this year, Vietnam was our only export market that showed a growth of 12.3 percent, especially with beneficiary items such as cosmetics, electric rice cookers, washing machines demonstrating significant exports figures. Vietnamese exports to South Korea also increased as much as 32.3 percent.

Aside from such trade growth, as of August 2016, South Korean investment in Vietnam had reached US$4.8 billion, accumulating to a record of US$50 billion so far, indicating great contribution to Vietnam’s economic development. Next year will mark the third year of the KVFTA’s validity, additional concessions for Vietnam’s imported goods as well as 16 items under Year-3 tariff elimination category turning duty-reduction such as cotton, synthetics, vehicle engines, and projectors are expected to boost bilateral trade even more. I think the healthy interdependence between the two countries that is strengthened through such process is desirable to both countries.

What do you think the two governments as well as business communities need to do to achieve the US$70 billion bilateral trade target set for 2020?

Despite bilateral trade being merely US$500 million at the time of the establishment of diplomatic ties, it made a record of US$37.6 billion last year, and seems certain to exceed US$40 billion this year. In 2013, the leaders of our two countries agreed on a goal of US$70 billion in trade by the year 2020. In my opinion, such goal is surely achievable as long as the two governments and business communities exert our redoubled efforts. Above all, as the KVFTA that came into effect last year plays an important part as a tool to boost bilateral trade and investment, it is essential that the two governments put focus on the KVFTA Implementing Committee among other support methods in order to utilize the FTA.

Non-tariff barriers such as customs clearance and technical regulations are a hindrance to trade extension that requires both governments’ extra efforts to remove. In addition, the signs of trade protection such as anti-dumping and safeguard measures have been making its presence around the world, which I personally think could become an obstacle to trade extension.

As for enterprises, while they try to maximize products’ competitiveness through research and development (R&D), efforts from the other country are also needed to facilitate market advance in areas where trade is less active. In the case of Korean enterprises, a majority of export products are materials and components to provide for Korean enterprises advancing in Vietnam, but I think it is also necessary to make active progress to join Vietnam’s consumer goods market, too.

As for Vietnam, there is a need to increase the export of products such as agricultural products, processed food, and textiles. The Korean government is planning to make great efforts to support that.

South Korea currently tops the list of countries and territories investing in Vietnam with US$50 billion. What do you think the Vietnamese government should do to attract more investment from Korean businesses?

Firstly, I would like to avail myself of this opportunity to express my appreciation for the great efforts of the Vietnamese government and people in supporting Korean enterprises’ access to the Vietnamese market. Bearing in mind such gratitude, in every chance that I get to meet Korean enterprises, I always ask them to abide by Vietnam’s laws while doing business here. I think the fact that Korean enterprises have invested more than US$50 billion in Vietnam makes the best verification that Vietnam provides a generally more excellent investment environment than any other country. However, in my opinion, there is still room for improvement in customs clearance, taxation, administration inspection, so that the possible inconvenience affecting enterprises’ activities is minimized, while they still maintain their main purposes. Besides, the increase of investors is now followed by labor shortage in many business categories, so I am looking forward to even more efforts in manpower cultivation.

Could you share your feelings and experiences about the people as well as life in Vietnam, when you live and work here?

It has been half a year since I started my tenure here. From the very first day that I set foot in Hanoi, I could feel the comfort as if arriving in my second home, as well as the great impression about our two nations’ racial, cultural, and historical similarities. In particular, the strong work ethics and enthusiasm for education I have observed in the Vietnamese people prove that Vietnam, too, will be able to achieve great growth in a short period of time. I personally have come to like many Vietnamese foods such as “banh cuon”, and I think I am very lucky to have become the Korean Ambassador to Vietnam.