Conference hears that Vietnam stands to gain more than it loses from free trade agreement with South Korea.
The Vietnam - South Korea Free Trade Agreement (VKFTA) will trigger a second wave of investment from South Korea to Vietnam, Ms. Dao Thu Huong, Head of the Department of International Integration at the Ministry of Industry of Trade, told a conference on the impact of the VKFTA on Vietnamese enterprises held today in Hanoi, with a similar event to be held tomorrow in Ho Chi Minh City.
“The opportunities are much greater than the challenges for Vietnamese enterprises,” said Mr. Hong Sun, General Secretary of the South Korean Chamber of Commerce and Industry in Vietnam. “By 2020, export and import turnover between South Korea and Vietnam is expected to increase by $70 billion,” he added, or 20 per cent annually.
Among all the free trade agreements Vietnam has signed, the VKFTA is expected to bring the greatest benefit to the Vietnamese side. Ms. Nguyen Thi Thu Trang, Director of the WTO Center under the Vietnam Chamber of Commerce and Industry, said that about 89 per cent of Vietnamese goods will have favorable tax conditions under the VKFTA, while the figure is less than 40 per cent in other free trade agreement Vietnam has signed.
Ms. Huong emphasized that there are many product lines where only Vietnamese enterprises will benefit, thanks to the VKFTA. For example, South Korea will gradually lift protective tariffs on product lines such as shrimp, garlic and chili.
Many may be surprised to hear that garlic and chili generate low profits. However, the consumption of these products in South Korea is substantial, she said. Vietnamese fruit, meanwhile, is beloved by South Koreans and will be subject to lower taxes under the agreement.
However, Mr. Hung pointed out that the most challenging problem for Vietnamese enterprises is the lack of adequate preparations. Many Vietnamese enterprises at today’s conference were looking for official Vietnamese documents on the VKFTA, but they are yet to be made available in Vietnamese.
There is also no official agency to support Vietnamese enterprises regarding knowledge and procedures in the VKFTA, Mr. Pham Khac Tuyen, Head of the Northeastern Department at the Ministry of Finance admitted. Lacking a modern and professional wholesale market where all goods are collected and classified is an obstacle for foreign investors who wish to buy agricultural products in Vietnam, he added.
Lastly, experts at the conference also expressed concern that while there is a wave of investment from South Korea to Vietnam there is no wave heading in the other direction.
Import tax reductions in VKFTA
Two-hundred types of goods from South Korea will be subject to lower import taxes:
1. Materials for textile and footwear (31 product lines): import turnover $434 million per year.