VietNamNet Bridge – Vietnamese and South Korean enterprises will benefit much from the Vietnam-South Korea free trade agreement (FTA) when it is ratified and implemented, according to the WTO Center.

Customers select farm products at a supermarket in HCMC. South Korea will liberalize 95.4% of tariff lines for goods imports from Vietnam, including farm produce, seafood and fruit

The long-awaited FTA was signed in Hanoi last week. Research by the center under the Vietnam Chamber of Commerce and Industry (VCCI) showed when the FTA comes in force, it would be more beneficial for Vietnamese goods than the ASEAN-Korea FTA.

“Many products of Vietnam will be free from tariffs when they are shipped to Korea,” said Nguyen Thi Thu Trang, director of the WTO Center.

Korea will remove 95.4% of tariff lines for goods imports from Vietnam, including farm produce, seafood, fruit, wooden items and manufactured products.

Vietnam is the first FTA partner to gain access to Korea’s sensitive sectors like garlic, ginger, honey and sweet potato whose import tariffs are very high, at 241-420%. Therefore, the FTA will offer a great opportunity for Vietnam’s goods to compete with those from China, Indonesia, Malaysia and Thailand.

Vietnamese enterprises will be able to import goods at lower prices, especially materials used for Vietnam’s major sectors like textile, garment, footwear and electronics to reduce dependence on imports from other countries.

According to the center, Vietnam will remove 89.2% of tariffs lines for imports from Korea, mainly materials for textile, garment, electronic components and auto parts, to meet demand of domestic manufacturers.

Korea ranked third among the top ten trade partners of Vietnam, and was the fifth biggest exporter and the second importer of Vietnam last year. Besides, the northeast Asian country is currently the biggest investor in Vietnam.

Vietnam will have to cope with many challenges, according to the WTO Center. Local producers will deal with rising competition with more imports from Korea.

However, Trang said the challenges would not be big as products of both sides would support each other to some extent, and imports of certain products would increase competitiveness of domestic products. Moreover, Vietnam has opened its market to Korean goods under the ASEAN-Korea free trade agreement (AKFTA).

Competition in the service and investment sector for domestic service providers and investors might intensify as Vietnam commits to support Korean services and investments in the FTA.

However, competition would force Vietnamese service enterprises to sharpen their competitiveness as they will have to compete with counterparts from the U.S. and the EU when Vietnam signs trade agreements with these partners, according to Trang.

Agricultural firms look to higher exports to Korea

Domestic agricultural enterprises are pinning high hopes that their exports to South Korea might jump in the coming time as it lifts more than 90% of tariff lines for imports from Vietnam under the FTA between the two nations.

Nguyen Ton Quyen, general secretary of the Vietnam Timber and Forest Products Association (Vifores), said the tax rates charged on Vietnam’s wooden products exported to South Korea and imported machines to process wood will be cut to 0%, helping enterprises lower costs.

With wood imports from Vietnam, Korea now stands at the fifth place with turnover reaching over US$300 million last year. The FTA signed early this month will create more opportunities for Vietnam’s wood processors.

Quyen said many Korean enterprises have visited Vietnam to explore the wooden goods market and prospects for cooperation.

Quyen’s optimism was shared by Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Producers and Producers (Vasep), and Nguyen Viet Vinh, general secretary of the Vietnam Coffee and Cocoa Association (Vicofa). According to them, the FTA will pave the way for more of Vietnam’s seafood and processed coffee to enter Korea.

“Vicofa and a group of Vietnamese coffee enterprises have recently attended a coffee expo in Seoul and met a number of Korean coffee importers. The possibility of exporting coffee to the Korean market is high,” Vinh said.

SGT