FTA to ramp up Korean cooperation

Vietnam and South Korea are expecting major benefits from a bilateral free trade agreement now under negotiations.

South Korea's Ministry of Foreign Affairs and Trade (MoFAT) reported that the Vietnam-South Korea free trade agreement (FTA) would help Vietnam annually increase gross domestic product (GDP) by 1.47-3.22 per cent and expand Vietnam's export turnover from South Korea by 18-20 per cent.

According to South Korea Information and Business Support Centre, Vietnam would fetch big benefits from this FTA in such exports as petroleum, anthracite, textiles, shrimps and prawns, octopus, footwear, coffee, fish and wood products. It was because these products would enjoy the biggest tax reductions and exemptions.

Meanwhile, the FTA would help South Korea annually increase GDP by 0.14-0.74 per cent, augment South Korea's welfare with $1.8-5.7 billion and swell this country's export turnover from Vietnam by 18-20 per cent, the MoFAT reported.

The first negotiation round of the FTA was concluded in Seoul in early September, 2012. The two governments are now preparing for the second round of negotiations. The FTA is expected to be inked in 2014.

The FTA, as an upgraded version of the ASEAN-South Korea FTA coming into force in 2007, will cover trade in commodities and services, investment, industry, energy, infrastructure, agriculture and fisheries.

"The continued trade and investment liberalisation via the Vietnam-South Korea FTA will play an important role in lifting the bilateral trade turnover to $20 billion before 2015 and $30 billion in the next period as set by the two nations' high-ranking leaders," said the MOFAT Deputy Minister Choi Kyonglim at a recent Hanoi-based seminar on this FTA. "To this end, the two countries needed to have specific strategies."

Vietnam's Ministry of Industry and Trade’s Asian Market Department reported that the two-way trade between Vietnam and South Korea soared to $18 billion last year—or 36 times from the $500 million in 1992, when the country's officially established diplomatic relations.

The MoFAT said South Korea was now Vietnam's fourth largest trade partner while Vietnam was South Korea's 15th largest trading partner, eighth biggest export market and sixth largest foreign investment destination.

South Korean Ambassador to Vietnam Ha Chan Ho also noted that once the FTA was clinched, it would pave the way for swollen trade and investment between the two countries. As Vietnam's second largest investor, after Japan, South Korea was embarking on a number of plans to further invest in Vietnam.

"The inking of this FTA will further expand South Korean investments in Vietnam and lay a big foundation for Vietnamese investments in the future," said the Asian Market Department head Bui Huy Son.

By late October 2012, South Korea had 3,134 investment projects in Vietnam, with total registered capital of over $24.48 billion, of which $8.37 billion was disbursed.

To reach the FTA negotiations, Vietnam and South Korea organised six meetings of the joint study group for the FTA from June, 2010 to October, 2011. The two sides adopted the FTA's joint study group report on November 8, 2011, and organised the FTA's public hearing on April 20, 2012.

Under the ASEAN-South Korea FTA (AKFTA), South Korea will by 2015 reduce 30 lines of import taxes for Vietnam's key products like farm produce, chemicals, paper, steel, machinery and footwear. For instance, the tax rate for footwear will be decreased from 0.26 per cent in 2010 to zero per cent in 2015.

However, also under the AKFTA, Vietnam's average tariff levels for South Korea’s key products like aquatic products, milk and milk products, vegetables and fruit, rice and wheat, and confectionery and cereal will be reduced to 10 per cent by 2015 from 15.41, 10.92, 14.6, 13.93 and 19.15 per cent, respectively, in 2011.

Thanh Thu (vir.com.vn)