Vietnam, Korea sign VKFTA, plan to triple trade turnover

Vietnam PM Nguyen Tan Dung witnessed the signing of a free trade agreement (FTA) between Viet Nam and the Republic of Korea (RoK) by Vietnamese Minister of Industry and Trade Vu Huy Hoang and RoK Minister of Trade, Industry and Energy Yoon Sang-jick in Ha Noi on May 5.

The Vietnam – Korea Free Trade Agreement (VKFTA) was signed on May 5, after two years of negotiation. It has widened the door for both countries to become each other’s major trade partner.

VKFTA is the first completed bilateral free trade agreement between Vietnam and its trade partners, that was put on the round table in 2014.

“The signing of the VKFTA will bring about positive impacts to the Vietnamese economy, such as an improved business environment, hence boosting the restructuring of the economy towards a sustainable, value-added growth,” the local government said in a report.

More transparent, comfortable investment conditions will lure more Korean investment into Vietnam, accompanied by Korea’s advanced technology and management expertise, and create opportunities of accessing a third markets.

The provisions of the bilateral trade agreement cover the trade of commodities, services (including appendixes for telecommunications, finance and the movement of natural persons – a way through which services can be supplied trans-nationally), investment, intellectual property, measures for food safety and animal and plant quarantine, rule of origin, customs facilitation, trade remedies, technical barriers, e-commerce, competition, economic cooperation and legal system.

In addition, Korea pledges to help Vietnam with enhancing the ability in making policies and increasing its competitiveness in mutually interested areas like agriculture, aquaculture, electronic industry, refinery and auxiliary industry.

Korea is one of Vietnam’s biggest export markets for products in the seafood, garment, footwear, agriculture and wooden furniture sectors. In turn, Vietnam imports mainly chemicals, garment input and equipments from Korea.

The two countries have been actively expanding economic operation since the 2000s. Vietnam is Korea’s fourth largest investment destination and the eighth largest trading partner. Korea’s volume of exports to Vietnam increased from $7.2 billion in 2009 to $22.3 billion last year.  Meanwhile, Korea is Vietnam’s largest foreign investor, the third largest trading partner and second largest source of tourists.

Against the backdrop, the two governments concluded negotiations last December that will bring them even closer. “Economic relations are expected to be further intensified through an import tariff removal of more than 90 per cent of the products in exchange, which will potentially see the bilateral trade value triple to $70 billion by 2020,” said Do Hoon Kim, president of the Korea Institute for Industrial Economics and Trade.

Meet the leading destination of investment, industrial zones

It has been 23 years since Vietnam launched its first industrial zone (IZ), the Tan Thuan Export Processing Zone, in Ho Chi Minh City. By the end of 2014, the country had 295 established IZs over the total 461 planned IZs. The southeast region of Vietnam attracted the majority of industrial parks (34 per cent of the total), typically in Dong Nai, Binh Duong, Ba Ria – Vung Tau, Long An and Ho Chi Minh City.

The established IZs have effectively attracted investment in infrastructure, manufacturing and general business. The total registered capital for infrastructure construction of the 295 IZs reached $12.8 billion, data shown by Vo Dai Luoc, professor from the Vietnamese Academy of Social Sciences. By the end of September last year, Vietnamese IZs had nearly 10,600 domestic and foreign direct investment projects with a total registered capital of $33 billion.

To sum up, the annual flow of foreign direct investment (FDI) into IZs accounts for 40-45 per cent of the total FDI in the country, Luoc said.

However, one of the recently highlighted barriers to foreign investors is a lack of land information in the local market. There has yet a national strategy in the establishment and development of a land information platform in Vietnam.

Meanwhile, once the system is formed, the database of the investment projects will be updated. It will be a tool that serves two objects: the investors who want to know how to allocate their money in Vietnam, and the government, which looks to prevent inefficiency in investment, according to doctor Vo Anh Tuan from the Ministry of Natural Resources and Environment’s General Department of Land Administration.

“If Vietnam implements the land information system now, it will surely get the support from international funding organizations as well as foreign governments,” he said.

Related stories:

More Russian capital to flow into Vietnam with FTA?

Vietnam en route to become one of four largest ASEAN’s economies

AFTA Tax advantage: Thai automobile cos foray into Vietnam

Vietnam’s railway sector to open to private investors

Vietnam opens door to aviation investment, local investors rush in