Korea-Vietnam 25-Year trade in full bloom
President Moon Jae-in holds talks with Vietnamese President Tran Dai Quang, second from right, at the City Hall in the central Vietnamese city of Danang on Nov. 11. / Korea Times file
By Im Byeong Min
Since Vietnam and South Korea set up diplomatic ties 25 years ago, the two countries have seen strong and steady progress in their cooperation in such areas as diplomacy, economy, technology and culture.
The two sides upgraded their relationship to a comprehensive partnership in the 21st century in 2001 and a strategic cooperative partnership in 2009. Korea regards Vietnam as one of the most important partners in Southeast Asia, especially in economic cooperation. Korea is now leading foreign direct investment in Vietnam and is one of its top three trade partners.
The Vietnamese government is attempting to simplify procedures to create favorable conditions for foreign investors. With abundant resources, relatively low production costs, and a government that always pays heed to investors’ aspirations, Vietnam has become an attractive destination for foreign investment.
After more than two decades, the two countries’ bilateral trade has increased to a record high. From only $500 million in 1992, two-way trade reached $43.45 billion in 2016, and $39.2 billion in the first eight months of 2017, and is forecast to hit over $60 billion in 2017.
In the last 10 years, two-way trade has continuously grown at an average rate of 23.4 percent per year in the context of global trade being negatively impacted by the global economic crisis. Korea is Vietnam's third largest trade partner after China and the United States, accounting for 14 percent of its total international trade. Vietnam is Korea’s fourth largest trade partner.
Vietnamese President Tran Dai Quang and Korean President Moon Jae-in hold a summit in Danang
Korea is a potential market for Vietnamese exports. With its strength in fuel, light industry and agricultural products, Vietnam exports telephones and spare parts; computers, electronic and various other products. Many of Vietnam's commodities have set their footholds in developed markets such as the United States, Japan and the EU with high requirements of technical and environmental standards, product safety, and designs.
They are gradually asserting their position in the Korean market.
Vietnamese enterprises are studying the requirements of the Korean market, applying advanced technology in management and production, training laborers, improving product quality and making designs suitable for each market segment in the RoK.
In turn, Korea ships to Vietnam items such as computers, electronic products and components, machinery and equipment and telephone components. In 2011, Korea officially overtook Japan to become the second largest supplier of goods to the Vietnamese market (after China).
The country now ranks first among 126 foreign direct investment (FDI) countries and territories in Vietnam with $57.5 billion, accounting for 18 percent of Vietnam's total FDI. The Korean FDI enterprises have actively contributed to the export of Vietnamese goods and created jobs for many Vietnamese workers.
Prospects from VKFTA
The Vietnam-Korea Free Trade Agreement (VKFTA), one of the new generation FTAs, officially came into force on Dec. 20, 2015, marking a historic milestone in the bilateral economic relationship.
In the deal, Vietnam committed to cutting 89.2 percent of tariff lines, while Korea vowed to cut 95.4 percent. It is worth mentioning that Korean tariff lines cut for Vietnam are more than those for its competitors such as China, Indonesia, Malaysia and Thailand. This shows Korea's preference for Vietnam.
On the occasion of Moon’s visit to Vietnam in September 2013, the two sides set a target of attaining 70 billion dollars in bilateral trade by 2020.
During the meeting between Prime Minister Lee Nak-yon and Vietnam’s Deputy Prime Minister Truong Hoa Binh in Seoul on Nov. 21, both sides agreed to accelerate the implementation of the bilateral free trade agreement to lift two-way trade to $100 billion by 2020. The Vietnamese government and enterprises are exerting every effort to perfect investment mechanisms and policies in the context of international economic integration, and adjust FDI flows in the direction of selective attraction and improve capacity to access the fourth industrial revolution.
They will also change the structure of import-export and domestic markets, and complete international trade policies which are in line with Vietnam’s conditions and consistent with the contents of VKFTA and other FTAs that Vietnam has participated in.
After 25 years of diplomatic relations, Korea-Vietnam trade is one of the fields that have gained many big achievements, especially the signing of VKFTA. With both sides’ commitment to opening their economies, bilateral trade and investment are expected to advance further in the decades to come.
In addition, the efforts of the two governments, the cohesion and cultural similarity between the two countries, and the Vietnam-Korea cultural bridge role of the Vietnamese community in Korea and Koreans in Vietnam are active players in fostering bilateral relations in other fields such as science-technology, education-training, and tourism.
The writer is the chairman of Argerigna.