|Farmers harvest garlic on Ly Son Island in the central province of Quang Ngai. Tariffs for Vietnamese garlic, ginger and honey exports to South Korea will be reduced to zero per cent over the next 10-15 years under the recently signed free trade agreement between the two countries. — VNA/VNS Photo Thanh Long
HA NOI (VNS) — The Republic of Korea has chosen Viet Nam as its first FTA partner that can export products such as garlic, ginger and honey with tariffs reduced to zero per cent over the next 10-15 years.
According to the VCCI, trade turnover between Viet Nam and the RoK rose from US$500 million in 1992 to more than $26 billion in 2014. The RoK was Viet Nam's third most important partner and its largest investor, with 36.2 per cent of the total investment in 2014.
In 2007, Viet Nam also became an FTA partner with the RoK under the ASEAN-Korea FTA pact.
The VCCI said among the FTAs Viet Nam had signed, the Korean deal was the most advantageous in terms of exports, imports and investments. Thus, a direct FTA with the RoK would definitely bring more benefits.
With 17 chapters, 208 articles, 15 appendices and one agreement, the deal was signed by 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. — VNS
The information was shared at a conference to inform Vietnamese businesses about the recently signed FTA between the two countries on Thursday, organised by the Viet Nam Chamber of Commerce and Industry (VCCI).
The VCCI said the current export taxes applied to these products in the RoK stood from 241 to 420 per cent, but under the Viet Nam-Korean Free Trade Agreement (VKFTA) signed on May 5, taxes for these products would be held at zero per cent for the next 10 years.
This would give Viet Nam a significant competitive advantage over other competitors in the region such as China, Indonesia, Malaysia and Thailand, said Pham Khac Tuyen, head of the North East Asian Bureau under the Ministry of Industry and Trade.
Hong Sun, secretary general of the Korea Chamber of Business in Viet Nam, said the agreement was a big move as it included garlic, which is the first key ingredient for the Korean specialty, kimchi.
At the same time, Viet Nam will also be the RoK's first FTA partner to be able to export natural honey at a zero tariff 15 years after the agreement takes effect.
The tariff on rambutan's will also be cut from the current 611.5 per cent to no less than 20 per cent from January 1, 2016. The export tax on tropical fruit like pineapple, guava, mango and mangosteen will also be dropped in the next ten years.
The RoK will eliminate tariffs for seven types of shrimps imported from Viet Nam from next year. In 2016, Viet Nam has a quota to export 10,000 tonnes to the RoK, with a 10 per cent increase each year. By 2020, the country could export 15,000 tonnes of shrimps per year without tariffs.
Currently, Viet Nam can only ship 2,500 tonnes without tax under the ASEAN Korean FTA. Current tariffs are applied to imported shrimp from Viet Nam are 10 to 15 per cent.
According to the Viet Nam Association of Seafood Exporters and Producers, the South Korean market is the fifth largest consumer of Vietnamese shrimp, after the US, Japan, the EU and China. Viet Nam also overtook China to become the largest shrimp supplier to the RoK in 2014. In 2014, South Korea imported 62,878 tonnes of shrimp, including 27,791 tonnes from Viet Nam.
In return, Viet Nam will cut import taxes for textile raw materials, textiles, plastic materials, electronic components, trucks and passenger car automobile parts, electrical appliances, some iron and steel products, electrical wire rods and cosmetics.
Chamber secretary Hong Sun said Korean companies were eager to invest in Viet Nam's agriculture sector, and the FTA was likely to induce more FDI.
He said Viet Nam had good natural conditions and human resources for agricultural production, but in terms of technology and manufacturing techniques, Viet Nam was still weak.
The RoK was experienced in technology and logistics, he said, adding that there should be a chance for future co-operation between the two sides.
However, MoIT official Tuyen said it would not be easy to enter the RoK market if local enterprises were not well prepared.
Instead, Tuyen advised local enterprises to co-operate with big Korean companies to seek advice about quarantine barriers. He said customs procedures and the RoK market were "very complicated", making it difficult for foreign brands to enter a market where local people only trusted their own products or well-known international brands.
Tuyen said Vietnamese enterprises should find established partners for their exports, such as Lotte Mart, Emart and Costco.
Chairman of the Viet Nam Beekeepers Association Dinh Quyet Tam said he did not expect much from the FTA, saying the RoK would enforce stricter quarantine regulations on products. Tam gave an example that under the FTA signed with Japan, they could export local honey products with no export tariffs, but other strict barriers had made very little difference to exports.
Nguyen Ton Quyen, general secretary of the Viet Nam Timber and Forest Products Association (Vifores), said the agreement would also bring stiff competition from the RoK with advanced technology and machinery, and lower prices. Quyen said that many Vietnamese enterprises would lose out. — VNS