The Vietnam-South Korea Free Trade Agreement (VKFTA) officially took effect on Dec.20, providing businesses from the two countries with many trade and investment incentives. In Binh Duong, new investment waves from South Korea are expected to help the locality reach more successes in urban and industrial development.
Opportunities
Vietnam and South Korea officially inked the VKFTA in Ha Noi on May 5, 2015. So far, they have completed ratification procedures. The Ministries of Foreign Affairs, on Dec.16, exchanged a diplomatic note, setting the effective date of the VKFTA on Dec. 20, 2015. Accordingly, respective businesses will enjoy trade and investment preferences and boost bilateral trade.
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The VKFTA strengthens bilateral trade between the two countries. In picture: Cotton fibre being manufactured at KyungBang Vietnam Co. in Ben Cat town
Right after the VKTAT comes into effect, the two sides will establish a ministerial level joint committee and subcommittees on goods trade, customs, trade defence, sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT) to accelerate the implementation of the agreement.
In 2014, South Korea was the third largest trade partner of Viet Nam after China and the US. Viet Nam’s export to South Korea posted at US$7.1 bln, up 7.9%, and its import at US$21.7 bln, up 5%. Main export products to South Korea from Vietnam were garment-textile with total turnover at US$21.7bln; fisheries at US$645mln; computers, electronic components at US$395mln, furniture at US$489mln…And import products with great value from South Korea were computers and electronics with US$5.05bln; machines, equipment with US$3.1bln; various fabrics with US$1.8bln; telephones and their components with US$1.7bln…
As of Oct.20, South Korea surpassed Japan to become Vietnam’s largest foreign investor, with total foreign direct investment (FDI) of US$43.6 bln in 4,777 projects, In Binh Duong, South Korea ranked third among foreign investors with 515 projects capitalized at US$2bln.
Park Jin Ku, Chairman of province-based South Korea Business Association said that many South Korean investors are interested in Binh Duong as there is a favorable investment climate together with the support of the local administration in production and business. Thus, the VKFAT not only promotes export-import values between Binh Duong and South Korea, but also make the wave of South Korean investment into the province soar.
And challenges
South Korea will eliminate tariff for more than 95% of Vietnamese goods as the VKFTA comes into effect. In return, 90% of goods imported from South Korea will be removed tariff within 15 years from Dec.12, 2015. According to the General Department of Customs, in the first 11 months of this year, bilateral trade fetched US$33.6 bln, a year-on-year rise of 27.6%.
Phu Huu Minh, Deputy Director of provincial Department of Planning and Investment said that since early this year, Binh Duong has absorbed 25 new projects from South Korea and 14 extra-one with total investment capital of more than US$134mln. Noticeably, there has been a strong increase for South Korean projects in auxiliary industries.
Some South Korean projects with great capital in Binh Duong include Kumho Vietnam Tire Co.Ltd. capitalized at US$128.3mln; DCT Partners Vietnam Co.Ltd. totaling US$100mln; Orion Vina Food Co.Ltd. with US$60mln…
Choi Je Ho, Director of Panko Vina Co.Ltd. that has operated in Binh Duong for 13 years with 4 times increasing capital said that the VKFAT will create advantageous conditions for respective businesses to strengthen trade exchange and pour investment capital into Binh Duong as well…
Not only the South Korean business community, domestic businesses in Binh Duong are also very delightful before the big opportunity. Phan Le Diem Trang, Vice-Chairwoman of Binh Duong Garment-Textile Association said: “We have exported garment products into South Korea for a long time and reaped certain success. Hence, right after the VKFTA was inked on May 2015, province-based garment businesses have prepared plans to seek orders exporting their products into the potential market”.
It is known that other strong industries in the province like electronics, furniture, footwear…have also rushed to learn about the VKFTA and promote their export into the country. According to Luong Ngoc Kim, Vice-Chairman of Binh Duong Furniture Association (BDFA), the VKFTA will be a great opportunity for Vietnamese enterprises to boost woodwork export into South Korea. But, there are a lot of challenges when the boisterous wave of South Korean investment in the industry flows into Vietnam in general and Binh Duong in particular. Therefore, advocacy from the local administration is needed to help domestic businesses enjoy advantages when doing business with South Korean partners.
According to data by the Foreign Investment Agency, Vietnam as of Nov., 2015 had a total of 1,855 FDI projects licensed with total investment capital of US$13.55 billion, a year-on-year increase of 1.1%. Thus, the country absorbed US$20.22bln in FDI capital from newly-licensed FDI projects and extra-ones over the past 11 months.
South Korea now takes the lead among 57 countries and territories investing in Vietnam with total newly registered capital and increased capital of US$6.3bln, accounting for 31.6% of total. It was followed by Malaysia with US$2.53bln or 12.5% of total; Japan with US$1.72bln or 8.5% of total.
Reported by Khanh Vinh-Translated by K.T
