HANOI: The Vietnamese government hopes the free trade agreement with South Korea will bring benefits to the country. But businesses fear it will bring them more losses than gains, a leading Vietnamese newspaper has reported.
The FTA signed last month is expected to boost Vietnam’s exports to Korea and more than double bilateral trade over the next five years. Park Sang Hyup, head of the Korea Trade-Investment Promotion Agency (KOTRA) in HCM City, said bilateral trade last year rose to more than $30 billion from nearly $500 million in 1992.
Phan Thi Thanh Minh, head of Vietnam’s industry and trade ministry’s southern operations department, said under the FTA, Vietnam would remove import tariffs on more than 90 per cent of Korean products, including garment and textile raw materials, unprocessed plastic, electronic parts, automotive components, household electricity, iron and steel, electric cables and others.
On its part, South Korea will reduce import duties on more than 95 per cent of Vietnamese goods, including key export items like shrimp, fish, crab, tropical fruits, garment and textiles, and wooden products.
Under the pact, import tariffs on garment and textile shipped to South Korea, now at 8-13 percent, will be abolished.
They make up Vietnam’s biggest exports to that country, accounting for $587 million in the first four months of this year, or nearly a quarter of the total exports to the market, according to the Vietnam General Department of Customs.
However, Vietnamese producers said they stand to gain little from the FTA. Most textiles and garments exported to Korea are produced by Korean-invested businesses in Vietnam, Bui Trong Nguyen, general secretary of the Ho Chi Minh City Association of Garment Textile Embroidery and Knitting, said.
Almost none of the association’s 200 members export to the market, the report said.
Besides, compared to the US or EU, South Korea is a small garment market, with buyers often making small orders of just 3,000-5,000 pieces, another industry insider said.
The FTA with South Korea would not help reduce Vietnam’s trade deficit with that country and could even increase it, Pham Khac Tuyen of the ministry of industry and trade, Asia-Pacific department said.
Increasing demand for machinery and equipment by South Korean firms seeking to expand their business in Vietnam to enjoy the benefits brought by the trade pact would also contribute to this, he added.
Trade between Vietnam and South Korea last year rose 6 per cent from 2013 to a record $29 billion, three-quarters of which were Vietnam’s imports, government data shows.
The FTA covers a range of areas from goods and services to customs, trade protection and technical barriers to trade.
South Korea is the biggest investor in Vietnam, with $38 billion in more than 4,200 projects.
Nguyen Van Nam, former head of the Institute for Trade Research, said local enterprises should not worry about the challenges posed by FTAs since economic integration is indispensable for development. They just need to perform better to adapt to the new situation, he added.
