Minister of Industry and Trade Vu Huy Hoang spoke to the VietnamGovernment Portal on how Vietnam can make use of the free tradeagreement signed with the Republic of Korea in Hanoi on May 5.
Q:Vietnam is the first FTA partner to gain market access in the RoK foragricultural products such as garlic, ginger, honey, and sweet potatoes ─products Vietnam has a comparative advantage in producing. In youropinion, what criteria must domestic enterprises meet to export theseitems to the RoK?
A: Exports from Vietnam will enjoymany new market opportunities because of the strong market accesscommitments from the RoK. The RoK liberalised 97.2 percent of importvalues (calculated according to 2012 figures), accounting for 95.4percent of all tariff lines, including many of Vietnam's keyagricultural commodities and seafood products such as shrimp, crab,fish, tropical fruits and industrial goods like textiles, furniture, andengineering products.
Vietnam is the first FTA partner withwhich the RoK opened its market to very sensitive products such asgarlic, ginger, honey, and sweet potatoes. The tax rate for theseproducts is normally very high, from 241 to 420 percent.
Thedemand of the Korean people for such sensitive items is considered to bequite high. This also means that they have very high requirements forquality. For many years, the RoK has maintained very high import tariffson this group. Many countries produce these goods but cannot exportthem to the RoK market.
This is the first time the RoK agreedto open the market for these goods from Vietnam by offeringpreferential tariffs at very low levels, demonstrating the goodwill fromthe RoK towards Vietnam.
For Vietnam, in response,exporters must pay attention to maintaining their pricing, quality and,most importantly, food safety. To do this, Vietnamese businesses andfarmers must respect production procedures and issues related tosubstances used for plant protection and pesticide use.
Q:One of the highlights of the trade relations between Vietnam and the RoKis the complementary export-import commodity structure and no directcompetition. Will this be an advantage or challenge for domesticenterprises as Vietnam also opens its market to textile products,garments, raw plastic materials, electronic components, trucks and carswith capacity of 3,000 cubic centimetres or more, auto parts, andelectric appliances?
A: We have to look at both sides of theissue when importing industrial parts from the RoK, especially inmanufacturing and electronics.
The positive side is that it willhelp increase the production of completed products in Vietnam ascurrently we are not able to produce several types of components.However, these products will lower the competitiveness of similarproducts produced by Vietnam, not to mention the development of theseproducts for export.
Vietnamese enterprises must find solutionsto improve quality and reduce production costs, while also improvinglabour productivity and gradually participating in global value chains.
Ithink that we have learned many lessons about integration from joiningthe World Trade Organisation, signing FTAs with ASEAN countries, andFTAs between ASEAN with China, the RoK, India, Japan, and New Zealand.
So,if we take advantage of this opportunity to turn challenges intoopportunities by initially accepting import parts, in the long run wewill ensure the supply of goods for domestic use and export.
Q:As a State management agency, what support mechanisms does the Ministryof Industry and Trade offer businesses to take advantage of theagreement?
A: The ministry has determined that the firststep is to have appropriate policies in place to support the developmentof auxiliary industry and stronger mechanisms to encourage enterprises’development.
A favourable legal framework for the development of the industry sector is needed in the shortest time possible.
Q: Although two-way trade turnover between Vietnam and the RoK reached30 billion USD at the end of 2014, is it feasible to achieve the goal ofbringing the total two-way trade turnover to 70 billion USD by 2020with Vietnam’s current trade deficit? Could the agreement help balancebilateral trade?
A: Currently, in trade relations withthe RoK, Vietnam has a trade deficit and this could continue for thenext few years. However, under the newly-signed agreement, many of theVietnamese products currently exported to the RoK in very low volumeswill see a spike in the coming period such as agricultural products,textiles and footwear.
In the next few years, as domesticproduction capacity increases and reaches a higher quality, I believethat the growth of exports from Vietnam to the RoK will increase.
Vietnamwill still import machinery, equipment, components and accessories fromthe RoK even after the agreement takes effect. Imports could rise butwill not increase at the same level of exports.
This means thatthe gap between imports and exports between Vietnam and the RoK willshrink. I believe that the goal of 70 billion USD in two-way tradeturnover by 2020 will be fulfilled. The difference in the trade balancewill remain, but certainly not as big as today.-VNA
Q:Vietnam is the first FTA partner to gain market access in the RoK foragricultural products such as garlic, ginger, honey, and sweet potatoes ─products Vietnam has a comparative advantage in producing. In youropinion, what criteria must domestic enterprises meet to export theseitems to the RoK?
A: Exports from Vietnam will enjoymany new market opportunities because of the strong market accesscommitments from the RoK. The RoK liberalised 97.2 percent of importvalues (calculated according to 2012 figures), accounting for 95.4percent of all tariff lines, including many of Vietnam's keyagricultural commodities and seafood products such as shrimp, crab,fish, tropical fruits and industrial goods like textiles, furniture, andengineering products.
Vietnam is the first FTA partner withwhich the RoK opened its market to very sensitive products such asgarlic, ginger, honey, and sweet potatoes. The tax rate for theseproducts is normally very high, from 241 to 420 percent.
Thedemand of the Korean people for such sensitive items is considered to bequite high. This also means that they have very high requirements forquality. For many years, the RoK has maintained very high import tariffson this group. Many countries produce these goods but cannot exportthem to the RoK market.
This is the first time the RoK agreedto open the market for these goods from Vietnam by offeringpreferential tariffs at very low levels, demonstrating the goodwill fromthe RoK towards Vietnam.
For Vietnam, in response,exporters must pay attention to maintaining their pricing, quality and,most importantly, food safety. To do this, Vietnamese businesses andfarmers must respect production procedures and issues related tosubstances used for plant protection and pesticide use.
Q:One of the highlights of the trade relations between Vietnam and the RoKis the complementary export-import commodity structure and no directcompetition. Will this be an advantage or challenge for domesticenterprises as Vietnam also opens its market to textile products,garments, raw plastic materials, electronic components, trucks and carswith capacity of 3,000 cubic centimetres or more, auto parts, andelectric appliances?
A: We have to look at both sides of theissue when importing industrial parts from the RoK, especially inmanufacturing and electronics.
The positive side is that it willhelp increase the production of completed products in Vietnam ascurrently we are not able to produce several types of components.However, these products will lower the competitiveness of similarproducts produced by Vietnam, not to mention the development of theseproducts for export.
Vietnamese enterprises must find solutionsto improve quality and reduce production costs, while also improvinglabour productivity and gradually participating in global value chains.
Ithink that we have learned many lessons about integration from joiningthe World Trade Organisation, signing FTAs with ASEAN countries, andFTAs between ASEAN with China, the RoK, India, Japan, and New Zealand.
So,if we take advantage of this opportunity to turn challenges intoopportunities by initially accepting import parts, in the long run wewill ensure the supply of goods for domestic use and export.
Q:As a State management agency, what support mechanisms does the Ministryof Industry and Trade offer businesses to take advantage of theagreement?
A: The ministry has determined that the firststep is to have appropriate policies in place to support the developmentof auxiliary industry and stronger mechanisms to encourage enterprises’development.
A favourable legal framework for the development of the industry sector is needed in the shortest time possible.
Q: Although two-way trade turnover between Vietnam and the RoK reached30 billion USD at the end of 2014, is it feasible to achieve the goal ofbringing the total two-way trade turnover to 70 billion USD by 2020with Vietnam’s current trade deficit? Could the agreement help balancebilateral trade?
A: Currently, in trade relations withthe RoK, Vietnam has a trade deficit and this could continue for thenext few years. However, under the newly-signed agreement, many of theVietnamese products currently exported to the RoK in very low volumeswill see a spike in the coming period such as agricultural products,textiles and footwear.
In the next few years, as domesticproduction capacity increases and reaches a higher quality, I believethat the growth of exports from Vietnam to the RoK will increase.
Vietnamwill still import machinery, equipment, components and accessories fromthe RoK even after the agreement takes effect. Imports could rise butwill not increase at the same level of exports.
This means thatthe gap between imports and exports between Vietnam and the RoK willshrink. I believe that the goal of 70 billion USD in two-way tradeturnover by 2020 will be fulfilled. The difference in the trade balancewill remain, but certainly not as big as today.-VNA
