The bilateral Free Trade Agreement (FTA) between Vietnam and South Korea has finally gone into effect after seven months of its signing in May this year at Hanoi. The pact provides both the countries many trade and investments incentives. The trade accord will open up 94.7 per cent of Korea’s market and 92.4 per cent of the Vietnamese market in terms of import volume.
The ratified deal – VKFTA – covers a wide range of initiatives, among them tariff elimination and reduction, investment, intellectual property, customs facilitation, trade safeguards, technical barriers to trade, e-commerce, competition, and institutional and economic cooperation.
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The East Asian country is also committed to eliminating 95.4 per cent of tariffs on Vietnam, which in return will remove 89.2 per cent of tariff lines to its partner country. A tariff line is a product as defined in lists of tariff rates, according to the World Trade Organization’s glossary. South Korea had surpassed Japan to become Vietnam’s largest foreign investor, with total Foreign Direct Investment (FDI) of US $ 43.6 billion in 4,777 projects, according to the Vietnamese Ministry of Planning and Investment.
In 2014 Vietnam’s exports to South Korea topped US $ 7.1 billion, while imports stood at US $ 21.7 billion, logging a US $ 14.5 billion trade deficit with its Korean partner. There are now nearly 3,000 South Korean firms operating in Vietnam, recruiting some 400,000 local workers.
