South Korea and Vietnam have agreed to establish a free trade agreement. It is the 15th free trade deal for South Korea and the fifth for the Park Geun-hye administration. The agreement is expected to boost the competitiveness of South Korean products in the Vietnamese market, which has a high growth potential.
Our Kim In-kyung has more.
Report: South Korea and Vietnam have agreed to establish a bilateral free trade agreement (FTA), leaving only legal reviews by both capitals.
President Park Geun-hye and Vietnamese Prime Minister Nguyen Tan Dung reached the accord in Busan on Wednesday ahead of a special summit between South Korea and the Association of Southeast Asian Nations (ASEAN).
President Park said the FTA will strengthen relations between the two countries.
[Sound bite: President Park Geun-hye (Korean)]
“I am grateful to have kept the promise to form a comprehensive free trade agreement with Vietnam this year. The Korea-Vietnam FTA will serve as an important basis for further development in relations between the two countries.”
The trade accord encompasses 17 areas, including goods, services and electronic commerce.
Under the deal, Vietnam agreed to lift tariffs on 89 percent of import items, or on 92 percent of the total amount of imports from South Korea. South Korea, for its part, will abolish 95 percent of its tariffs in terms of the number of items as well as the amount of imports.
Vietnam agreed to open its automobile, cosmetics and home appliance markets, which wasn’t part of the Korea-ASEAN FTA. The agreement also encompasses intellectual property rights, which is expected to bolster the protection of Korean Wave contents such as K-pop and K-drama.
Five years after the FTA goes into effect, Vietnam will abolish tariffs of up to 15 percent that it currently imposes on South Korean components for wireless communication devices and up to eight percent on synthetic resin.
The government expects the removal of tariffs on major components and materials will boost exports of South Korean intermediary goods. It also hopes the deal will raise the competitiveness of South Korean companies as Vietnam serves as a core assembling and processing plant for Korean manufacturers such as Samsung Electronics.
When the FTA goes into effect, South Korea will immediately eliminate tariffs on Vietnamese apparel and remove tariffs on tropical fruits such as mangos and bananas in ten years.
Vietnam, which has a population of 90 million and an annual growth rate of five to six percent, is South Korea’s largest investment destination and second-largest trade partner among ASEAN countries.
The presidential office said the FTA with Vietnam has created favorable conditions for conducting negotiations to expand its FTAs with ASEAN.
The deal will go through legal reviews in Seoul and Hanoi in the first half of next year before parliamentary ratification.