Park Chul Ho
The future for bilateral trade is bright, says Park Chul Ho, General Director of the Korea Trade-Investment Promotion Agency (KOTRA) in Ha Noi. He was speaking on the occasion of the Korea Expo 2016 taking place in Ha Noi. The Viet Nam-Korea Free Trade Agreement (VKFTA) is expected to boost bilateral trade to US$70 billion in 2020.
What are the reasons behind Korean interest and participation in Viet Nam’s retail market?
Viet Nam’s retail market is growing rapidly, so it has potential, but it also poses great challenges for investors. The country has seen an average retail growth of 7.3 per cent a year between 2010 and 2015. In 2015, its market value reached US$112 billion, or an annual increase of 10.6 per cent. The modern retail market share accounted for 25 per cent of total retail sales – that is an average increase of 12 per cent between 2010 and 2015.
Between 2016 and 2020, retail trade is expected to grow by 12 per cent a year, and its market value to exceed $180 billion in 2020. Of this, the modern retail sector will account for 45 per cent.
There’s fierce competition in the local retail market between Vietnamese and foreign businesses such as Vingroup, Saigon Co-op and Lotte (Korea), Aeon (Japan), and BJC and Power Buy (Thailand).
Korean investors see Viet Nam as a market with a lot of potential. Other points to consider are the influence of the powerful Korean cultural wave in Viet Nam and the large and growing number of Korean companies and people here.
The retail market’s rapid growth, the VKFTA trade agreement with preferential tariffs, a population larger than 90 million people, and increasing per capita income all make Viet Nam an attractive market.
What is KOTRA doing to help Korean businesses thrive in this competitive market?
On March 2, a support centre was inaugurated to help companies from both countries take full advantage of the FTA. The centre provides enterprises with accurate information on the VKFTA and supports those facing hurdles, particularly in terms of non-tariff trade barriers and the granting of certificates of origin.
In the future, KOTRA will continue to organise business networking events, meetings and trade exchanges between the two countries, and conduct market research so as to provide information and advice to Korean businesses.
The VKFTA has been in effect since December 20, 2015, and Korea has committed to eliminating 95 per cent of tariff lines for imports from Viet Nam, while Viet Nam has committed to eliminating 90 per cent within 15 years. What are the challenges facing businesses on both sides?
Since the VKFTA took effect, trade performance between both countries has progressed. According to preliminary statistics, in the first 10 months of 2016, import turnover from South Korea increased by 12 per cent, compared to the same period in 2015, mainly on items like computers, electronic products and components, machinery, equipment and spare parts, telephones and fabric.
Viet Nam’s exports to South Korea have seen an increase of 28 per cent in the first 10 months of 2016, compared to the same period in 2015. Key items are textiles, seafood, wood and wood products, computers, phones and components, machinery, equipment and spare parts. So it can be said that both sides have begun to grab the opportunities offered by the agreement.
However, to take full advantage, the two governments must offer strong support and provide sufficient information to businesses. And enterprises themselves must actively study the VKFTA to be able to make the most of the investment opportunities.
As for challenges, when Vietnamese businesses export products to a demanding market like Korea, they have to study the rules and meet the strict standards on imported products, such as sanitary measures. Similarly, Korean businesses have to pay attention to and learn Viet Nam’s laws and customs procedures.
Which sectors are Korean investors most interested in?
The VKFTA gives Korean businesses the opportunity to invest in several sectors including textiles, retail and support industries. The textile industry has received a lot of attention from Korean investors. — VNS