Econ
Korean exports to Vietnam sank in March
The Republic of Korea (RoK)’s exports to Vietnam dropped 3.3 percent in March 2018, according to the Korea Customs Service.
The country’s export value to Vietnam reached US$4.4 billion in the month, raising the total revenue in the first quarter of this year to some $11.91 billion, data from the Vietnamese Ministry of Industry and Trade (MoIT) showed earlier.
Korean main export items to Vietnam in the period included computers, electronic products and spare parts, machineries and equipments, petroleum and plastic products.
Despite a decline of the RoK’s shipment to Vietnam in March, the Southeast Asian nation still had a trade deficit of nearly $7.59 billion with RoK in the quarter as it exported goods worth $4.32 billion to RoK in Q1 2018, the MoIT reported.
Last year, Vietnam saw a trade deficit of about $31.8 billion with RoK, up 53.4 percent from the $20.8 billion deficit of 2016. In 2015, the figure stood at $18.7 billion.
However, according to the Korea Chamber of Business in Vietnam’s (KorCham), the trade deficit presents a grey area for Vietnam, as many RoK firms have been boosting their investment and exports to Vietnam, while increasing imports of machinery, equipment, and materials to serve their production in the country.
Many are worried about the strong rise in Vietnam’s trade deficit with RoK. However, they shouldn’t be, and should understand that Vietnam’s imports from RoK are largely conducted by RoK firms in Vietnam – mostly Samsung and LG. They largely import machinery, equipment, and materials for production, and then export products from Vietnam to foreign markets, KorCham’s vice chairman Hong Sun explained.
Samsung’s export turnover sat at about $51 billion last year, accounting for more than 25 percent of Vietnam’s total export turnover of $214 billion. Samsung also holds 95 percent of the total export turnover of RoK firms in Vietnam.
Meanwhile, Vietnam’s exports to RoK, mostly end-products and consumer goods, have increased rapidly by more than 31 percent in 2017, against last year’s 28 percent rise, Sun said. “Thus I would affirm that firms from both countries are doing well to take advantage of the Korea-Vietnam Free Trade Agreement (KVFTA) and other trade pacts between RoK and ASEAN.”
These pacts include a goods trade agreement which took effect in 2007, a service and commercial deal which came into force in 2009, and an investment co-operation agreement made valid in 2009. These pacts have created the ASEAN-Korea Free Trade Area (AKFTA).
According to KorCham, the most important thing now is for the two countries to boost their exports to each other’s markets. Thus during the Korea-Vietnam Summit on November 11, 2017 in the central city of Da Nang on the sidelines of the 2017 APEC Economic Leaders’ Week, RoK President Moon Jae-in and Vietnamese President Tran Dai Quang vowed to boost the countries’ bilateral trade to more than $100 billion in 2020, from the former target of $70 billion as set by the two countries in 2013.
According to Vietnam’s Ministry of Finance, by 2018, 86 percent of the import tariff lines under AKFTA will be reduced to zero percent, from their current average of 50 percent.
Under KVFTA’s commitments, Vietnam will completely remove its import duties on 89.9 percent of all products from RoK over a 15-year period.
For example, Vietnam will remove its 30 and 20 percent tariffs imposed on RoK air conditioners and rice cookers, respectively, over the next 10 years. The average tariffs for foodstuffs and consumer goods will be gradually reduced from the existing 16-17 percent to zero percent over the next five years.
Korean main export items to Vietnam in the period included computers, electronic products and spare parts, machineries and equipments, petroleum and plastic products.
Vietnam mainly imported electronic spare parts from RoK to serve local production
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Last year, Vietnam saw a trade deficit of about $31.8 billion with RoK, up 53.4 percent from the $20.8 billion deficit of 2016. In 2015, the figure stood at $18.7 billion.
However, according to the Korea Chamber of Business in Vietnam’s (KorCham), the trade deficit presents a grey area for Vietnam, as many RoK firms have been boosting their investment and exports to Vietnam, while increasing imports of machinery, equipment, and materials to serve their production in the country.
Many are worried about the strong rise in Vietnam’s trade deficit with RoK. However, they shouldn’t be, and should understand that Vietnam’s imports from RoK are largely conducted by RoK firms in Vietnam – mostly Samsung and LG. They largely import machinery, equipment, and materials for production, and then export products from Vietnam to foreign markets, KorCham’s vice chairman Hong Sun explained.
Samsung’s export turnover sat at about $51 billion last year, accounting for more than 25 percent of Vietnam’s total export turnover of $214 billion. Samsung also holds 95 percent of the total export turnover of RoK firms in Vietnam.
Meanwhile, Vietnam’s exports to RoK, mostly end-products and consumer goods, have increased rapidly by more than 31 percent in 2017, against last year’s 28 percent rise, Sun said. “Thus I would affirm that firms from both countries are doing well to take advantage of the Korea-Vietnam Free Trade Agreement (KVFTA) and other trade pacts between RoK and ASEAN.”
These pacts include a goods trade agreement which took effect in 2007, a service and commercial deal which came into force in 2009, and an investment co-operation agreement made valid in 2009. These pacts have created the ASEAN-Korea Free Trade Area (AKFTA).
According to KorCham, the most important thing now is for the two countries to boost their exports to each other’s markets. Thus during the Korea-Vietnam Summit on November 11, 2017 in the central city of Da Nang on the sidelines of the 2017 APEC Economic Leaders’ Week, RoK President Moon Jae-in and Vietnamese President Tran Dai Quang vowed to boost the countries’ bilateral trade to more than $100 billion in 2020, from the former target of $70 billion as set by the two countries in 2013.
According to Vietnam’s Ministry of Finance, by 2018, 86 percent of the import tariff lines under AKFTA will be reduced to zero percent, from their current average of 50 percent.
Under KVFTA’s commitments, Vietnam will completely remove its import duties on 89.9 percent of all products from RoK over a 15-year period.
For example, Vietnam will remove its 30 and 20 percent tariffs imposed on RoK air conditioners and rice cookers, respectively, over the next 10 years. The average tariffs for foodstuffs and consumer goods will be gradually reduced from the existing 16-17 percent to zero percent over the next five years.
