Free Trade Agreement gives advantages in the deduction or in the elimination of tax on items that qualify. The free trade agreement between Vietnam and Korea boosted the two way trade value up to more than $10 billion by the year 2015. The people to people trade between Korea and Vietnam have been continuously advanced. This trade relationship also reflects the compatibility of Korea and Vietnam’s natural benefits. This free trade agreement give both countries, Vietnam and Korea’s, economies different levels of development considering that Vietnam has been a developing countries for the past years and Korea, that has been always included in one of the developed countries.
Vietnam has established great trade relationships with more than 100 countries such as the Bilateral trade agreement (BTA) with the US in 2000, the World Trade Organization in 2007 etc. and it has been considered to be one of the largest export oriented economies in ASEAN and this was highly influenced by the free trade agreements that Vietnam has involved itself. The Vietnamese market has a significant role in Korea’s market. Because of Vietnam’s openness to trade and investment policies, it will be easy for more Korean companies to enter the Vietnamese market and export goods. Vietnam is Korea’s 4th largest foreign investment destination and 3rd largest export market. Vietnam and Korea has been in the business of trade surplus since the 1980s.
The Vietnam Korea Free trade agreement is just one of the many free trade agreements and acts as a cornerstone in the bilateral relation that promises to bring about positive impacts on both of the countries. Vietnam has been one of the largest export of other countries including China, Hong Kong and the United States. Vietnam in 2010 belonged in the top ten largest export markets and was clearly presenting itself as the fastest growing export partner for the Republic of Korea. Even though Vietnam has had achievements on its trade relations with other countries, its economic integration has not been sustainably positive. Its ability to cope up with the economy’s market and to boldly take opportunities is still weak. It seems that Vietnam has not taken advantage of long term benefits hence its slow renovation and innovation. The Vietnam-Korea Free Trade Agreement is considered to be a strong move in the support of the process of restructuring, implementing industrialization and proactive incorporation system and for the modernization of the country. While still contributing to the partnership of both countries, Vietnam and Korea, to sustain the implementation of economic stability and environmental peace. This free trade agreement also has a high level of commitment to balance the interests of both countries. It is expected to have and bring positive impacts on not just the trade between both countries but also on the economic status of Vietnam.
After a month of signing into the free trade agreement, the import and export of goods between Vietnam and Korea were well. About 87 percent of manufacturing and industrial goods were exported to Korea from Vietnam and less of it were fishery goods with 15 percent. This explains how the Vietnam Korea Free trade agreement has been a really good step, especially for Vietnam since it will benefit them the most. The Republic of Korea gave assurance to Vietnam to have higher level of technology and promised to support Vietnam in its capacity to improve through the implementation of Economic cooperation commitments. Korea’s investments to Vietnam has been consistently ascending for the past years and it is one of the reasons of why Vietnam has experienced booming that also contributed to their economic growth. According to a report on December 2015, Vietnam has reached 6.68 percent of its gross domestic product and it has been the highest in the past five years. Vietnam’s economy has been performing well due to the country’s recovery and well sustained reforms. It’s gross domestic product, that had a wide range which was strengthened by external demand, is anticipated to increase by over 7 percent in the first quarter of 2018. Furthermore, having a strong performance in the export business in the sector of fishery had a big impact on the agriculture output of the country which resulted to its increase.
Export has significantly influenced the economic development in Vietnam in the ongoing years. According to the Central Intelligence Agency, Vietnam was positioned 35th in exporting in 2015 and bounced to 28th place with the export value of more than $150 billion. Regardless of practical data that proved the positive effect of export on economic development there are still not enough official researches on the crucial role of export in the country’s economic development.
Years have passed and Vietnam’s population has reached about more than 90 million in the year 2017, which increased about 30 percent since 1986, and is still expected to reach over a hundred million before reaching the year 2040. The population of Vietnam is quickly increasing. Right now, 70 percent of the populace is under 5 years old, with a life expectancy of near 70 years. Vietnam today is fundamentally more educated compared to the past years, and these characteristics are impartially dispersed. According to a program for international student assessment, results in learning and coverage are high and fairly accomplished in elementary school and that students in Vietnam exceeds over many countries that belong to the Organization for Economic Cooperation and Development. Vietnam has improved not only on its basic services and demographic and social status but also on its access to infrastructure. From the year 1993, the country’s percent of population that utilize power as their fundamental source of lighting. In the year 2016, more than 60 percent in the provincial sector approached sanitation facilities in comparison to the year 1993 with almost 30 percent.
Vietnam wasn’t excluded in gender imbalances. The country have strong preference for boys that resulted to couples that participate in gender selective abortions. In the year 2006, Vietnam adopted the law on Gender Equality to end gender gap, protect and give importance to women’s rights and fight bias in the country. Over the past years Vietnam achieved their goal in promoting gender equality and in empowering women. Women share a big part in wage work that will result to an increase in employment opportunities foreign trade relations. During the Vietnam-Korea Free trade agreement in 2015 these gender imbalances were also narrowing. Giving importance to gender equality and human rights in Vietnam helped in the deduction of violence in the country and in the discrimination of women and also made good opportunities for women to develop.
Second, Korea is considered to be most significant export-partner of Vietnam for the last 25 years and this relationship has brought nothing but positive impacts on both countries. Trade surplus between both of the countries, Korea and Vietnam, has been sustained, this trade between both countries has expanded over the years and it remained unchanged.
Korea has given the biggest amount of investments in Vietnam which reached about $50 billion sine the 1980s. Korea’s export to Vietnam in the first few months increased more than 10percent from last year, according to the Korea Trade Investment Promotion Agency. Korea’s total export resulted to about 7 percent because of the weak demand in major markets which include Japan, China, etc. Vietnam, in a way, helped Korea achieve its position among the top exporters in a wide range of items such as steel and iron to consumer goods. The Republic of Korea, as we all know, was the largest seller of electronics and the largest supplier of machinery to Vietnam with a total value up to $7 billion.
Since this bilateral trade gives permission to both countries to a people-to-people exchange. Five thousand Korean companies currently run businesses in Vietnam which include LG Electronics, Samsung, Korea Electric Power Corporation. These companies are said to be expanding their facilities to Vietnam which will result to an increase in exports of needed parts. Wages are low in Vietnam which makes the country the perfect alternative to China, since China’s unofficial spurn. Furthermore, low wages attracted more Korean companies to invest in Vietnam. Japan as Korea’s 3rd largest export destination was over taken by Vietnam due to a plunge of the country’s growth rate.
Third, the bilateral trade between Korea and Vietnam is principally between industry exchange. The low levels of IIT over the research period show that the traditional factor theory still remains constant for the exchange of Korea and Vietnam. This then, additionally affirms the trade pattern between developed and developing countries like Korea and Vietnam.
In the year 2007, Korea’s annual direct investment to Vietnam appears to be higher than the results in Korea’s overall annual direct investment. Annually, studies show that in the year 2007 Korea has reached the highest direct investment but Korea’s overseas direct investment to Vietnam increased in line since 2005 which has a value lower than $10,000 and bounced to an amount more than $1 billion in 2007. The country experienced a big fluctuation during the years 2008-2012.
In conclusion, with relevance to the aggressiveness of export, the results of world wide and bilateral RCA appear that Korea incorporates a solid revealed comparative advantage. In fabricated products and hardware. This outcome is predictable with the information of exchange complementarity index as an exchange between two countries is competitive. The free trade agreement between the two countries, Vietnam and Korea, has been cautiously stable and thorough, but development is still needed.
In addition, I believe that this free trade agreement between Korea and Vietnam is better compared to the Korea-ASEAN free trade agreement because the Vietnam-Korea free trade agreement provides a much more high level of investment which makes a more favourable environment especially in terms of business for Korean companies. Through this trade agreement, the Vietnamese market has been continuously expanding and has been diversified through many bilateral and free trade agreements. For instance, tax reduction and intensifying rules will allow many companies that operate in Vietnam to develop and improve their competitiveness in export in toher countries that are also with trade agreements with Vietnam.
Korea focused its contribution on priorities like transport, water management, education and other development needs of Vietnam.