The question, however, is whether Vietnam can take advantage of the opportunities, which was asked at the conference “Vietnam-Korea FTA: Opportunity to Boost Exports”, held by the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade (MoIT) on July 14.

Tax reductions

According to Mr. Pham Khac Tuyen, Manager of the Northeast Asia, Asia Pacific Market Department under MoIT, the VKFTA will expand the market for Vietnam’s exports, with the high number of tariff lines being reduced bolstering the competitiveness of its products heading to South Korea.

He added that textiles and fisheries are best placed to take advantage of the FTA. Textiles already record the largest export turnover to South Korea. When the VKFTA takes effect most textiles will be subject to a tax rate of 0 per cent instead of 8 to 13 per cent, as now.

Meanwhile, seafood exports to South Korea have increased sharply in recent times, especially shrimp, Mr. Tuyen said. Demand for seafood consumption in South Korea is continually increasing and the capacity of Vietnamese enterprises to meet demand is gradually improving.

Of particular note, on January 1, 2016 South Korea will completely eliminate tariffs on Vietnamese shrimp but apply quotas. Despite such quotas creating certain obstacles for Vietnamese exporters, the 0 per cent tax rate still presents them with a great deal of opportunities.

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), South Korea is currently the fifth largest market for shrimp in the world, after the US, Japan, the EU and China. In 2014 alone South Korea imported 62,878 tons, of which 27,791 tons came from Vietnam.

Quarantine challenges

The opportunities may be clear but VASEP said that the VKFTA will also present many challenges for Vietnam’s exports, especially stricter quality management.

Product quality and food safety are major concerns in South Korea. Vietnam’s dragonfruit exports, for example, had quarantine issues between 2005 and 2010 before finally being allowed into the country. Quarantine issues, therefore, will be a major challenge for Vietnamese exporters.

Mr. Tuyen suggested that to take advantage of tax cuts and seize market opportunities, Vietnamese enterprises must obtain market information and understand trends in South Korea. At the same time, enterprises need to take advantage of support channels from the Vietnamese and South Korean governments to limit the risks and shorten quarantine times.