Not only did exports to Vietnam leap upwards by 13.0% but imports from Vietnam grew by an astonishing 27.7% from January through October of 2016, official ROK statistics show.
This is because more Korean companies in the automotive parts, clothing, textiles and electronic devices segments have begun operating in Vietnam and their presence boosted exports of raw materials to Vietnam as well as imports of products they manufactured.
In addition, reduced tariffs provided by the trade deal played an instrumental role in the enhanced commercial trade figures, say officials of the ROK.
Kim Geuk-soo, president of the Institute for International Trade of the Korea International Trade Association opined that the trade pact increased the level of market opening due to the relaxed rules of origin.
Prior to the Vietnam-Korea free trade pact coming into force commercial trade between the two economies was conducted under the then existing Korea-ASEAN FTA, which contained rigorous rules of origin that placed too many constraints on trade, said Geuk-soo.
Under the new trade arrangements, the rules of origin have been loosened and we are experiencing a much freer flow of commercial goods between the two economies, he added.
Since the Vietnam-Korea free trade agreement took effect, the ROK import market share of Vietnam increased by 1.8% (16.7% → 18.5%) to the detriment of other rival countries.
In particular, the food segment has experienced significant benefit. For instance, Don Chicken Co., which exports chicken sauce to Vietnam, used to pay a high tariff of 20-33% as the company failed to meet the then existing ROK-ASEAN free trade agreement stringent rules of origin for food products.
However, now, the maximum tariffs imposed are 10% and more often than not there are no duties imposed on the company exports to Vietnam.
As a result, say the ROK officials, the cumulative tariff savings from the use of the Vietnam-Korea FTA is estimated to reach US$1.82 million dollars (about 2.1 billion won) over the next five years.
Jang Jung-Mi, CEO of Dream Corporation says Korean cosmetics are particularly good selling products in Vietnam along with children’s snacks such as snack nuts and health drinks like adlay tea soybean milk.
These products are particularly favoured by Vietnamese women in their thirties, despite their high price.
We are a small company with only eight employees, says Jung-Mi, and the free trade agreement has helped us find Vietnamese buyers by making our products more competitive in Vietnam.
Now we are looking at more than doubling our staff and hiring an additional 10 employees.
A researcher Lee Geun-hwa at the Institute for International Trade says: Not only have the exports of raw materials such as automotive parts, textile and electronic devices increased but also sales of consumer gods including cosmetics and medical supplies have been on the upswing.
The Vietnam-Korea free trade pact has served as a new catalyst to boost the ROK economy, the researcher says emphatically.