Research on the current situation of Vietnam-Korea economic cooperation in several key areas shows that Korea is one of the most important trade and strategic partners of Vietnam. Over the past 22 years, economic relation between the two countries has developed rapidly across many sectors. These achievements were reiterated and reconfirmed in the signing of the Vietnam-Korea Free Trade Agreement (VKFTA) on 5 May 2015 in Hanoi. This event also marked a new milestone in bilateral economic ties in the coming time. Besides, the Vietnam-Korea economic relation will also be influenced by various factors of global, regional and national nature. The favorable and unfavorable factors can be summarized as follows:
The overall trend of regional and international cooperation has also created many favorable conditions for the development of bilateral ties between Vietnam and Korea. The achievements in the cooperation between the two countries in recent years are the combined result of Vietnam’s active foreign policy of “befriending all countries in the world” and Korea’s “look south” policy as well as a peaceful and cooperative environment, of which East Asia economic integration is one salient factor.
Vietnam and Korea are two East Asian countries with long-established traditions characterized by a sense of patriotism and abundance source of labourers who are industrious and avid for knowledge. Both countries were devastated by wars and both have industrialized on the basis of a mostly agrarian economy. Relations between Vietnam and Korea have a long history. Although in the past Korean troops fought in the Vietnam War, both countries nowadays want to “put aside the past and look to the future”. They have a shared determination of furthering the cooperation on the basis of mutal respect for the national independence and sovereignty in the long-term interest of both peoples, striving for stability, cooperation and prosperity in the region and the world.
Vietnam-Korea cooperation is still based on most immediate and complementary needs which are conducive to the economic development of each country. This is reflected in the statement made by late President Roh Moo-huyn on a visit to Vietnam: “Vietnam has abundant resources and labour while Korea has advanced technology and investment capital.” As companions who share strategic interests, the development of such a relation is highly beneficial.
In recent years, thanks to accelerated exchanges in the field of education, the two countries have been able to generate a good batch of labourers who know the language and understand the culture of the partner country. They will be the main forces to accelerate cooperation between the two countries.
Currently, with the open-door policy and increasing integration into the region and the world, Vietnam boasts a rapidly changing investment and business environment. Vietnam has established relations with multiple international organizations and countries around the world. The prospect of signing Free Trade Agreement with other countries and the amendment of the Law on Investment, Law on Enterprises, aided by the advent of the ASEAN Community at the end of this year, will create new opportunities for investors and businesses of both Vietnam and Korea.
The signing of VKFTA in 2015 after nine rounds of continuous negotiation since 2012 is a highlight in bilateral ties. Similar to commitments with WTO and other FTAs in which Vietnam is either already a member or in the process of negotiating, the signing of VKFTA will help further improve the business environment, allocate and use social resources in a more effective manner in order to speed up the process of restructuring the economy along the line of increasing added values and sustainable development. Under this Agreement, Vietnam’s exports will have more market opportunities as Korea opens wide its market according to commitments. Korea pledges to assist Vietnam in improving the capacity to formulate and enforce policies, better the competitiveness of the areas Korea is good at and Vietnam is in need of, in order to export sustainably agriculture, fishery and forestry products; electronics industry, oil refinery industry, supporting industry, etc. In an optimistic scenario, the VKFTA is expected to generate positive social benefits by creating more jobs for Vietnamese labour force, improving their incomes and eradicating poverty in the rural area.
Difficulties and challenges
Besides the foregoing favorable conditions, the economic relation between Vietnam and Korea also faces multiple challenges. Specifically:
Bilateral economic relation cannot be divorced from political relation. The two countries need to reiterate their policy to support each other in relevant international issues in a fast-changing and unpredictable regional and global context. The rise of China and the changes in its strategy and method of development, for example its increasing assertiveness in the South China Sea/East Sea have posed serious challenges to some Southeast Asian countries, including Vietnam, in terms of sovereignty over the archipelagoes and Exclusive Economic Zone (EEZ) in this sea area. Vietnam appreciates Korea’s view, as a strategic partner of Vietnam, to solve all disputes peacefully on the basis of international laws. Besides, Vietnam also needs to share experience with and support Korea’s efforts to bring about peaceful reunification on the Korean Peninsula.
Vietnam and Korea have different political, economic and social regimes and the types of ownership of capital goods. Once FTA has been officially implemented, it requires greater and more concerted efforts from the goverments and the ministries, departments and businesses from the Vietnamese part. If it fails to reform its current administrative system, it will not be able to live up to the commitments regarding the creation of favorable conditions for transactions and delivery of public services. A more transparent and less cumbersome legal environment will encourage greater investment from Korea in Vietnam, which entails high technology, advanced management level, and accessibility to a third market. Moreover, confronted with fierce competition in the trend of liberalizing trade, Vietnamese businesses particularly small and medium ones will lose their markets or go bankrupt unless they innovate quickly and improve their governance. In addition, Vietnam still has many difficulties in training and using the human resources to serve development needs. Compared with their counterparts in many regional countries, Vietnamese enterprises still have relatively limited understanding of the global market and little experience to respond effectively to the current trends of international cooperation.
The rapid development of economic relation between Vietnam and Korea in recent years shows that both countries have built on their competitive advantages. Over the past 20 years, the relation between the two countries have taken long strides and become a model of an international relation in which two countries are determined to put aside issues of the past to look to the future, and thus made remarkable achievements. From very low rungs of the ladder, the relation between Vietnam and Korea has moved up to higher places almost at full speed. With the political will of the two governments and the aspirations of the two peoples, we have all reasons to believe that the friendly relations between two “in-laws” countries will continue to develop robustly and profoundly in the coming time.