Efforts for Bilateral Trade to Hit US$100 Bln in 2023

Mr. Vu Ba Phu, Director of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade

What have Vietnam and Korea achieved in their trade relations?

Vietnam and Korea have developed their diplomatic ties for three decades and worked together to promote the "Comprehensive Strategic Partnership" in various fields such as economy, trade, investment, culture and people-to-people. In particular, the signing and enforcement of the Vietnam-Korea Free Trade Agreement (VKFTA) in December 2015 has been creating an opportunity to foster the continuous growth of two-way trade value.

Besides investment cooperation, trade is always a bright spot in the Vietnam-Korea relationship. In 2021, their import and export value reached over US$78 billion, up 18.2% over 2020 and equal to 11.6% of Vietnam's total trade value with the world (US$668.5 billion). And in the 10 months of 2022, the value rose 16.5% year on year to US$73.5 billion.

At multilateral trade forums, Vietnam and Korea closely coordinate and support each other in multilateral trade frameworks such as WTO, ASEAN and APEC. Especially, at the 11th Meeting of the Vietnam-Korea Joint Committee on Industry, Trade and Energy Cooperation in Seoul, Korea, in December 2021, the two sides agreed to further promote economic integration in the Asia-Pacific region, emphasizing their commitments to working together closely to carry out the Regional Comprehensive Economic Partnership (RCEP) from January 1, 2022, to facilitate economic integration in the Asia-Pacific region, boost trade and investment, strengthen supply chains in the region and spur post-pandemic economic recovery.

What are the opportunities and challenges in trade promotion in Korea?

Despite being affected by the COVID-19 pandemic in recent years, Vietnam-Korea trade kept growing well, and is expected to top US$100 billion in 2023. To obtain this, Vietnam's opening to the world is clearly one of the opportunities to boost trade turnover.

Strong commitments to opening the market within the VKFTA framework catalyze Vietnam's export growth to Korea, helping diversify export markets and products, especially agricultural and aquatic products, and its other competitive products.

In the opposite direction, the market is increasingly open. Korean companies are increasing their investment in Vietnam, supporting Vietnamese partners to access many sources of imported goods and materials such as machinery, equipment, technology/technique of high and stable quality at competitive prices, thereby enhancing productivity and export quality.

In addition to the opportunities and resolve of governments and business communities of the two countries, Vietnamese exports to Korea are facing certain difficulties, especially competition from their competitors from ASEAN countries and Asian nations. Moreover, technical barriers and requirements for high standards in Korea are creating great challenges for small merchants in Vietnam.

Language barriers and limit ed legal knowledge are also concerning Vietnamese enterprises. However, the Vietnamese community in Korea and the Korean community in Vietnam are growing, with about 200,000 people in each country. This is helping narrow language and cultural barriers between the two countries and indirectly support business transactions.

Being aware of the above issues, the Vietnam Trade Promotion Agency (Vietrade) has actively cooperated with relevant agencies like AKC, KOTRA and KOICA to carry out national trade promotion events to boost trade exchange and support businesses of the two countries to bolster trade and business cooperation. In November 2019, Vietrade and KOTRA signed a memorandum of understanding on cooperation in trade and investment promotion with the presence of the Vietnamese Prime Minister and Korean President. Within this cooperation framework, the two sides agreed to establish a KOREA DESK to support the businesses of the two countries to expand trade and investment promotion. After nearly three years of operation, the programs have worked well and received strong support and broad participation from Korean entrepreneurs, Vietnamese local authorities, industrial parks and enterprises. KOREA DESK is playing an increasingly important role in fostering trade, business and investment cooperation for the business communities of the two countries, creating a premise to bolster bilateral strengths and overcome existing limit ations in trade promotion and market development.

In addition to traditional trade promotion measures, Vietrade, relevant agencies, industry associations and businesses are taking basic steps to help Vietnamese commodities penetrate Korean retail systems.

Do you have any recommendations for Vietnamese exporters?

From a business perspective, in order to effectively take advantage of trade promotion solutions for the sustainable export of Vietnamese goods, we put forth recommendations as follows:

First, businesses need to spend time researching and analyzing the Korean market to clearly determine targeted consumer segments and learn about technical standards on products needed to be met, especially pesticide residue. They need to actively participate in specialized fairs in Korea to understand market needs and have the right responses. Domestic firms also need to work with Korean partners to analyze the market for each specific product together with marketing strategies on social networking platforms.

They need to foster exchanges and cooperation between Vietnamese and Korean trade associations as well as with distributors like Lotte Mart, E-Mart, Home Plus and CJ Home Shopping to increase the chance to sell products to supermarkets and distribution channels in Korea. Vietnamese enterprises will be supported to introduce and sell products on major Korean e-commerce sites such as Coupang and Gmarket to gradually penetrate the e-commerce market there. In addition, it is also necessary to carefully prepare export plans for each item and each target market, and actively interlink enterprises to support each other to meet importers’ requirements.

Second, the Korea market prefers quick meals rather than instant, easy-to-cook products that are growing rapidly, especially in the past five years. In addition, health-boosting and immunity-boosting products like organic products and foods for the elderly have become a major trend. Consuming meat substitutes, protecting the environment with plastic-minimized packaging and adopting the ESG (environmental, social and corporate governance) has also become more popular in Korea.

Therefore, Vietnamese enterprises need to comply with regulations on food hygiene and safety and quarantine procedures for exports. In addition, they need to invest in product development, improve and control product quality, and enhance competitiveness to meet regulations of import markets on quality, food hygiene and safety, traceability and non-tariff technical barriers.

Third, businesses need to concentrate on training human resources with foreign languages, negotiation and trade promotion skills; capture modern consumer trends; know how to update information technology to do business; and boost trade promotion and export promotion to international markets more professionally and effectively.

What are some solutions to improve trade promotion into the Korea market?

Facing numerous challenges from markets where more trade defense barriers are being erected, trade promotion and export support must be boosted with specific solutions in the coming time:

Actively and closely coordinating with Vietnamese trade offices abroad to promptly inform and warn businesses of import requirements and regulations of host countries that are applicable to Vietnamese exports.

Raising awareness of Vietnamese enterprises in improving production techniques, focusing on international production standards and product origin to meet export standards and minimize risks when exporting Vietnamese goods.

Strengthening training and support for enterprises to enrich product development skills, carefully prepare export plans for each product and target market, actively improve product competitiveness to meet product requirements and standards set by importing countries.

In addition, Vietrade will coordinate with relevant bodies to support localities and industry associations in the registration and protection of geographical indications, collective marks and trademarks for potential exports to foreign markets to protect brands, support export development, and minimize imitations and counterfeits exported.

Thank you very much!