Sugar, eggs, cereal, flour, food, beer, wine, salt, tobacco, cement, and so forth are among 200 kinds of Vietnamese products considered to have tariffs lowered within the framework of ASEAN-Korea Free Trade Agreement (AKFTA) this year.

AKFTA was enforced in the early of June, according to which Korea will eliminate tariffs on nearly 8000 kinds of products from Southeast Asian countries. Tariffs of 45% of the Korea product portfolio will also be reduced to 0-5%. Taxes on 200 kinds of products from Korea will be also reduced by Vietnam. As Vietnam is not a member of ASEAN 6 (including Brunei, Malaysia, Indonesia, Philippines, Singapore, and Thailand), the first group to apply AKFTA, it has a more flexible roadmap to open its market.

According to the agreement to lower tariffs of AKTFA, at least 90% of kinds of taxes of the imports of ASEAN 6 will be reduced gradually and completely eliminated by 2010. Some kinds will be flexibly eliminated by 2012. Vietnam’s deadline is, however, 6 years later, which means by 2016 and 2018.

Specifically, the Most Favoured Nation (MFN) taxes that are higher than 20% will be reduced by 13% this year in these 6 countries, 10% by 2008 and 5% in the next 5 years. Taxes from 15% to 20% are reduced by 10% this year and will be 8% and 5% in the next two years. To “sensitive” taxes, ASEAN 6 and Korea will reduce by 20% by 2012 and 0-5% by 2016.

Time to lower taxes is longer for Vietnam. Accordingly, taxes of more than 60% in 2006 are reduced by 50% this year and then reduced 10% every next year until 2016, when it becomes 0%. Taxes of between 40% and 60% will be 35% next year, 25% by 2009, 20%, 15% and 10% respectively by 2011, 2013 and 2015. By 2015, Vietnam will reduce most of the AKFTA tariffs to 0%-5%. By 2016, taxes except for some flexible ones will be eliminated entirely.

The combined import-export turnover of South Korea and Vietnam is now USD 4.6 billion in which Vietnam’s exports is only USD 800 million.
Phan Anh