RoK economy and FDI slowing down

Popular brands such as Kumho Asiana, Posco, Samsung, LG, Lotte, and CJ have long been operating in Vietnam and as a group these businesses comprise the largest foreign greenfield investors in the Southeast Asian nation.

But with an economic downturn hitting the RoK, will this growth in outward FDI continue?

In a business survey of 540 RoK companies with business stakes in Vietnam by the Korea International Trade Association (KITA), 49% of the respondents said they were content with their achievements in Vietnam last year.

The same percentage said they were willing to expand investment in existing businesses here in Vietnam.

These statistics are consistent with other published surveys that show foreign companies around the globe are pulling back, with outward FDI into most emerging markets, below what it had been in 2015 and 2014.

It’s possible some experts speculate, that worsening economic conditions in their home markets could have hit the RoK company balance sheets, making it harder to fund international expansion and causing a retrenchment from global markets.

“Too much exposure to the Chinese economy has dampened the outlook for the RoK, and the volatile exchange rate also has added to woes,” said Lee Soo-sung, managing director of Roland Berger in the RoK.

It also comes at a time when more and more industry observers and investors are questioning whether or not Vietnam is ready to reap the benefits from the free trade deals it has entered into.

Raphael Madarang, director of global trade and supply chain solutions for APL Logistics, is one leading expert who questions whether Vietnam has sufficient labour forces to meet production.

There has been news that Vietnam could experience a manpower shortage by 2017 or 2018, so they may not have enough people to run the factories and the mills, he recently told just-style.com an online news research portal.

However, in the context of a Vietnam-RoK free trade agreement that entered into force last December the prospects for economic cooperation and trade remain upbeat for 2015.

Particularly for RoK invested companies in the clothing, footwear and textile sector as existing RoK manufacturers such as Fibre Producer Hyosung Vietnam Limited Company and Panko Tam Thang Textile-Garment Co, Ltd report exports show no signs of slowing down this year.

The reduced tariffs brought about by the trade pact are also expected to help boost Vietnam farmers exports such as rice, garlic, ginger, shrimp and chilli and help them gain a toehold in the RoK market.

VOV