It is expected that the relationship between Vietnam and the Republic of Korea (RoK) will continue to flourish this year as leaders of both countries may exchange high-level visits, laying firm groundwork for the two nations to beef up their ties, with a prime focus laid on expanding trade and investment cooperation.
From February 9-11, 2022, Vietnamese Minister of Foreign Affairs Bui Thanh Son is paying an official visit to the RoK and attending the ministerial meeting within the Southeast Asia Regional Programme (SEARP) of the Organisation for Economic Co-operation and Development.
This will be Vietnam’s first high-level visit to the RoK this year, marking the first event in the 30th anniversary of the two nations’ diplomatic relations.
The visit is also expected to pave the way for the two countries to lift their existing bilateral strategic partnership to a comprehensive strategic partnership in the coming time, according to Vietnam’s Ministry of Foreign Affairs.
In fact, during a visit to the RoK by Vietnamese National Assembly Chairman Vuong Dinh Hue last December, he and his counterpart Park Byeong-seug agreed on this new comprehensive strategic partnership set to be forged in 2022, when both nations will be celebrating the 30th anniversary of their diplomatic relationship.
The new cooperation framework would mean that more favourable policies will be used for further expanding their cooperation in all sectors, with a focus laid on trade and investment.
Expanding investment
According to the Vietnamese Ministry of Planning and Investment, total accumulative registered investment capital into Vietnam from the RoK hit 77.32 billion USD, making this Northeast Asian nation the second largest foreign investor of the Southeast Asian country, followed by Singapore at 65.24 billion USD and Japan at 63.96 billion USD.
The RoK’s total registered investment capital in Vietnam stood at 481.2 million USD in January 2022, making it the second largest foreign investor in Vietnam, after Singapore (665.75 million USD).
Two months ago, leaders of five northern provinces of Vietnam, namely Thai Nguyen, Ha Nam, Bac Ninh, Thai Binh, and Hai Duong, granted 15 investment certificates and cooperation agreements to Korean enterprises, worth billions of US dollars.
For example, giant Daewoo got licensed for implementing a new 2 billion USD project in Vietnam, while Amkor Technology, Inc. was licensed by Bac Ninh to deploy a 1.6 billion USD semiconductor manufacturing project.
“This 1.6 billion USD project is very big, with the application of very high technology,” said Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam. “It is signaling the RoK’s investment into Vietnam in the semiconductor sector, the products of which are now in serious shortage worldwide. Many European companies are thirsty for semiconductor products.”
On Tuesday this week, the European Union launched a plan to raise tens of billions of euros to push up its semiconductor production process in Europe and decrease its dependence on Asia and other regions. This plan, worth about €42 billion ($48 billion), is expected to enable the European Union to become a producer of semiconductors, or chips
“Thus, once this 1.6 billion USD semiconductor manufacturing project is implemented, Vietnam will be better known for chips. We are seeing a strong rise in Korean investments in Vietnam, where there is quite an attractive investment climate,” Sun continued.
Many Korean groups such as Hyosung, GS Engineering & Construction, Kyobo Life Insurance, Amore Pacific, and Dongwon have also revealed their plans to continue increasing investments in Vietnam.
For example, general director of Kyobo Life Insurance Pyun Jung-bum said that as one of the three largest life insurance companies in the RoK with a strategy to increase business in Southeast Asia, Kyobo always pays special attention to the Vietnamese market. Jung-bum also underlined that the group would like to seek out investment opportunities in healthcare and start-ups in Vietnam.
Meanwhile, Suh Kyung-bae, chairman and CEO of Amore Pacific, said that this group plans to establish a factory in Southeast Asia, in which it gives priority to selecting Vietnam, or may cooperate with Vietnamese businesses in this sector.
On the same note, Park In-ku, vice chairman of Dongwon, said that that Dongwon is planning to swell investment in other sectors including logistics, transportation, containers, cold storage, packaging materials, food. In addition, Dongwon is also considering investing in Vietnamese enterprises operating in related sectors.
Samsung is also investing over 17.5 billion USD in Vietnam in many projects. Meanwhile, in late August last year, LG Display Vietnam was granted an adjusted investment certificate for the 1.4 billion USD increase from the Haiphong Economic Zone Authority. This new investment has raised its total investment in Vietnam to 4.65 billion USD.
Both Samsung and LG Display are taking the lead in Vietnam’s export of electronics items, including mobile phones, laptops, and others. They contributed to the Vietnamese electronics industry’s 2021 export turnover of more than 51.01 billion USD, up 14.4% on-year.
Also, Vietnam raked in US$57.5 billion last year from exporting mobile phones and their spare parts, up 12.4% on-year. Samsung held 60.36% of Vietnam’s total export turnover from electronics and mobile phones.
Choi Joo Ho, general director of Samsung Vietnam, said that Samsung’s total revenue in 2021 from all activities involving business, production, and exports hit more than 74 billion USD, up 14% on-year, in which the export turnover reached nearly 65.5 billion USD, up 15.8% compared to 2020.
Fostering trade via RCEP
Vietnam and the RoK have agreed that they will further facilitate bilateral trade and investment ties thanks to advantages from the Regional Comprehensive Economic Partnership (RCEP) in which the RoK and Vietnam are members. The RCEP took effect in the RoK on February 1, 2022.
The RCEP is entering into force on January 1, 2022, for Japan, Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, Australia, China, and New Zealand.
The RCEP facilitation measures are set to boost regional trade and economic cooperation among the 15 members, who are already the major traders in Asia and Oceania. Their total exports and imports in 2020 amounted to some 5.5 trillion USD and 4.7 trillion USD, respectively, constituting about 70% of the combined trading activities of the two regions.
According to research by HKTDC Research and ACCA, the trading activities of most Asian countries have been growing rapidly for the last two decades, thanks to the booming export oriented production. Not surprisingly, China is the largest exporter as well as the largest import destination among the RCEP members. It accounts for 47% of RCEP exports and 44% of RCEP imports in 2020, both up from 21% in 2001, the year in which the mainland joined the World Trade Organization. Despite China’s remarkable performance, it is noteworthy that ASEAN’s percentage share declined only marginally (both ASEAN exports and imports, particularly those of Singapore, Thailand, Malaysia, Indonesia, and Vietnam, increased strongly in value terms during the period), as global relocation of production and sourcing activities also benefited production sites in ASEAN.
The RoK also fared well, as the country maintained its high value-added electronics and automotive production, which has facilitated the country’s export and import of a wide array of intermediate goods and industrial inputs. As for Japan, however, relocation of production to lower cost regions reduced its share of exports significantly from 32% to 12% in the period. Its share of imports likewise declined from 30% to 14% from 2001 to 2020. Australia’s exports have been boosted by the solid demand for raw materials and primary products on the back of the surge in global production. New Zealand’s share of regional trade has been dwarfed by the faster trade expansion of other members, although it has also shown steady growth in the period.
According to the RoK’s Ministry of Trade, Industry and Energy, the combined amount of this nation’s exports to the participants of the RCEP came to 254.3 billion USD in 2020, taking up around half of the RoK’s total outbound shipments.
Figures from the General Department of Vietnam Customs showed that total trade between Vietnam and the RoK hit 66.01 billion USD in 2020 (including 46.9 billion USD worth of Korean exports) and 78 billion USD in 2021 (including 56.1 billion USD worth of Korean exports).
In January 2022, Vietnam witnessed a trade deficit of 3.8 billion USD from the RoK, up 28.9% compared to that in the same period last year. However, such a large deficit caused no worries as almost all products imported from the RoK are materials used for domestic production in Vietnam, not luxury items, said the General Department of Vietnam Customs.
