According to figures released last week by the National Statistics Office under the Ministry of Finance, South Korea is now Vietnam’s third-largest trade partner after China and the US.

The Vietnam-South Korea trade turnover in the first three months of this year reached $26.8 billion, up from $20.7 billion in the corresponding period last year. This included $8.1 billion worth of Vietnamese exports, up 19.6 per cent, and $18.7 billion for South Korean exports, up 34.5 per cent.

The total trade deficit for Vietnam in the period sat at $10.6 billion, up from $7.1 billion in the same period last year.

Vietnam has for many years suffered from a trade deficit with South Korea (see chart). However, according to the Vietnamese Ministry of Industry and Trade (MoIT), the country remains an attractive destination for South Korean investors, who often import assorted materials for production from their home market into Vietnam, where such materials cannot be produced directly due to a weaker supporting industry.

Last year, both nations’ total trade turnover reached $89.4 billion. Vietnam’s exports to South Korea hit $28.9 billion, accounting for 6 per cent of the former’s total export turnover ($475 billion). Meanwhile, Vietnam’s imports from South Korea stood at $60.5 billion, occupying 13.3 per cent of Vietnam’s total import value ($455 billion).

The key item groups that were imported most from South Korea includes computers and electronics, machinery and equipment, assorted petrol and oil, plastic materials, metals and steel, automobile spare parts, and mobile phone and related spare parts. All these figures recorded an on-year increase.

These imported items do not compete with those in Vietnam, where many of similar items are not produced, and they are all used for domestic production in Vietnam, according to the MoIT.

The two countries are stepping up efforts to reach a target of $150 billion in bilateral trade turnover in a more balanced manner by 2030. According to the MoIT, an expansion in South Korean investment into Vietnam has contributed to a rise in imports from South Korea.

Meanwhile, President of South Korea, Lee Jae-myung, will pay a state visit to Vietnam during April 21-24. It is reported that this visit will be accompanied by leaders of South Korea’s top conglomerates as they seek business opportunities to hedge against uncertainties stemming from the Middle East crisis and rising protectionist policies.

The South Korean business delegation will likely include representatives from hundreds of companies who will participate in a business forum with Vietnamese companies.

Many major investors are performing well in Vietnam. For example, SK Innovation has recently secured a large-scale project in Vietnam worth $2.3 billion, including the construction of a gas-fired power plant and a liquefied natural gas terminal, as it ramps up its energy infrastructure business.

Samsung Electronics manufactures nearly half of its global smartphone shipments in Vietnam, while Samsung Display’s Vietnam unit also operates in the country. LG Electronics, LG Innotek, and LG Display run global production bases in Vietnam through 12 affiliates.

Hong Sun, a representative from the Korea Chamber of Business in Vietnam, told VIR that Vietnam remains a top player for South Korean investors.

“All major companies from South Korea are already operating in Vietnam. Vietnam is home to over 10,000 South Korean companies employing more than one million domestic workers,” Sun said. “Their investments are largely focused on the manufacturing industry.”

Figures from the Ministry of Finance’s Foreign Investment Agency show that cumulatively as of late March, South Korea was the biggest foreign investor in Vietnam, with about 10,450 valid projects registered at almost $99 billion. In the January-March period, total newly registered and newly added capital and stake acquisition and capital contributions from South Korean investors in Vietnam hit $4.38 billion, up 128.8 per cent on-year.

Vietnam and South Korea have also been enhancing cooperation in industries such as gas-fired power generation, fuel conversion in coal-fired power plants, and the co-firing of hydrogen and green ammonia in thermal power plants. They also agreed to expand the electricity grid and develop smart grid systems.

Both sides have also committed to exploring opportunities for government-business cooperation in the use of critical minerals and to intensifying efforts to attract investment aimed at building critical mineral supply chains.

Source: VIR