Trade between Vietnam and Korea surges by $9 billion
This import-export total is less than the approximately $1 billion that Korea's Ministry of Trade, Industry, and Energy (MOTIE) recently reported.
During this period, Vietnam's exports to this market increased by 10.2 per cent, while imports increased by 11 per cent, and the country's trade deficit with Korea remained at $38.3 billion.
Vietnam is implementing three free trade agreements (FTAs) with Korea, which is a substantial boost for Vietnamese products seeking to enter the Korean market. Noteworthy is the Vietnam-Korea Free Trade Agreement (VKFTA), which went into force at the end of 2015 and is producing considerable benefits for import and export operations by using the preferred tariffs of businesses in the two countries.
After more than six years of VKFTA implementation, bilateral commerce between Vietnam and Korea has steadily increased. Statistics from the MOTIE show that bilateral commerce between Vietnam and South Korea exceeded $87.7 billion in 2022.
Vietnam has become Korea's key trading surplus partner for the first time. Numerous robust commodity groupings, including agricultural and aquatic goods, processing, and manufacturing sectors, are exported to Korea by Vietnam. Vietnam's fourth-biggest export market, behind the United States, the European Union, and China, is Korea.
Korea is one of the top three foreign investors in Vietnam in terms of both registered capital and investment projects, with almost 9,500 projects totalling more than $80 billion. Throughout the first eleven months of 2022, Korea continued to invest in Vietnam, with over 370 projects totalling over $4 billion.
According to the MOTIE, Vietnam is rising as a worldwide industrial base among ASEAN nations. Vietnam has become Korea's greatest trade surplus partner as a consequence of Korean companies' continual penetration of the Vietnamese market, and the two nations have developed into close economic allies.
Korea's largest trade surpluses are with the United States ($28.04 billion), Hong Kong ($25.79 billion), India ($9.98 billion), and Singapore ($9.86 billion).
According to the MoIT, the framework of Vietnam's exports has shifted from primarily manufactured agricultural, forestry, and fishery products, raw materials, and low value-added goods to technology, such as electronics, agriculture, forestry, deep processing seafood, mechanical engineering, and high value-added consumer goods.
Approximately 70 per cent of Vietnam's export revenue is contributed by firms with foreign direct investment (FDI), of which more than half are electronic items and about a quarter are Korean enterprises, including Samsung. This demonstrates the significant impact of Korean FDI firms on Vietnam's exports.
During a recent meeting with deputy prime minister Le Minh Khai, Park Hark Kyu, general director of finance at Samsung Electronics, said that the group's export value exceeded $65 billion last year, accounting for about 9 per cent of its overall turnover. The total value of Vietnam's imports and exports is $700 billion.
With an original export goal of $69 billion, 94 per cent of Samsung's strategy has been accomplished. In comparison to the previous year, Samsung's performance declined by around $500 million.
In Vietnam, Samsung maintains six plants in Bac Ninh, Thai Nguyen, and Ho Chi Minh City, as well as a research and development centre and sales entity in Hanoi.
With the wealth that Korean investors bring to Vietnam, the two countries' governments have set a goal of $100 billion in trade exchange.
Choi Bundo, head of the Korea Chamber of Business in Vietnam said, "Vietnam's industrial and agricultural sectors are still growing rapidly. When large corporations such as Samsung enter Vietnam, they bring clients with them. This encourages a fast expansion of import and export activity."
Furthermore, the quality of FTA implementation with Korea is superior to that of many other FTA markets, as evidenced by the rate of preferential tariff treatment.
According to statistics from the Agency of Foreign Trade, the rate of preferential use of original certificates under the VKFTA reached $5.8 billion, or 26.35 per cent; and under the Asean-Korea FTA it reached $5.4 billion, or 24.5 per cent.
Last year, the use of preferential certificates of origin for Vietnamese exports to Korea under two FTAs reached over 51 per cent of the market's total export turnover, only behind India and Chile.
Despite the pandemic, the entire import and export turnover between Vietnam and South Korea reached $78.1 billion in 2021, an increase of 18.3 per cent compared to 2020, with exports reaching $21.9 billion, an increase of 14.9 per cent, and $9 billion after 2022.