Vietnam cautious over trade deficit rise with Republic of Korea: MOIT
According to the latest figures from the General Statistics Office, Vietnam- RoK trade turnover in the first five months of this year reached 30 billion USD, down from 39.1 billion USD in the same period last year. It includes 9.6 billion USD worth of Vietnamese exports and 20.4 billion USD of South Korean exports.
The total trade deficit for Vietnam in this period sat at 10.8 billion USD, versus such a figure in the same periods of 2022 (17.9 billion USD), 2021 (12 billion USD), 2020 (9.6 billion USD), and 2019 (11.3 billion USD).
Vietnam has been suffering from a trade deficit with RoK in recent years, at 37.8 billion USD in 2022, 34.2 billion USD in 2021, 27.6 billion USD in 2020, 27.5 billion USD in 2019, and 29.6 billion USD in 2018.
However, according to the Ministry of Industry and Trade (MoIT), there is now worry about a rise in the trade deficit for Vietnam. Vietnam is an increasingly attractive destination for RoK investors who export many types of materials for production from their home market into Vietnam, where such materials cannot be produced directly due to a weak supporting industry.
|Vietnam cautious over trade deficit rise with South Korea, illustration photo/ Photo Le Toan.|
Last year, both nations’ total trade turnover reached 86.4 billion USD, up 10.4 per cent on-year. Vietnam’s exports to South Korea hit 24.3 billion USD, up 10.7 per cent, and accounted for 6.5 per cent of the former’s total export turnover. Meanwhile, Vietnam’s imports from RoK stood at 62.1 billion USD, up 10.3 per cent, and occupied 17.3 per cent of Vietnam’s total import value.
The key item groups that were imported the most include computers, electronics and their spare parts (23.2 billion USD); mobile phones and their spare parts (11.5 billion USD); machinery and equipment (6.2 billion USD; assorted petrol and oil (3.4 billion USD), plastic materials (2.7 billion USD); assorted clothing materials (1.8 billion USD); ordinary metal (1.6 billion USD); and vehicle spare parts (1.5 billion USD), among others. All these figures recorded an on-year increase last year.
The MoIT said that 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, not luxury items.
The Korean Times cited data from RoK’s Ministry of Trade, Industry and Energy, and Federation of Korean Industries (FKI) as saying that Vietnam became this nation’s third-largest trading partner in 2022, generating the largest trade surplus for South Korea. The analysis of trade and investments between the two countries from 1992 to 2021 showed that South Korea has mostly registered a surplus in trade with Vietnam.
Vietnam has established itself as an important trading partner of RoK, accounting for 8.8 per cent of the latter’s exports and 3.9 per cent of imports, the FKI said.
Figures from the Ministry of Planning and Investment showed that accumulatively as of May 20, RoK was the biggest foreign investor in Vietnam, with nearly 9,670 valid projects registered at 81.55 billion USD. In the year up to May 20, total newly registered and newly added capital and stake acquisition and capital contributions from South Korean investors in Vietnam reached 666.5 million USD, up 32.4 per cent on-year.
The Korea Times also cited a report by the Bank of Korea as underlining the importance of personifying export markets for Samsung Electronics and SK Hynix.
The report said that Vietnam is emerging as a new source of demand for South Korean semiconductors, as it rises as an international production base for IT devices. In particular, Vietnam is now home to major smartphone manufacturers’ production bases, and RoK semiconductors are used as intermediary goods in Vietnam to produce finished IT goods.
The report also noted that Vietnam’s abundant low-wage workforce and high accessibility to the Chinese market are prompting global businesses, including those from RoK, to build manufacturing facilities in Vietnam.
“Many South Korean companies are stepping up investment in Vietnam and if this trend continues, the trade scale between the two countries this year is expected to exceed 100 billion USD,” Hong Sun, Chairman of the Korean Chamber of Business in Vietnam, told VIR.
Vietnam and RoK have agreed on a scheme to better the quality of economic, trade, and investment cooperation, with efforts to be made through devising more favorable policies so as to increase the bilateral trade turnover to 100 billion USD this year and 150 billion USD by 2030.
To this end, the two economies have agreed on further opening doors for goods and services from both sides, while taking advantage of the Regional Comprehensive Economic Partnership, the Korea-Vietnam Free Trade Agreement, and the ASEAN-Korea FTA to which they are signatories.
Last year, Vietnam’s exports to RoK ranked third in terms of enjoying tariff incentives under the three deals, with a total value of 12.4 billion USD, according to the MoIT.