High Trade Deficit from South Korea

According to Vietnam Customs, total trade turn-over in 2010 between Vietnam and Korea was US$12.85 billion, increasing by 42.7 percent against 2009. Vietnam export to Korea was US$3.09 billion whereas import was US$9.76 billion, increasing by 40.6 percent. As in January 2011 only, total trade turn-over of Vietnam and this market was US$1.45 billion, of which exports only account for approximately US$500,000 and imports account for over US$1 billion.

The trade balance between Vietnam and Korea has experienced high deficits for years. In 2010, the deficit with Korea ranked only after China, at US$6.67 billion, increasing by 36.8 percent against 2009 and twice as much Vietnam’s exports to this country. In January 2011 alone, the trade deficit with Korea reached US$0.55 billion.

 

The continual high deficit with Korea over time is mainly due to strongly increasing imports from this market. Korean goods account for higher proportion in trade turn-over of Vietnam and reached 11.5 percent in 2010. The major import goods from Korea were materials for footwear, leather garments, machines, equipments, tools and spares, petroleum, iron, steel, automobiles, components and accessories, plastic materials, cosmetics and household appliances. Among those, ranked first was iron and steel, with US$1.2 billion, increasing by nearly 85 percent against 2009.

 

Augmentation in mutual trade activities is rooted in strongly boosted investment of Korea into Vietnam, which is always high. In February 2011, Korea ranked 3^rd with registered newly investment and expansion capital of US$89.9 million, accounting for 5.8 percent of total capital. At the same time, Korea is a big ODA donor for Vietnam. Korean enterprises doing business in Vietnam are mainly involved in social-economic infrastructure development, new energy, material production, high-tech products, substitute industries, human resources development, medicine, and agriculture-forestry-fishery development. Ho Chi Minh City pulled in the highest capital from Korea, ahead of Bac Ninh province.

 

According to leaders of Vietnam Customs, in Vietnam’s four years of WTO membership, the tax reduction agenda for foreign imported goods has been implemented step by step, a condition to boost national commerce. For example, the cosmetics tariff decreased from 40 percent to 20 percent. Many Korean cosmetic firms have gained success in Vietnam, such as Debon. In addition, the similarity in culture helps Korea expand their commercial presence in Vietnam. If Vietnam has no reasonable policies to take on the Korean market with its advantages in agricultural products and foods, this trade gap will only grow, Customs leaders stressed.

 

At the moment, Korea is the world’s 4^th largest market importing goods from Vietnam, with over four percent in national total trade turnover. Vietnam’s main exported goods to Korea include: crude oil (US$556 million), garments (US$432 million), coal, wood & wood products, footwear, coffee, computers, and electronic products and components.