Vietnam, Korea Foster Business Cooperation, Increase Trade and Investment Opportunities

10:34:20 AM | 8/11/2019

Investment flows into Vietnam from Korean companies are expected to be more substantive and effective in the coming time, especially when the Government of Korea started to launch its New Southern Policy. This policy aims to pursue a more consolidated partnership with South Asian and Southeast Asian markets, and Vietnam is a very important and core link of Korea in the region. The bilateral business cooperation is at the core of this partnership.

Vietnam Business Forum has an interview with Dr. Vu Tien Loc, VCCI President and President of Vietnam - Korean Friendship Association, on this issue.

Recently, many overseas Korean representative offices in Southeast Asian nations such as Singapore and Malaysia have been relocated to Vietnam, including the Korea Trade - Investment Promotion Agency (KOTRA). What do you think about this move?

In recent years, many trade promotion activities have been actively launched by Vietnam and Korea to further expand bilateral cooperation and help their businesses boost cooperation.

Highly valuing the growing importance of Vietnam and opening up more opportunities for the business communities of the two countries, KOTRA opened a representative office in Da Nang City in early 2019, its third representative office in Vietnam after it officially relocated its Southeast Asia and Oceania Head Office from Singapore to Hanoi on August 1, 2018, and opened a representative office in Ho Chi Minh City. 

This event illustrates a strong message, expressing the resolve of the Government of Korea to foster Vietnam - Korea strategic partnership to a new high. This decision will pave the way for many Korean businesses to explore the investment environment and establish their business facilities, thus promoting connectivity, cooperation, and exchange of human resources and technology with Vietnam.

At the opening ceremony of Da Nang Representative Office, KOTRA signed two memorandums of understanding on trade and investment cooperation with the Vietnam Chamber of Commerce and Industry (VCCI) and the Investment Promotion Center of Central Vietnam (IPCC), aiming to strengthen cooperation and mutual support for the common goal of boosting investment and bilateral trade.

With the goal of achieving bilateral trade value of about US$100 billion by 2020, Governments and organizations of Vietnam and Korea, particularly VCCI, have hosted many meetings and exchanges to seek cooperation opportunities, and establish partnerships for growing bilateral economic and trade relations. Could you please tell us the outcomes of these exchanges and upcoming goals?

Vietnam and Korea are highly complementary economies and share basic benefits in bilateral and multilateral cooperation. Korea is currently the second largest investor and trade partner of Vietnam.

The two-way trade value has constantly increased, reaching US$65.7 billion in 2018. On investment, Korea is a top partner of Vietnam, ranking first in foreign direct investment (FDI) value and second in official development assistance (ODA) fund. About 7,000 Korean businesses are investing in Vietnam and nearly 50,000 Vietnamese workers are working in Korea.

VCCI has hosted many programs, events, conferences, meetings and dialogues to introduce market developments for the two business communities. Some Korean business delegations recently visited and worked with VCCI and the Vietnamese business community to explore some areas of interest such as cosmetics, interior decorations, curtains, photographic studios, beauty equipment, interior and exterior painting, construction, machinery, vacuum equipment, food, specialized ink, kitchenware, computers, household appliances, information technology, design, import and export, logistics, media and advertising. Korean companies are particularly strong at high-tech manufacturing and supporting industries for electronics and automotive industries.

Consulting, trade promotion, investment and finance organizations also had very productive working meetings with VCCI and opened up many substantive cooperation projects and programs.

In addition to the Vietnam - Korea Free Trade Agreement (VKFTA), VCCI and KCCI also have a new cooperation agreement along with existing cooperation mechanisms such as the Vietnam - Korea Economic Cooperation Committee and the Vietnam - Korea Business Forum in response to Korea's New Southern Policy. Under this agreement, VCCI and KCCI will further strengthen existing cooperation mechanisms such as the Vietnam - Korea Economic Cooperation Committee and the Vietnam - Korea Business Forum. At the same time, we will delve into specific areas of cooperation, such as infrastructure development, supporting industries, high technology, smart agriculture, and innovations. Businesses of the two countries hope the Governments will better support their operations.

I am confident that there will be a new wave of Korean investment into Vietnam in the coming time. Besides large investors, a lot of Korean SMEs are keen on cooperation with Vietnamese counterparts.

VCCI is always ready to support Korean businesses to tackle their hardships and strengthen cooperation with partner chambers of commerce and business organizations in Korea to assist businesses of the two countries to tap Vietnam’s potential in the future.

Vietnam's business environment becomes more attractive as Vietnam is country benefiting most from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Together with VKFTA, what does Vietnam need to do to attract more Korean investors?

The advantages that make Vietnam a ‘magnet’ to Korea’s FDI fund are high and stable economic growth, competitive investment and business costs, open policies, and attractive investment incentives.

According to Korean businesses what convinces them to invest in Vietnam is that a more attractive Vietnamese environment when the country gains most from CPTPP, especially in apparel, footwear and agricultural products, and its GDP growth will add at least 1.1% till 2030. This is also a driving force for institutional reforms and investment environment improvements towards international standards, cooperation and construction of supply and production chains to access CPTPP member markets.

Besides, with about 250 flights interconnecting both nations a week, investment and trade ties of Vietnamese and Korean businesses are getting more favorable.

Korea’s investment into Vietnam in recent years is always stable. With the FDI sector contributing over 70% of the country’s export value, Korean investors are making a considerable part. Currently, Korea is a leading foreign investor in Vietnam with more than US$66 billion. Korean businesses are playing an important role in many economic sectors of Vietnam, for example automobile, apparel and electronics.

Particularly, Samsung Electronics accounts for 25% of Vietnam’s export value. Many other Korean manufacturers in Vietnam revealed their production expansion plans in the coming time.

Furthermore, many Korea corporations and investors are planning to invest in Vietnam in the future by means of foreign direct investment (FDI), foreign indirect investment (FII) in the stock market, mergers and acquisitions, and investment in privatized SOEs and investment into banking, financial and insurance services.

Their investment flows are expected to roll into Vietnam substantially and effectively in the near future. Accordingly, Korean businesses are interested in automobile manufacturing, machinery manufacturing and petrochemical production.

Besides, Korean investors will invest in more advanced stages of global value chains such as research and development, as well as more advanced engineering like precision engineering, information technology, renewable energy, smart cities. They also invest in initial public offerings (IPO) of Vietnamese enterprises.

To attract higher-quality investment fund from Korea, Vietnam should focus on large-scale projects, highly competitive products; join in global supply value chains; encourage industrial projects to gradually shift from processing to manufacturing, infrastructure development projects under the public-private partnership (PPP) form, high-quality human resources training, research and development, information technology, agricultural biotechnology and high-tech agriculture.

Additionally, Vietnam needs to further improve consistent, open, transparent and predictive investment laws and policies toward international standards.

Thank you very much!