VIETNAM-KOREA ECONOMIC RELATION: CURRENT SITUATIONS AND PROSPECTS AND PROSPECTS FOR DEVELOPMENT

CefiaWiki
이동: 둘러보기, 검색
Tran Thi Minh Hoa
섬네일을 만드는 중 오류 발생: 섬네일 변수가 잘못되었습니다
Name in Latin Alphabet: Tran Thi Minh Hoa
Nationality: Vietnam
Affiliation: Vice Rector VNU University of Social Sciences and Humanities, Hanoi

Abstract

Despite the profound changes in the situations of the world and the Asia-Pacific region, Vietnam and the Republic of Korea have enjoyed an increasingly robust, comprehensive and mature relation in various areas such as investment, labour exchange, tourism, science and technology, among others, 22 years after the establishment of formal diplomatic relation in December 1992 and five years after the upgrading of bilateral ties to “strategic cooperation partnership” in 2009. To understand more about the two countries’ economic relation over the past years, this paper will (1) explore the progress in the Korea-Vietnam economic ties and (2) assess the prospects for development of the economic relation between the two countries by reviewing some of the favourable and adverse conditions.

  • Key words: Economic relations, Vietnam, the Republic of Korea (ROK), strategic cooperation, development cooperation

1. The current level of Vietnam-Korea economic relations

Vietnam-Korea bilateral economic relation is assessed on the basis of relations in such areas as trade, direct investment, and development cooperation.

1.1. Trade

Before the establishment of formal relations in 1992, Vietnam and Korea had a very low level of trade relation. The total value of Vietnam’s exports to Korea in 1983 was only $22.8 million, and in 1988 it was $75.7 million. By 1990, the figure rose to $150 million, and in 1992 it was $493.5 million, roughly a 22-fold increase[1]. These figures show that prior to 1992, the two countries enjoyned incremental demand for trade exchange, creating a momentum for the development of bilateral relations in the post-1992 period.

After 1992, through high-level visits paid by leaders of the two countries, the relations between Việt Nam and Korea have been increasingly strengthened and developed. The two countries have signed various important agreements towards the continued expansion of economic relation, such as the Trade Agreement in May 1993, the Agreement for Avoidance of Double Taxation in May 1994, Agreement for Customs Cooperation in March 1995, Agreement for Cooperation in Maritime Transportation in April 1995, etc.

The main characteristics of the trade relation between the two countries from 1993 to date can be summarized as follows:

Economic relation continuously increased at Vietnam’s trade deficit

Over the past two decades since 1992, trade relation between Vietnam and Korea has significantly increased. Two-way trade has jumped from $0.5 billion in 1992 to $18 billion in 2011 and $28.8 billion in 2014, a 57-fold increase. In 2011, Korea was the fourth largest trade partners of Vietnam, and Vietnam was the eight largest export market of Korea. With the achievements recorded in 2014, Korea has officially surpassed Japan to become the second largest economy of exports to Vietnam, second only to China. With regards to the total two-way revenue, Korea is already the second-biggest trade partners of Vietnam. Currently, the two countries have set the goal of reaching a two-way total revenue of $30 billion in the post-2015 period. After many rounds of negotiations, on 5 May 2015, the Vietnam-Korea Free Trade Agreement (VKFTA) was officially signed. VKFTA is a free trade agreement of the new generation which is characterized by a large scope, high level of commitment and a balance of interest for both sides. The agreement plays an important role in promoting bilateral trade relations towards the achievement of the goal of $70billion revenue by 2020, creating favorable conditions for Vietnamese-made merchandise to compete better in the Korean market. 

Table 1: Vietnam-Korea Export Revenue(1993-2014) (Unit: billion USD)
1993 2001 2009 2010 2011 2012 2013 2014
Export 0.09 0.4 2.06 3.09 4.71 5.58 6.63 7.14
Import 0.49 1.89 6.98 9.76 13.2 15.5 20.7 21.7
Total revenue 0.58 2.29 9.04 12.85 17.91 21.08 27.33 28.84

Source: General Department of Vietnam Customs However, for this market, Vietnam’s trade still runs a big deficit. In the bilateral ties, Korea’s exports to Vietnam has well exceeded its imports of goods from Vietnam. In the first 11 months of 2014 alone, preliminary statistics from the General Department of Vietnam Customs (Figure 1) showed that trade balance between the two countries continued to tilt against Vietnam, with a deficit of $13.1 billion. Compared with the total export revenue of Vietnam to Korea in the first 11 months of 2014, this deficit was twice higher. In the first 11 months of 2014, Korea ranked fourth among 200 countries and territories in the whole world which have export and import relations with Vietnam and ranked third in Asia.

Figure 1: Vietnam-Korea export and import turnover and trade balance in the 11 months of 2014 versus the 11 months of 2013(Source: General Department of Vietnam Customs (2014), Some highlights in the trade relation between Vietnam and Korea, updated in the 11 months since the beginning of 2014,(http://www.customs.gov.vn/Lists/ThongKeHaiQuan/ViewDetails.aspx?ID=750&Category=&Group=Ph%C3%A2n%20t%C3%ADch, truy cập ngày 28/6/2015))


The trade structure is highly complementary

One of the most noticeable characteristics of Vietnam-Korea bilateral trade relation is the export-import structure is highly complementary and basically not competing directly against each other.

The trade structure between Vietnam and Korea reflects the overall trade structure of Vietnam and its competitive advantages in terms of natural and human resources as well as cheap labour cost. Vietnam exports mainly fuel and agricultural products to Korea and import mostly machinery, capital goods and production materials.

Compared to the previous period, the structure of Vietnam’s exports to in the post-1992 period has witnessed positive changes, with a gradual decrease in the volume of raw materials and fuels and increase in manufactured goods. Whereas in 1993, the fuels and raw materials category accounted for the largest proportion at about 35% total export turnover, by 1997 this figure was reduced to only 13.3% and in 2000 it was about 6.85%. Currently, Korea is an important consumption market for Vietnam’s major exports such as aquatic products, textiles, footwear, woodware, and farm produce. According to figures from the General Statistics Office, in 2014 Vietnam’s exports to Korea were worth $7.8 billion, which meant a 18.1% increase.

Contrary to exports, the structure of Vietnam’s imports from Korea does not see any major changes. Imports from Korea focus on four main categories, namely fuels, chemicals, materials, machinery and transportation facilities to serve its demand for investment and production, some of which are used by Vietnamese businesses which produce exports.

Figure 2: List of main types of goods Vietnam imported from Korea in 2014(Source: General Department of Investment (2014))

In recent years, thanks to the improved growth rate of exports against imports, Vietnam’s trade deficit in relation with Korea tends to decrease gradually. Imbalance in the export-import structure remains, however, and Vietnam is still importing excessively from Korea. In the whole year of 2014, Vietnam’s imports from Korea were about $14.6 billion, twice higher than its exports value to this market.



1.2. Investment

After the promulgation of the law on foreign investment in Vietnam in 1987, the Republic of Korea was one of the first countries to invest in Vietnam. Because of Korea’s relative superiority in capital and technology, FDI influx from Korea to Vietnam played a more dominant role than the other way round.

Table 2: Vietnam – Korea Investment Profile(Unit: thousand USD, %)
2000 2010 2011 2012 2013 2014
Korea → Vietnam Amount 98,666 2,158,201 1,508,973 939,064 1,458,939 1,391,273
Rank 11 4 6 10 6 4
Vietnam → Korea Amount 0 792 4,986 1,745 2,072 849
Rank - 60 41 47 52 51

Source: Institute for International Trade (2014), Trade Brief, No 72, 10/12/2014 (http://www.kita.net/newtri2/report/iitreporter_view_kita.jsp?sNo=1237, accessed on 28/7/2015)


The scale and growth rate of Korea’s FDI in Vietnam

When diplomatic relation between Vietnam and Korea was established in 1992, Korea’s investment capital in Vietnam started to increase sharply. In 1993, Korea’s capital ranked 3rd, after Taiwan and Hongkong, with 30 projects and a total investment value of $508 million, increasing about four folds against 1992[2]. By 1998, the number of investment projects plummeted to about 12/25 compared with 1997. Together with the subsequent recovery of the Korean economy, things began to change for the better. Since 2002, Korea’s investment in Vietnam gradually regained momentum like before, and peaked in 2008 with 5278 projects. The global economic crisis in 2009 also affected Korea’s FDI. However, investment remained at a high level compared with the early 2000s. This is a characteristic of FDI from Korea, which increased robustly but irregularly, and it was also an obvious result of the process of global economic development. Regional and global economic crises impacted strongly on the growth rate of many countries, including Vietnam. According to statistics from the Department of Foreign Investment (Ministry of Planning and Investment), in 2014, Korea’s FDI injected into investment projects rose rapidly, evident in the 505 newly licensed projects and 179 capital increased projects, which brought the total newly licensed capital and capital increase to $7.32 billion, accounting for 36.2% of the total investment capital in Vietnam[3]. With this achievement, Korea became the biggest investor in Vietnam, contributing substantially to Vietnam’s exports to the global market.

Table 3: Korea’s FDI in Vietnam
2007 2008 2009 2010 2011 2012 2013 2014
Number of new projects 407 295 204 249 267 243 366 505
Rank 11 4 6 10 6 4
Amount of new investment capital (million USD) 4,754.0 1,807.9 1,597.7 2,043.0 875.3 757.1 3,752.1 6,128.0

However, according to real investment figures, we can see that investment of Korean companies into Vietnam increased rapidly with many diverse activities. Korea has always been in the list of top ten biggest investors in Vietnam in terms of both scale and amount of investment capital.

Table 4: Foreign investment in Vietnam by countries(Unit: Number of Projects/million USD)
Cumulative standards since1/1/1988 ~ 15/12/2014 1/1/2014 ~ 15/12/2014
Countriecs Number of projects Investment capital Countries Number of newly licensed projects Amount of newly licensed investment capital Increased registered capital
Korea 4,110 37,233 Korea 505 6,128.0 1,199.5
Japan 2,477 36,891 Hongkong 99 2,803.4 199.6
Singapore 1,351 32,745 Singapore 106 2,310.1 489.7
Taiwan 2,368 28,401 Japan 298 1,209.8 840.4
Others 7,193 115,398 Others 580 3,191.2 1,859.1
Total 17,499 250,688 Total 1588 15,642.6 4,588.3

Source: Figures from the Ministry of Planning and Investment (MPI), Foreign Investment Agency (FIA)

Of all Korea’s investment projects in Vietnam, big corporations called Chaebols have taken the leading role and account for nearly one half of the investment capital. One example is Samsung, with three factories and a total investment of more than $7 billion . In December 2014, Samsung had three newly licensed projects, namely the Samsung-Thái Nguyên High-tech complex – second phase investor limited liability company Sam Sung Electronics Vietnam Thái Nguyên – Korea, the investment project of Yên Bình I Industrial Zone, Thái Nguyên Province with a total registered capital of $3 billion; the Project Samsung CE Complex invested by the Samsung Asia Pte.Ltd - Singapore in Ho Chi Minh City with total registered investment capital of $1.4 billion, the Project limited company SamSung Display Bắc Ninh by Korean investor in Bắc Ninh with total registered investment capital of $1 billion.

Areas of investment

In the initial stage, Korea’s investment was directed towards light industries such as garment, footwear, rucksacks, handbags, etc. and the processing industry of forest products. This was because there was no significant demand for capital in these areas, coupled with the possibility of taking advantage of low-cost labour. From 1994 onwards, especially in the last 10 years, Korea has started to invest in high-tech industries like electronics, automobile, manufacturing, construction of infrastructure and services. It can be said that this approach to investment is very well-aligned with Vietnam’s needs for economic development in its attempt to industrialize and modernize the country.

In 2014 alone, Korea’s projects in Vietnam were implemented in 18 out of 21 sectors and fields. At the forefront were the processing and manufacturing industries with 322 newly licensed projects and 151 increased capital projects whose total capital was $6.58 billion in 2014, accounting for 89% of the total investment capital. Next on the list was the real estate sector with six new projects and one increased capital project whose total capital averaged $363.2 million, accounting for 5% of the total investment capital. Third was accommodation and food, which accounted for 2.1% of the total investment capital, and the remainder was for other sectors. Cumulatively by the end of 2014, Korea was the biggest investor in Vietnam with a total registered capital of $36.7 billion and 4,063 investment projects that remain valid.


Vietnam and Korea cooperate actively in multilateral forums

Similar to their political and diplomatic relations, and apart from bilateral economic and trade relations, Vietnam and Korea have also cooperated actively in multilateral platforms, such as ASEAN-Korea, ASEAN+3, ASEAN+6, and in such forums as APEC and WTO. Especially noteworthy was the fact that in 2007, Vietnam and other ASEAN countries signed a free trade agreement with Korea, known as AKFTA in short, with the Trade in Goods Agreement, the Trade in Services Agreement, and the Investment Agreement becoming effective since June 2007, May 2009 and September 2009 respectively. With the signing of these agreements, bilateral trade exchanges since 2007 have enjoyed robust growth, averaging 26.1% a year and tripling the total revenue in 2010 against 2006 before the AKFTA came into effect.

We can say with certainty that bilateral trade between Vietnam and Korea has developed rapidly in the past years, contributing tremendously to the development of foreign trade and the economic development of the two countries. However, the issue of trade imbalance against Vietnam needs to be seriously acknowledged and effectively redressed by both sides.

Table 5: Korea’s FDI in Vietnam by areas of investment(Unit: million USD)
Sq Cumulative Standards between 1/1/1988 and 15/12/2014 1/1/2014 ~ 15/12/2014
Areas Investment capital Areas Newly licensed capital Increased registered capital
1 Manufacturing 23,850.5 Manufacturing 5,694.1 887.0
2 Real estate 6,993.3 Real estate 129.7 234.0
3 Construction 2,401.9 Hospitality (hotels, foods and drinks) 102.0 54.9
4 Transportation 923.3 Wholesale and retail 72.3 4.7
5 Art and recreation 918.5 Construction 55.4 4.1

Source: Synthetic figures from Vietnam’s Ministry of Planning and Investment (MPI), Foreign Investment Agency (FIA)


Location of investment

Initially, Korea’s FDI concentrated mainly in the south where land is spacious and infrastructure is good while administrative procedures are less complicated and labour is more abundant. Since 2000, however, thanks to the Vietnamese Government’s investment incentives and adjustments of capital, investment has been more evenly distributed across the country, although still mainly concentrated in localities in the vicinity of Hanoi and Ho Chi Minh City. With the project to build the biggest factory in Southeast Asia on a total land area of 170 hectares and a total investment capital of $5 billion in Thái Nguyên since 2013, Thái Nguyên has become the biggest recipient of FDI from Korea in 2014.

Table 6: Korea’s FDI in Vietnam by provinces(Unit: Number of projects, million USD)
TT Cumulative Standards between 1/1/1988 and 15/12/2014 1/1/2014 ~ 15/12/2014
Provinces/cities Number of projects Investment capital Provinces/cities Newly licensed investment capital Increased registered capital
1 Hà Nội (Northern) 857 5,302.8 Thái Nguyên (Northern) 19 3,324.1
2 Thái Nguyên (Northern) 42 4,726.6 Bắc Ninh (Northern) 97 1,276.5
3 Đồng Nai (Southern) 311 4,524.1 Đồng Nai (Southern) 29 517.4
4 Hồ Chí Minh (Southern) 983 3,955.4 Hà Nội (Northern) 112 417.4
5 Vũng Tàu (Southern) 62 3,663.7 Vĩnh Phúc (Northern) 23 214.4

Source: Synthetic figures from Vietnam’s Ministry of Planning and Investment (MPI), Foreign Investment Agency (FIA)

Generally speaking, Korean businesses in Vietnam have actively taken part in export-import activities and have quickly asserted their roles in this area, contributing significantly to the economic development of Vietnam. However, some of the 191 Korean businesses have been involved in regrettable disputes with the local workers, mostly due to differences in language and limited understanding of each other’s customs and mores.


1.3. Cooperation for development

Once a recipient of aid from developed countries in a long time and now the 10th biggest economy in the world, Korea is aware that it has responsibilities to provide ODA to other less developed countries and, therefore, is committed to becoming a donor in international development.

Since 1993 to date, Vietnam has always been one of the three biggest recipients of Korea’s aid. The only exception was in 2003, when Korea directed most of its aid to the war-ravaged Iraq and Vietnam was fourth. This shows that Korea places Vietnam on its prioritized list of attention, economically and politically.

Table 7: KOICA’s grants to ASEAN countries between 1999 and 2009(Unit: million won)
Countries 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Brunei 19 56 13 21 32 24 20 0 4 5
Indonesia 2,263 2,243 2,503 3,465 3,115 7,492 9,531 16,865 10,893 10,518
Malaysia 122 293 165 107 165 138 125 39 24 56
Philippines 642 2,514 3,922 2,266 7,108 7,286 5,182 6,348 5,358 9,939
Singapore 5 0 0 0 0 0 0 0 6 3
Thailand 450 736 773 1,016 1,077 2,278 3,227 1,289 1,225 1,180
Cambodia 353 738 1,363 2,208 2,790 3,824 5,955 6,047 8,075 14,558
Laos 353 711 878 1,775 2,418 3,868 2,170 4,054 6,567 9,393
Myanmar 554 826 841 1,970 1,741 2,341 3,490 2,670 1,489 6,800
Vietnam 7,367 5,499 6,214 5,888 4,189 11,205 9,515 7,523 11,060 11,061
ASEAN total 12,128 13,616 16,672 18,716 22,635 38,456 39,215 44,835 44,701 63,513
(%) 26.88 26.55 23.91 24.09 15.30 18.90 18.22 24.25 17.80 20.78

Source: htttp://www.koica.go.kr/devaid/statistics/1217374 - 1727.html, accessed on 31/7/2015

In all high-level meetings between the two countries, Korea has always stressed that it sees Vietnam as one of the most important partners in its ODA policy and will give priorities to projects on infrastructure, green growth, and human resource development[4]. The success of these projects has contributed substantially to the development of Vietnam as a whole and its many provinces as well. Korea has provided Vietnam with $70.14 million in 2010 and about more than $200 million in 2011. In 2011, Korea lauded Vietnam as a model, a “poster child”, and a focus of its OAD grants and chose Vietnam to be one of 26 countries on its list of “strategic partners of ODA cooperation” with three focuses: green growth, human resource training and infrastructure construction. Between 1993 and 2012, Korea was the third largest donor of bilateral aid for Vietnam with $2.33 billion, after only Japan and France. Over the past two years, Korea has risen to become the second largest ODA donor for Vietnam, after only Japan, and Vietnam has been the biggest recipient of Korea’s ODA. The two countries have also signed the Cooperation Agreement on Development Aid, under which Korea is committed to providing Vietnam with $1.2 billion of EDCF fund between 2012 and 2015, an increase of $200 million against the 2008-2011 period[5].

Korea’s ODA falls into two different categories: grants and loans. Grants, which do not have to be repaid, are managed by Korea International Cooperation Agency (KOICA)[6]. In the mid-1990s, Korea’s ODA for Vietnam was mainly used to build hospitals and vocational training centres. After the second half of the 1990s, the focus was switched to human resource development, such as sending Vietnamese professionals to Korea for training and Korean experts and volunteers to Vietnam to assist in the field of socio-economic development.

Science and technology cooperation is also accorded significant attention by the two countries. Korea is currently one of the most scientifically and technologically developed countries. And history shows that science and technology play an important role and present breakthrough solutions to the development of this fourth largest economy of Asia. Bilateral cooperation in science and technology is materialized mainly through joint research projects, technology transfer from Korea to Vietnam. Together with the Vietnam-Korea Agreement on Economic and Technical Cooperation (1993), Agreement on Scientific and Technological Cooperation signed at governmental level in 1995 and the advent of the Vietnam-Korea Inter-governmental Committee on Economic, Scientific and Technical Cooperation, bilateral ties between the two countries have enjoyed remarkable progress, especially in the field of technology and information. Many academic exchanges and experience sharing activities between research institutes on both sides have taken place. The two countries signed an agreement to open the Centre for Scientific and Technological Cooperation in 1997, technical industry college in 1998 and the Vietnam-Korea Vocational College in Nghệ An in 1999. Recently, KOICA and Vietnam’s Ministry of Science and Technology have signed an MOU on the Project to build the Vietnam-Korea Institute of Science and Technology (V-KIST). Under this agreement, the Korean Government, through KOICA, will provide Vietnam with a grant of $35 million to build V-KIST according to the model of Korea Institute of Science and Technology (KIST)[7]. The budget for the establishment of V-KIST is estimated at about $70 million, half of which is in the form of grant, which requires no repayment. This is the second biggest grant that Korea has provided Vietnam with, second only to the first project which built the Quang Nam General Hospital with a capital of $35 million.

Bilateral Concessional Loans are provided through the Economic Development Cooperation Fund (EDCF)[8]. Thanks to this fund, by 2009, Vietnam topped Southeast Asia in terms of ODA reception from Korea, with 17 projects worth of $450.8 million.

Table 8: Korea’s ODA for ASEAN between 2000 and 2006(Unit: Thousand USD)
2000 2001 2002 2003 2004 2005 2006
Brunei 49 10 18.0 26 21 19 -
Indonesia 1,984 1,939 2,544 2,613 6,545 9,305 17,650
Malaysia 259 128 83 139 120 122 40
Philippines 2,224 3,038 1,729 5,964 6,366 5,059 6,644
Singapore - - - - - 0.2 -
Thailand 651 599 869 904 1,990 3,150 1,349
Campuchia 637 1,057 1,467 2,341 3,341 5,813 6,328
Laos 629 681 1,262 2,048 3,379 2,119 4,243
Myanmar 730 651 1,406 1,460 2,045 3,407 2,794
Vietnam 4,880 4,814 4,700 3,515 9,789 9,290 7,873
ASEAN 12,043 12,917 14,078 19,010 33,596 38,284 46,921
ASEAN/World (%) 31.4 27.5 23.0 15.3 18.9 18.2 24.2

Source: Please see Nguyễn Thị Thu Hiền, The Significance of Korea’s Official Development Assistance in the Southeast Asian region (http://dostquangbinh.gov.vn/uploads/tlxb/tapchi/2.13/8.doc, accessed 30/7/2015.)

Korea’s ODA has arguably added an important source of capital for socio-economic development in Vietnam. ODA has brought about multifaceted development of the economy. Thanks to ODA, infrastructure in Vietnam has been radically changed both in terms of quantity and quality, creating favorable conditions for enhancing the effective use of domestic capital and attracting increasing FDI. Korea’s ODA for Vietnam in recent years has increased in amount and improved in quality. However, generally speaking, ODA from Korea remains spread out instead of going to well-targeted projects that help Vietnam build substantial national level infrastructure.


2. Prospects for furthering economic cooperation between Vietnam and Korea

Research on the current situation of Vietnam-Korea economic cooperation in several key areas shows that Korea is one of the most important trade and strategic partners of Vietnam. Over the past 22 years, economic relation between the two countries has developed rapidly across many sectors. These achievements were reiterated and reconfirmed in the signing of the Vietnam-Korea Free Trade Agreement (VKFTA) on 5 May 2015 in Hanoi. This event also marked a new milestone in bilateral economic ties in the coming time. Besides, the Vietnam-Korea economic relation will also be influenced by various factors of global, regional and national nature. The favorable and unfavorable factors can be summarized as follows:

2.1. Favorable conditions

- The overall trend of regional and international cooperation has also created many favorable conditions for the development of bilateral ties between Vietnam and Korea. The achievements in the cooperation between the two countries in recent years are the combined result of Vietnam’s active foreign policy of “befriending all countries in the world” and Korea’s “look south” policy as well as a peaceful and cooperative environment, of which East Asia economic integration is one salient factor.

  • Vietnam and Korea are two East Asian countries with long-established traditions characterized by a sense of patriotism and abundance source of labourers who are industrious and avid for knowledge. Both countries were devastated by wars and both have industrialized on the basis of a mostly agrarian economy. Relations between Vietnam and Korea have a long history. Although in the past Korean troops fought in the Vietnam War, both countries nowadays want to “put aside the past and look to the future”. They have a shared determination of furthering the cooperation on the basis of mutal respect for the national independence and sovereignty in the long-term interest of both peoples, striving for stability, cooperation and prosperity in the region and the world.
  • Vietnam-Korea cooperation is still based on most immediate and complementary needs which are conducive to the economic development of each country. This is reflected in the statement made by late President Roh Moo-huyn on a visit to Vietnam: “Vietnam has abundant resources and labour while Korea has advanced technology and investment capital.” As companions who share strategic interests, the development of such a relation is highly beneficial.
  • In recent years, thanks to accelerated exchanges in the field of education, the two countries have been able to generate a good batch of labourers who know the language and understand the culture of the partner country. They will be the main forces to accelerate cooperation between the two countries.
  • Currently, with the open-door policy and increasing integration into the region and the world, Vietnam boasts a rapidly changing investment and business environment. Vietnam has established relations with multiple international organizations and countries around the world. The prospect of signing Free Trade Agreement with other countries and the amendment of the Law on Investment, Law on Enterprises, aided by the advent of the ASEAN Community at the end of this year, will create new opportunities for investors and businesses of both Vietnam and Korea.
  • The signing of VKFTA in 2015 after nine rounds of continuous negotiation since 2012 is a highlight in bilateral ties. Similar to commitments with WTO and other FTAs in which Vietnam is either already a member or in the process of negotiating, the signing of VKFTA will help further improve the business environment, allocate and use social resources in a more effective manner in order to speed up the process of restructuring the economy along the line of increasing added values and sustainable development. Under this Agreement, Vietnam’s exports will have more market opportunities as Korea opens wide its market according to commitments. Korea pledges to assist Vietnam in improving the capacity to formulate and enforce policies, better the competitiveness of the areas Korea is good at and Vietnam is in need of, in order to export sustainably agriculture, fishery and forestry products; electronics industry, oil refinery industry, supporting industry, etc. In an optimistic scenario, the VKFTA is expected to generate positive social benefits by creating more jobs for Vietnamese labour force, improving their incomes and eradicating poverty in the rural area.

2.2. Difficulties and challenges

Besides the foregoing favorable conditions, the economic relation between Vietnam and Korea also faces multiple challenges. Specifically:

  • Bilateral economic relation cannot be divorced from political relation. The two countries need to reiterate their policy to support each other in relevant international issues in a fast-changing and unpredictable regional and global context. The rise of China and the changes in its strategy and method of development, for example its increasing assertiveness in the South China Sea/East Sea have posed serious challenges to some Southeast Asian countries, including Vietnam, in terms of sovereignty over the archipelagoes and Exclusive Economic Zone (EEZ) in this sea area. Vietnam appreciates Korea’s view, as a strategic partner of Vietnam, to solve all disputes peacefully on the basis of international laws. Besides, Vietnam also needs to share experience with and support Korea’s efforts to bring about peaceful reunification on the Korean Peninsula.
  • Vietnam and Korea have different political, economic and social regimes and the types of ownership of capital goods. Once FTA has been officially implemented, it requires greater and more concerted efforts from the goverments and the ministries, departments and businesses from the Vietnamese part. If it fails to reform its current administrative system, it will not be able to live up to the commitments regarding the creation of favorable conditions for transactions and delivery of public services. A more transparent and less cumbersome legal environment will encourage greater investment from Korea in Vietnam, which entails high technology, advanced management level, and accessibility to a third market. Moreover, confronted with fierce competition in the trend of liberalizing trade, Vietnamese businesses particularly small and medium ones will lose their markets or go bankrupt unless they innovate quickly and improve their governance. In addition, Vietnam still has many difficulties in training and using the human resources to serve development needs. Compared with their counterparts in many regional countries, Vietnamese enterprises still have relatively limited understanding of the global market and little experience to respond effectively to the current trends of international cooperation.

Conclusion

The rapid development of economic relation between Vietnam and Korea in recent years shows that both countries have built on their competitive advantages. Over the past 20 years, the relation between the two countries have taken long strides and become a model of an international relation in which two countries are determined to put aside issues of the past to look to the future, and thus made remarkable achievements. From very low rungs of the ladder, the relation between Vietnam and Korea has moved up to higher places almost at full speed. With the political will of the two governments and the aspirations of the two peoples, we have all reasons to believe that the friendly relations between two “in-laws” countries will continue to develop robustly and profoundly in the coming time.

References(VIETNAM-KOREA ECONOMIC RELATION: CURRENT SITUATIONS AND PROSPECTS AND PROSPECTS FOR DEVELOPMENT)

각주

  1. For more information about the trade and investment relations between Vietnam and Korea and the trade deficit of Vietnam, please refer to (http://www.inas.gov.vn/658-quan-he-thuong-mai-dau-tu-viet-nam-han-quoc-va-van-de-nhap-sieu-cua-viet-nam.html, truy cập ngày 25/6/2015)
  2. Trần Quang Minh - Võ Hải Thanh (2005), Korea’s FDI and ODA in Vietnam: Real situations and prospects for development, Conference on Vietnam-Korea Economic Cooperation in the context of East Asia integration, Social Sciences Publishing House, Hà Nội
  3. Trần Quang Minh - Võ Hải Thanh (2005), Korea’s FDI and ODA in Vietnam: Real situations and prospects for development, Conference on Vietnam-Korea Economic Cooperation in the context of East Asia integration, Social Sciences Publishing House, Hà Nội
  4. http://thutuong.chinhphu.vn/Home/Thu-truong-Ngoai-giao-noi-ve-ket-qua-chuyen-cong-tac-tai-Han-Quoc-cua-Thu-tuong/201412/22247.vgp, truy cập ngày 30/7/2015
  5. http://chinhphu.vn/portal/page/portal/chinhphu/NuocCHXHCNVietNam/ChiTietVeQuocGia%3FdiplomacyNationId%3D264%26diplomacyZoneId%3D85%26vietnam%3D0, truy cập ngày 28/7/2014
  6. KOICA lập văn phòng đại diện tại Việt Nam năm 1994.
  7. KIST in Korea was established in Seoul in 1966 with the responsibility of resolving technically related issues for production, driving Korea to a society based on modern technology. KIST carries out research projects by taking orders from Korea’s leading industrial corporations. KIST’s research activities are believed to have contributed nearly 30% of the added value of the country’s industrial products.
  8. EDCF is a program for bilateral official development aid, established by the Korean Government in June 1987. EDCF supports developing countries by providing the needed financial sources for industrial development and economic stabilization in these countries. The Korean export and import bank (Eximbank) is tasked by the government with the operation and management of the programme.

발표문 목록

구분 제목
1 광복 70주년과 역사문화적 배경
2 Korea and Southeast Asia: Building Partnerships in Education
3 Korea Studies in University of Malaya
4 Indonesia-Korea Relation
5 Towards Korea-Southeast Asia Collaboration in Greying Societies
6 VIETNAM-KOREA ECONOMIC RELATION: CURRENT SITUATIONS AND PROSPECTS AND PROSPECTS FOR DEVELOPMENT
7 TOWARDS THE COMPREHENSIVE FLOURISHMENT OF VIETNAM-KOREA RELATIONS
8 Cambodia-ROK Relations: Human Resource Development
9 National University of Laos-vision and strategy in the context of current higher education development in Lao PDR, partnership and cooperation with Republic of Korea
10 Educational Collaboration between Myanmar and Korea
11 Korean Studies in Costa Rica: Considering KoSASA Model
12 Korea -Southeast Asia relations and Promotion of Korean Studies