Investment from South Korea still standing the test of time

Vietnam and South Korea upgraded their relations to a comprehensive strategic partnership in 2022. How do you evaluate the positive impact of this relationship since that time?

Choi Bundo, chairman of the Korean Chamber of Commerce in Vietnam

The elevation of Vietnam and South Korea’s relationship to a comprehensive strategic partnership has had a significant positive impact on bilateral trade relations. This strengthened partnership has led to deeper and more diversified economic cooperation between the two countries.

Firstly, there has been a significant increase in South Korean investment in Vietnam. According to data from the Foreign Investment Agency under Vietnam’s Ministry of Planning and Investment, South Korea’s investment capital in Vietnam reached $1.41 billion in the first six months of 2024. This marks a 15.8 per cent increase compared to the same period in 2023, positioning South Korea as the fourth-largest investor among 84 countries doing so in Vietnam.

South Korean companies have expanded their funding across various sectors, including manufacturing, real estate, and retail. Notably, major conglomerates such as Samsung and LG have made substantial investments that have garnered considerable attention.

Secondly, the trade volume between the two countries has increased significantly, from less than $2 billion in 2000 to $79.4 billion in 2023. Each country now ranks as the third-largest trading partner for the other. There has been particularly vibrant trade in electronic products, textiles and garments, and agricultural and fishery products.

Thirdly, people-to-people exchanges have flourished. As of 2023, 170,000 South Koreans reside in Vietnam, while approximately 270,000 Vietnamese live in South Korea. Last year, about 3.6 million South Korean tourists visited Vietnam, with Vietnamese visitors to South Korea reaching 500,000.

In the first four months of this year, South Korea emerged as the largest tourism market for Vietnam, with 1.6 million visitors accounting for 28.5 per cent of all international arrivals. These increased people-to-people exchanges, including students, workers, and tourists, have enhanced mutual understanding and solidified the foundation for economic cooperation.

These positive outcomes are the result of continued support and strengthened cooperation efforts by both governments. It is anticipated that this positive trend will persist, creating even greater synergies for both economies in the future.

What factors should Vietnam and South Korea do to attract high-quality investors from the latter?

To entice high-quality financial backers from South Korea, Vietnam should consider several factors.

The first is providing relevant advantages. The process for obtaining registration certificates and work permits should be streamlined. While there’s proactivity at the prime minister level in addressing issues, this enthusiasm often doesn’t translate effectively to the operational level.

This gap needs to be bridged to ensure investors receive tangible benefits. Consideration should be given to establishing a one-stop centre for foreign-led companies to handle all funding, labour, and tax-related issues in one place.

Secondly, supporting the materials, components, and equipment industries is crucial for attracting high-quality investors. The Vietnamese government should implement proactive support policies for these sectors, laying the groundwork for collaboration with high-quality South Korean financiers. Failure to address these supply chain issues could lead to increased logistics costs, potentially deterring investors.

Next, related regulations should be clarified and administrative procedures simplified to reduce uncertainties. It’s crucial to protect intellectual property rights and foster a fair competitive environment.

It is also essential to strengthen education and training programmes for highly skilled technical personnel and establish a tailored workforce supply system that meets the needs of South Korean companies. Therefore, it is also necessary to revise relevant laws to facilitate the entry of educational institutions and companies focused on training technical personnel. By comprehensively considering these factors in policy formulation and implementation, Vietnam can more effectively attract high-quality investors from South Korea.

What is your prediction for the funding wave from South Korea in the coming period?

Future South Korean investments in Vietnam are likely to focus increasingly on renewable energy, advanced technologies including AI, and digital transformation.

In line with Vietnam’s renewable energy policies, South Korean companies are expected to increase funding in clean energy sectors such as solar and wind power. Investments are also expected to grow in cutting-edge fields like semiconductors, AI, and robotics.

South Korean companies are expected to intensify their efforts to leverage Vietnam’s skilled workforce and cost competitiveness to enhance their global competitiveness, and there are likely to be expanded investments in areas related to the digital economy, including e-commerce, fintech, and digital content.

These trends are expected to further strengthen economic cooperation between Vietnam and South Korea, contributing to the sustainable growth of Vietnam’s economy.