Increasing Alone

South Korea’s exports to Vietnam this year increased 10.1% from a year ago, while those to China, the United States and Japan fell 13.5%, 5.4% and 12%, respectively.
South Korea’s exports to Vietnam this year increased 10.1% from a year ago, while those to China, the United States and Japan fell 13.5%, 5.4% and 12%, respectively.

 

According to the Korea International Trade Association (KITA), Vietnam has become one of the three major export destinations for South Korea this year and the ratio of exports from South Korea to Vietnam to South Korea’s total exports for the first seven months of this year reached 6.4%. The KITA added that the ratio is continuing to rise at a rapid pace and the ratio is 14% when it comes to South Korea’s exports to the United States.

During the seven months, South Korea’s exports to Vietnam totaled US$18.0215 billion, up 10.1% from a year ago, while South Korea’s total exports declined by the same percentage. During the same period, South Korea’s exports to China, the United States and Japan fell 13.5%, 5.4% and 12%, respectively.

Last year, Vietnam became the fourth-largest export destination for South Korea by beating Japan. Given that Hong Kong at the third place is included in the trade bloc of China, it can be said that Vietnam became the de facto third-largest destination last year.

Such a rapid increase in the significance of Vietnam has to do with the fact that global manufacturing giants such as Samsung Electronics and LG Electronics are focusing on its potential as a strategic manufacturing base. In Vietnam, intermediate goods demands for raw materials, subsidiary materials and the like showed an annual average growth of 17.6% from 2009 to 2014. The bilateral trade between South Korea and Vietnam is likely to continue to increase with the free trade agreement between the two countries having become effective in December last year.

Still, it is pointed out South Korean companies in Vietnam have yet to show a better business performance with respect to the size of their investment in the Southeast Asian country. According to the Korea Trade-Investment Promotion Agency, South Korean companies’ direct investment in Vietnam amounted to US$15 billion last year but their operating profit ratio and current net income ratio stood at 2.3% and 0.6%, much below their global averages of 3.2% and 1.7%.

 

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