The Republic of Korea (RoK) has surpassed the US, the European Union and ASEAN for the first time to become Vietnam’s second-largest trade partner, after China.
According to the General Department of Vietnam Customs, in the first half of this year, trade value between Vietnam and the RoK reached US$29.12 billion, accounting for 14.7% of total national trade value, of which export value from Vietnam to the RoK stood at US$6.57 billion while import value from the RoK to Vietnam was US$22.56 billion.
That import value with strong growth at 51.2% year-on-year made Vietnam’s trade deficit with the RoK increase to US$15.99 billion, higher than its trade deficit with China at US$13.72 billion.
The Ministry of Planning and Investment said these figures showed that Vietnam had promoted imports from the RoK and that country, therefore, became the second largest goods supplier of Vietnam, after China. Vietnam mainly imported machines and equipment from the RoK for RoK investors’ factories to produce export goods in Vietnam.
Nguyen Duc Thanh, Director of the Vietnam Institute for Economic and Policy Research, said this development and current structure of import and export goods reflected the trend of dependence on trade of some large RoK enterprises, especially Samsung.
Some US$15 billion of the US$22.5 billion import value from the RoK to Vietnam was spent to import machinery, equipment and spare parts; computers, electronic products and their components; and phones of all kinds and components. These products were required for Samsung’s investment projects in Vietnam.
Economic expert Dinh Tuan Minh said it was a positive development if imports from the RoK consisted mainly of equipment and material for production, however, it was a different story if the imported items were consumption goods.
Tran Toan Thang, head of the World Economic Department at the National Centre for Socio-economic Information and Forecast, said this development was unavoidable.
Vietnam and the RoK had expected this change in the structure of trade when negotiating the Vietnam-RoK Free Trade Agreement. According to the expectation, imports from the RoK would increase and this change would diversify Vietnam’s import and export markets to avoid dependence on one market.
However, those changes came earlier than expected, Thang said.
Vietnam must depend on the import of equipment and material for production because the domestic support industry has not developed for the short term, he said. The nation has seen large volumes of import items for the processing of export products.
The important thing was that Vietnam should depend on countries that will bring more benefits. If it depends on imports from the United States, European Union or OECD with high quality products, Vietnam will have imported material of high quality and will thus process higher quality export products, Thang said.
In addition, putting a stop to imports was impossible once tariff barriers were lifted according to commitments of free trade agreements signed between Vietnam and some countries, he said.
The key solution was for other countries to make use of the FTA to export their goods to Vietnam while Vietnam would also do the same to promote its exports to those countries, he said.
Meanwhile, Vietnam should improve further development of its support industry to reduce the import of equipment and material, leading to a trade deficit cut in the future.
