Three Decades of Korea-Vietnam Relations: Challenges and Opportunities in a Key Partnership

Dongsoo Kim ()
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Dongsoo Kim: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr

No 22/25, Research Papers from Korea Institute for Industrial Economics and Trade

Abstract: Three decades have passed since South Korea and Vietnam initiated diplomatic relations. The two countries have recently elevated their relationship to a “comprehensive and strategic partnership.” Vietnam is Korea’s fourth-largest trading partner, and cumulatively the third-largest recipient of Korean foreign direct investment (FDI). Korea has a vital interest in seeing Vietnam become a stable host to supply chains. Vietnam, too, needs Korea in order to boost its own economic and industrial growth. Aggregate statistics show that bilateral trade between Korea and Vietnam features an astounding variety of goods and services, but much of this trade consists of transactions between Korean companies’ affiliates in Vietnam and their parent companies in Korea. This can be interpreted to suggest that the trade between the two countries makes only a trivial contribution to the overall Vietnamese economy; Korean companies may be investing more and more in smartphone production, consumer electronics, auto manufacturing, distribution, and finance in Vietnam, but Vietnamese businesses’ participation in Korean companies’ supply chains remains quite limited. Korea needs to reevaluate and readjust its strategic partnership with Vietnam from a long-term perspective. Specifically, Korea needs to recognize Vietnam as an essential partner, and discuss with the Vietnamese government how to increase Vietnamese businesses’ participation in Korean companies’ supply chains. More cooperation is needed to gradually transfer technologies and human resource capabilities from Korea to Vietnam. The Korean government needs to provide strategic and consistent objectives to ensure coherence between multiple and scattered partnership projects involving Vietnam, basing any planning any future undertakings on a concrete vision.

Keywords: Korea-Vietnam relationship; trade; foreign direct investment; FDI; trade policy; supply chains; localization; manufacturing; industrial policy (search for similar items in EconPapers)
JEL-codes: D25 F13 L63 O20 O21 O24 O25 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2022-12-30
New Economics Papers: this item is included in nep-int and nep-sea
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