00:46 (GMT +7) - Sunday 04/12/2016

Business

Set to surge

Released at: 23:53, 01/11/2014 VN-South Korea Relationship

Set to surge

Trade opportunities between Vietnam and South Korea will only increase into the future.

by Do Huong

Trade between Vietnam and South Korea has continued ever upwards in recent years. South Korea is considered the market with the most potential by the Ministry of Industry and Trade (MoIT), which is implementing plans to promote major Vietnamese commodity exports to the country as demand for agro-forestry and seafood products is high. South Korea’s total imports now stand at $500 billion annually. 

Figures from the General Department of Customs show that the total value of trade between the two countries grew from $500 million in 1992 to $27.3 billion in 2013; a 55-fold increase over the two decades. Growth has remained stable so far in 2014, with bilateral trade reaching $20.9 billion in the first nine months, including $5.2 billion worth of exports to South Korea and $15.7 billion in imports into Vietnam. Among Vietnam’s exports, ten major products recorded value exceeding $100 million, including textiles and garments, with $1.54 billion, seafood $467.4 million, wood and wooden products $359.4 million, computers, electronic products and associated spare parts and components $264.3 million, telephones, mobile phones and associated parts $248.6 million, and footwear $229.2 million.   

Last year bilateral trade reached $27.3 billion, up from $21.1 billion in 2012, of which South Korea imported $6.6 billion and exported $20.7 billion, making Vietnam its second-largest trading partner during the year. Vietnam’s major exports were textiles and garments, with $1.6 billion, a sharp increase of 53.3 per cent, while seafood exports were $512 million, 0.5 per cent higher than in 2012. 

South Korea’s export turnover to Vietnam from January to September reached $15.7 billion, with 20 or so products recording value in excess of $100 million, including computers, electronic products and associated spare parts and components, with $3.63 billion, machinery, equipment, tools and instruments with $2.2 billion, cloth with $1.3 billion, telephones, mobile phones and associated parts with $1.27 billion, and raw plastic with $870 million. 

A highlight of the trade relationship is that the structure of export and import items meet mutual needs and are not in competition with each other. Vietnam mainly exports agricultural products, wood products, textiles and garments, and footwear, while mostly importing finished and high-cost products such as computers, electronic products, and vehicles. South Korea was Vietnam’s fourth-largest importer last year, while Vietnam was South Korea’s second-largest export market. 

Opportunities and challenges

As trading activities between Vietnam and South Korea have been increasingly promoted in recent years, the number of Vietnamese enterprises operating in the export-import industry to the country also increased, from 9,800 in 2012 to 10,900 in 2013. The Vietnam Embroidery Co. (Vinaem) attended international fairs to locate South Korean partners and has recorded positive results after two years of exporting to the country. Its 2013 turnover was VND10 billion ($500,000) from the export of embroidered home textiles and decorative items to key markets, including South Korea, which accounted for 10 per cent. Ms Vu Thi Thuy Duong, Director of Vinaem, said that the company’s products have been exported to the EU and Japan for many years and it expects 30-40 per cent of its turnover to come from South Korea by 2017. As South Korean consumers prefer 100 per cent cotton and silk products, “our target customers are in the high-end segment, and I hope to achieve healthy growth from the market this year,” she said.

Mr Vu Dinh Duan, Director of the Hai Hung High Quality Vegetable Food Process JSC (Haveco), said that the company’s turnover in the first nine months of this year was equal to all of 2013. “Turnover from South Korea was small, as it was in 2012,” he said, but believed it would increase by 20-30 per cent this year. Two years ago Mr Duan spent a great deal of time researching the South Korean market through cooperative programmes and secured long-term cooperation with South Korean partners. His company now manufactures, processes and exports tropical fruit and vegetables in cans, jars and drums, such as salted gherkins and pickled gherkins. He found that demand for agricultural products and medicinal plants in South Korea was high and that Vietnam held advantages in this regard based on its climate and diverse soil types. He has faith in the potential of the market and expects to overcome existing obstacles relating to lack of capital. “With limited capital we cannot invest or expand our production scale, yet we receive outsourcing orders at a low price,” he said. “We need to access large orders that earn high profits, so we will continue to identify and approach South Korean partners.” 

Despite trading with South Korean partners for many years, the Vietwoodee JSC has a story similar to Haveco. Export turnover to the market in 2014 is estimated to be lower than that in 2013. Sales Manager Le Thi Cam Van told VET that the requirements of its South Korean partners are quite high and the company faces obstacles such as shortages of wood sources from suppliers and changes in South Korea’s policies towards environmental protection and clean energy. 

Exporting to more than 40 countries, the Duc Thanh Wood Processing JSC saw 20 per cent of its growth in export turnover during the first eight months of this year coming from South Korea. Ms Kim Cuong from its Export Marketing Department said that the company found and cooperated with major South Korean distributors, retailers and traders to bring its products to the market, who have demand for products that meet standards on environmental protection. Export turnover to South Korea accounted for 36 per cent of the company’s Asia total during the first eight months of this year, which in turn accounted for 76 per cent of its total export turnover. In 2013 figures were 49 per cent and 72 per cent, respectively. The company’s products are now available in the Lotte supermarket chain, with turnover being higher than that gained from Lotte Vietnam. The company plans to record 35-40 per cent growth from the market in 2015.

Agricultural products

South Korea is one of the largest importers of agricultural products and processed foodstuff in Asia-Pacific and the world. Vietnamese foodstuff, however, has failed to gain market share compared to its rivals. According to the Dong Nai Provincial Department of Agriculture and Rural Development, South Korean consumers have taken a liking to Vietnamese fruit and vegetables, with demand for bananas, litchi, rambutan and jackfruit on the increase. In 2013 South Korea imported 6,000 tons of mango and estimates are that it will import up to 10,000 tons this year, given that average annual growth stands at around 50 per cent. Vietnam recently began exporting dragon fruit and mango to the tough market after spending four years working towards meeting export standards.

Ms Nguyen Thi Le Hong, General Director of the Dong Nai Food Industry Corporation (Dofico), said that the company will export different types of fruit to the market and has shaken hands with other enterprises and agricultural cooperatives. Nam Sa, a South Korean company, has cooperated with Dofico in implementing a pilot project planting Italian Ryegrass, which will be used as animal feed in South Korea. “The project was successful and the company plans to expand the planting area to 350 hectares,” she said. 

Vietnamese enterprises currently enjoy tax incentives when exporting goods to South Korea as a result of the ASEAN-South Korea Free Trade Agreement (FTA). Under the agreement, at least 90 per cent of tax lines on goods from ASEAN to South Korea were to have been lowered to 0 per cent by 2010, but South Korea will not fully open its doors until 2016 on goods considered “sensitive”. The Vietnam-South Korea FTA is expected to remove tariffs on such sensitive goods, which include farm produce, seafood and apparel. 

The South Korean market has great potential but the greatest difficulty for Vietnamese enterprises is the high requirements on food quality. Mr Nguyen Cong Thua from the Anh Dao Co.op in the central highlands’ Lam Dong province told VET that when exporting to the market the company must meet uniform quality in size and colour under VietGap requirements. The company has partnered with the CJ Group, a major South Korean player, in supplying lettuce at handsome prices and plans to expand its export volume in the future. 

According to MoIT, Vietnam and South Korea are yet to sign any quarantine agreement regarding food so exporting Vietnamese foodstuff to the market remains limited. The two countries are to find ways to support enterprises promoting foodstuff exports in the future. Mr Le An Hai, Deputy Head of the Asia-Pacific Market Department at MoIT, said that demand for seafood, coal, crude oil and footwear imports in South Korea will continue to rise in the years to come and this represents opportunities for Vietnamese enterprises to secure orders. However, he also noted that Vietnamese enterprises wanting to export to the market must focus on linking with distribution channels. Once the Vietnam - South Korea FTA is signed later this year the goal of $70 billion bilateral trade turnover between the two countries by 2020 will be well within reach. 

  • TAGS
  • South Korean
  • Vietnam
  • Trade

User comment (0)

Send comment