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Vietnam Today

In accord

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

In accord

The relationship between Vietnam and South Korea is to reach a new level in the future based on continued understanding and mutual trust in political and economic cooperation.

by Thong Dat

When Party General Secretary Nguyen Phu Trong paid a four day visit to South Korea last month both he and President Park Geun-hye stressed the importance of boosting economic and trade relations between the two countries. Over recent years Vietnam’s economic cooperation with South Korea has made both countries increasingly integrated and their relationship stronger. The trade volume has grown 56 times since formal diplomatic relations were established in 1992, from $500 million to $28 billion as at the end of 2013, and few observers were surprised when both sides set a goal of increasing bilateral trade to $70 billion by 2020. Vietnam and South Korea will also push for a conclusion to negotiations over a bilateral free trade agreement (FTA) this year.

During the talks the two sides signed memoranda of understanding on economic cooperation projects worth $12 billion. These covered cooperation on military supply warranties and the provision of aid for victims of land mines and unexploded ordnance. They also signed a loan contract to build the Vam Cong Bridge over the Hau River in the Mekong Delta that will link Can Tho city with Dong Thap province and in which South Korean companies will take part.

Shared strategic interests

After diplomatic relations were established in 1992, bilateral relations were upgraded to a “strategic and cooperative partnership” during President Lee Myung-bak’s State visit to Vietnam in 2010, expanding ties in not only economic fields but also in national defence and security. Since 1992 the two sides have exchanged visits by more than 22 senior leaders from the Party, State, Government and National Assembly. In addition, leaders of the two countries frequently hold bilateral meetings on the sidelines of international forums. Foreign relations and cooperation between ministries, branches and localities in the two countries are increasingly linked. More than 30 cities, provinces and districts in the two countries have established cooperative relations, including Hanoi, Ho Chi Minh City, Hai Phong, and Da Nang in Vietnam and the major South Korean cities of Seoul, Busan, Incheon, and Daegu.

In terms of development cooperation, South Korea is currently a major supplier of concessional refundable and non-refundable capital to Vietnam. Regarding concessional loans, in the 2008-2011 period South Korea pledged to provide Vietnam with nearly $1 billion, mainly in the fields of transport, health, and water supply. In the 2012-2015 period it pledged to grant preferential credit worth $1.2 billion and two sides have signed agreements worth $660 million in a number of projects in transport, health and education. 

On export collaboration and workforce training, South Korea is the second largest labour export market of Vietnam. Since 1993 over 120,000 Vietnamese workers have gone to South Korea, of which about 52,000 were in trainee programmes and 70,000 in the Employment Permit System programme. Unofficial figures also reveal that there are more than 130,000 Koreans working and living in Vietnam and more than 120,000 Vietnamese people living, working and studying in South Korea. This is the important bridge that reinforces and strengthens the friendship, mutual understanding and cooperation between the two sides. 

Both Mr Trong and Ms Park agreed that while the two countries had become important partners and true friends with many shared strategic interests there was still room to expand the friendship and cooperation. They agreed to increase the number of meetings between senior leaders, governments, parliaments and political parties in order to enhance mutual understanding and political trust and improve the efficiency of existing strategic and policy dialogue mechanisms in the fields of diplomacy, defence and security. Both countries also agreed to enhance co-operation in defence, military training, capacity enhancement for peacekeeping and maritime law enforcement forces, and transnational crime and terrorism prevention. 

The two leaders reconfirmed Vietnam’s support for the upcoming ASEAN-South Korea Commemorative Summit, scheduled to be held in Busan in December, where the Vietnamese Prime Minister will be in attendance. They also agreed to set up an exclusive department in the police organisations of both countries to protect the safety of people who travel or reside in each other’s country.

For her part, the South Korean President expressed her support for Vietnam hosting the APEC Summit. Two sides also looked at ways to intensify coordination and information sharing on regional and international issues via existing cooperation mechanisms, bilateral communication channels, and multilateral forums, as well as cooperation in the area of peacekeeping. They highly valued ASEAN-South Korea cooperation and welcomed South Korean efforts to promote ties in a practical manner. 

Regarding regional development, Vietnam backed South Korea’s initiatives to boost dialogue, ease tension and build peace and co-operation in the Northeast Asian region. Both countries emphasised the importance of maintaining peace, stability, maritime security, safety and freedom in the East Sea. They highlighted the necessity for concerned parties to resolve disputes via peaceful means in line with international law and the Declaration on the Conduct of Parties in the East Sea (DOC) while striving towards the early conclusion of a Code of Conduct in the East Sea (COC).

Economic Ties

Mr Trong’s visit came at a time of increasing economic links between Vietnam and South Korea. Two-way trade rose from $500 million in 1992 to $28 billion as at the end of 2013. As for trade cooperation, South Korea is currently the fourth largest export market of Vietnam, with main products including textiles, fisheries, oil and wood. It is also Vietnam’s second largest import market, with over $20 billion in 2013, with main products being electronics, phones, fabric, plastics, iron and steel, machinery, and equipment. In many cases, products imported from South Korea have been used in the production of goods destined for export. They have therefore contributed significantly to the expansion of Vietnam’s trade with other countries. 
South Korea is also one of Vietnam’s largest foreign investors. South Korean companies have registered more than $33.4 billion in projects in Vietnam, becoming the second-largest investor among countries and territories investing in the country. In the first nine months of the year South Korea overtook Japan and Singapore to rank first among foreign investors in Vietnam, with fresh approvals amounting to $3.55 billion.

On the investment front, Vietnam is the favourite destination for foreign direct investment (FDI) from South Korean companies. Samsung’s pledged investment of $6.85 billion for its mobile phone and component production projects, excluding the $1.4 billion project at Saigon Hi-Tech Park, accounts for a major part. Other long-term investors include LG Electronics, who is set to build a new factory in Hai Phong with $300 million by 2020. Newcomers include Lotte Mart, who operate seven stores in Vietnam, and Shinsegae International, which has plans to invest $65 million in opening stores in Ho Chi Minh City.

Official figures show that South Korean investors are now present in 49 localities throughout the country, in which Hanoi, Dong Nai, Thai Nguyen, Bac Ninh and Long An have the largest number. South Korean investment is particularly outstanding in the electric and electronic industries, as 23 out of 76 new investment projects as at March this year were in electronic components and mobile phone accessories, representing 34 per cent of all investment, according to the Korea Trade - Investment Promotion Agency (KOTRA). 

In the future there can be no doubt that the political and economic relationship between Vietnam and South Korea will be maintained and developed. Vietnam is setting three goals: to develop high-quality human resources, perfect the socialist rule of law via amending the Constitution and the Land Law, and improve infrastructure development to become industrialised country in 2020. This is the premise for the two countries to cooperate, as South Korea’s development offers lessons for an emerging Vietnam.

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