RoK becomes Vietnam’s second largest trade partner

According to the General Department of Vietnam Customs, in the first half of this year, trade value between Vietnam and the RoK reached 29.12 billion, accounting for 14.7 percent of total national trade value, of which export value from Vietnamtothe RoK stood at 6.57 billion USD while import value from the RoK to Vietnam was 22.56 billion USD.

That import value with strong growth at 51.2 percent year-on-year made Vietnam’s trade deficit withthe RoKincrease to 15.99 billion USD, higher than its trade deficit withChinaat 13.72 billion USD.

The Ministry of Planning and Investment said these figures showed that Vietnam had promoted imports fromthe RoKand that country, therefore, became the second largest goods supplier of Vietnam, afterChina. Vietnammainly imported machines and equipment fromthe RoKfor 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 15 billion USD of the 22.5 billion USD 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 fromthe RoKconsisted 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.

Vietnamandthe RoKhad expected this change in the structure of trade when negotiating the Vietnam-RoK Free Trade Agreement. According to the expectation, imports fromthe 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, Mr. Thang said.

Vietnammust 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 theUnited 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, Mr. 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 Vietnamwhile Vietnamwould also do the same to promote its exports to those countries, he said.

Meanwhile, Vietnamshould improve further development of its support industry to reduce the import of equipment and material, leading to a trade deficit cut in the future.