10:42 | 29/05/2019 Investment
(VEN) - The Republic of Korea (RoK) has been Vietnam’s leading source of foreign direct investment (FDI) in recent years, reflecting the strong attraction of the Vietnamese market for RoK investors.
Leading source of FDI
According to the Foreign Investment Agency under the Ministry of Planning and Investment, the RoK has retained its position as Vietnam’s leading source of FDI, with total annual registered capital of about US$7-9 billion in the past five years. By April 2019, the RoK had poured US$64.3 billion into Vietnam, making up 18.4 percent of total registered FDI in Vietnam. Last year, the RoK had 1,043 projects worth US$7.2 billion, accounting for 20.3 percent of the total FDI in the Southeast Asian country.
Deputy Minister of Planning and Investment Vu Dai Thang said no partners have had stable investment in Vietnam in the same period like the RoK.
According to economists, the selection of Vietnam as an investment destination is attributed to its abundant, skilled and industrious labor force, large consumer market with about 97 million people, increasing middle and young class, relatively fast-growing economy, and political stability.
At an April 22 seminar in Hanoi on promoting trade and investment links between Vietnam and the RoK, Vietnam Trade Promotion Agency Director Vu Ba Phu said there are about 7,000 RoK businesses investing in Vietnam, using some 700,000 local workers and contributing roughly 30 percent to Vietnam’s total export value. They have contributed to promoting the development of industry, agriculture, tourism and services.
In the industrial sector, the presence of economic giants such as Samsung, LG, Kumho, Doosan, Hyundai, GS, and Posco has had an important impact on promoting support industries in Vietnam, especially in the fields of engineering, metallurgy, chemicals, electricity-electronics, and plastics.
RoK groups have mostly invested in Vietnam’s manufacturing and processing sector in recent years. Projects include the Hyosung Chemical Corporation’s US$1.2 billion-construction of a polypropylene (PP) plant and a liquefied petroleum gas (LPG) warehouse in the southern province of Ba Ria-Vung Tau; LG Innotek’s camera module project in Vietnam with additional capital of US$501 million; LG Display’s project in Hai Phong with additional capital of US$500 million. Also on the list of major investments are Hyosung Advanced Materials’ project on developing the engineering support industry in the Chu Lai Open Economic Zone with total investment of US$1.34 billion.
New investment trend
In addition to pouring capital into the manufacturing and processing sector, energy and services, RoK businesses have expanded investment in Vietnam through mergers and acquisitions (M&A) deals in retail, consumer goods, logistics and transport. In 2018, total capital contributions and share purchases of RoK businesses in Vietnam reached US$1.4 billion, an increase of 50 percent compared to 2017.
Investment has mainly gone into services, retail, electronics, finance and banking, and insurance in Vietnam. Specifically, the Hanwha Asset Management paid US$400 million for 84 million preferential shares in Vingroup, while the ASAM Asset Management bought VND200 billion of convertible bonds from the TNG Investment and Trading Joint Stock Company. In addition, Shinhan and Woori Bank have established 100-percent foreign owned banks in Vietnam, while KB, KEB Hana, Nonghyup, IBK, and Busan have opened branches or representative offices.
According to the Korea Trade-Investment Promotion Agency (KOTRA), RoK businesses are interested in the Vietnamese consumer market due to its large population of about 97 million people. In 2019, the fashion sector is expected to become a new magnet for investors.
Vietnam is the focus of the RoK’s New Southern Policy. Accordingly, the RoK government will encourage businesses to expand investment in Vietnam as a central conduit to Southeast Asia, Europe and America. Kim Han Yong, chair of the Korea Chamber of Business in Vietnam, said RoK businesses must improve their credibility in Vietnam. He also urged Vietnam to simplify further its administrative procedures for investment projects in IT infrastructure and improve law enforcement to ease the process of doing business.